Chapter 12 Money – The Federal Reserve - Banks Relevant standards (Economics) C - Explain the function of money and its use in society D - Define economic institutions (e.g., banks, labor unions).

Section 1 – Money  Objectives List and describe the 3 major roles of money. Describe the major qualities of money. Relevant standards (Economics) C - Explain the function of money and its use in society.

Money must play 3 major roles: Medium of exchange  Money can be exchanged for just about anything and because there is no need to barter; it’s easy. Relevant standards (Economics) C - Explain the function of money and its use in society.

Money must play 3 major roles: Store of Value  Value of a dollar stays with it. Relevant standards (Economics) C - Explain the function of money and its use in society.

Money must play 3 major roles: Measure of price  makes the value of an item easy to understand. Relevant standards (Economics) C - Explain the function of money and its use in society.

Money must play 3 major roles: 1. Medium of exchange – money can be exchanged for just about anything and because there is no need to barter; it’s easy. 2. Store of Value – value of a dollar stays with it. 3. Measure of price – makes the value of an item easy to understand. Relevant standards (Economics) C - Explain the function of money and its use in society.

Money should also have the following qualities: All money, in order to be used effectively for a nation must have the following: Relevant standards (Economics) C - Explain the function of money and its use in society.

Money should also have the following qualities: Stability  same today as tomorrow Relevant standards (Economics) C - Explain the function of money and its use in society.

Money should also have the following qualities: Portability  small an easy to carry Relevant standards (Economics) C - Explain the function of money and its use in society.

Money should also have the following qualities: Durability  high quality paper or metal Relevant standards (Economics) C - Explain the function of money and its use in society.

Money should also have the following qualities: Uniformity  all $1 the same, all $5 etc Relevant standards (Economics) C - Explain the function of money and its use in society.

Money should also have the following qualities: Divisibility  that’s why we have coins! Relevant standards (Economics) C - Explain the function of money and its use in society.

Money should also have the following qualities: Recognizable  hard to copy/easy to recognize Relevant standards (Economics) C - Explain the function of money and its use in society.

About $1.148 trillion on an average day Types of “money” – today there are currency, demand deposits, traveler checks etc… Relevant standards (Economics) C - Explain the function of money and its use in society.

Please turn to page 143 of text… Complete handout as directed… D - Define economic institutions (e.g., banks, labor unions).

Section 2 -- Banks & Federal Reserve 3 major functions of banks Facts on the federal reserve! D - Define economic institutions (e.g., banks, labor unions).

Banks provide 3 functions: Accept and hold deposits – physical protection against fire and theft; also deposit insurance up to $100,000 by FDIC D - Define economic institutions (e.g., banks, labor unions).

Banks provide 3 functions: Making loans – “financial middlemen” of money from depositors to borrowers; interest from loans is the chief money maker of banks D - Define economic institutions (e.g., banks, labor unions).

Banks provide 3 functions: Collecting and transferring funds – management of checking account is a key role of banks for you D - Define economic institutions (e.g., banks, labor unions).

The Federal Reserve System: D - Define economic institutions (e.g., banks, labor unions).

The Federal Reserve System: The nations banking system made in 1914 to improve banking. ***Called the “Fed” Made up of 12 District Banks throughout the U.S. – think of it as a bank for a bank! D - Define economic institutions (e.g., banks, labor unions).

The Federal Reserve System: Provide banking services for financial institutions Holds deposit accounts for local banks such as a National City or a PNC. Supplies cash for those same local banks. Processes checks – Federal Reserve banks process 20,000,000,000 checks a year! Yes, ALL OF THEM! D - Define economic institutions (e.g., banks, labor unions).

The Federal Reserve System: Serve as banker for the federal government – they keep their checkbook! D - Define economic institutions (e.g., banks, labor unions).

The Federal Reserve System: Supervises and regulates the nations banking system ! D - Define economic institutions (e.g., banks, labor unions).

The Federal Reserve System: Develop monetary policy for the USA! D - Define economic institutions (e.g., banks, labor unions).

Counterfeit Money D - Define economic institutions (e.g., banks, labor unions).

MONEY D - Define economic institutions (e.g., banks, labor unions).

Salt D - Define economic institutions (e.g., banks, labor unions).

front D - Define economic institutions (e.g., banks, labor unions).

Colonial Currency, Pennsylvania, 50 shillings, D - Define economic institutions (e.g., banks, labor unions).

PA 4 pounds D - Define economic institutions (e.g., banks, labor unions).

continental D - Define economic institutions (e.g., banks, labor unions).

D - Define economic institutions (e.g., banks, labor unions).

5000 back D - Define economic institutions (e.g., banks, labor unions).

D - Define economic institutions (e.g., banks, labor unions).

2

100 GOLD D - Define economic institutions (e.g., banks, labor unions).

New 20

D - Define economic institutions (e.g., banks, labor unions).

front D - Define economic institutions (e.g., banks, labor unions).

back D - Define economic institutions (e.g., banks, labor unions).

Make Your Own Currency?? D - Define economic institutions (e.g., banks, labor unions).

Who would you place on the bill? President?? Sports Star??? Civic Leader?? Names: D - Define economic institutions (e.g., banks, labor unions).

The Secrets of Making Money! D - Define economic institutions (e.g., banks, labor unions).