Money and Banking  1. Median of Exchange= any items that sellers accept as payment.  2. Standard of Value= a way to measure the relative value of goods by comparing their prices.  3. Store of Value= it can be saved, or stored for later use.

Characteristics of Money:psadd  1. Portability  2. Stability  3. Acceptability  4. Durability  5. Divisibility

Sources of Money’s Value  Commodity money: An item used as money that also has value of its own (like gold or tobacco ).  Representative money: An item that has value because it “represents” something else. And can be exchanged for that something else. (A sheet of paper that can be redeemed for currency.)  Fiat money: this money has value because a government “fiat”, or decree states that it has value (like currency= coins and paper bills).

Forms of Money  1. Coins and paper money  2. Demand deposits= checking accounts. Checks can be paid “on demand” at any time.  3. Near money= An asset that can easily be converted into cash when needed, like savings accounts and time deposits.

Trends  1. Automation also called Electronic Funds Transfer (EFT), means the reliance on computers to handle financial transactions. A. ATM’s (Automatic Teller Machines) allow you to deposit or withdraw money from an account or transfer funds from one account to another.

B. Automatic Clearinghouse Service (ACH) a system where banks can transfer funds from your account without suing money, so that customers can pay bills without writing checks. C. Point of Sale Transactions Allows customers to pay for merchandise on the spot using a Debit Card, which will pay for merchandise automatically by transferring money from the buyer’s account to the seller’s account. Customers who use debit cards must supply their PIN (Personal Identification Number) to use the card.

 D. Home Banking- Customers are now able to do banking on the Internet to transfer funds, pay bills, and invest.

 2. Deregulation, or the reduction of government restrictions. This deregulation led to increased competition and regional banking.

 3. Financial Troubles (Due mostly to deregulation) A. Loan default is when borrowers are unable to make payment on their loans. B. Bank Failures (see chart on page 231).