1. Money and Banking

2. What is Money?
Money- anything that people are willing to accept in exchange for goods
Types of Money
Coins- metallic forms of money
Currency- Coins and paper money

3. What is money? Why do we value and accept money?
We are sure that others will accept its value
It has value because we accept it has value
In America, money used to be “backed” by gold or silver, but this went out in the 1930’s

4. Banking Bank- an institution for receiving, keeping, and lending money
Early Banking in the US
Very informal
A merchant would allow customers to deposit money and charge a small fee; This was not always safe… what if the merchant goes out of business or is not trustworthy?

5. Financial Institutions
Commercial Banks- financial institutions that offer full banking services to individuals and businesses
Savings and Loan Associations- financial institutions that traditionally loaned money to people buying homes; they also take deposits and issue saving accounts
Credit Unions- financial institutions that work on a not-for-profit basis; open for members of a certain group only

6. Safeguarding our Financial System
The financial system of the US is one of the safest in the world because of regulation and insurance
The FDIC or Federal Deposit Insurance Corporation- the national corporation that insures that individual accounts up to $250,000; was created after the bank collapse of the 1930’s (Great Depression)

7. The Federal Reserve System
The Federal Reserve System- central bank of the US; The Fed regulates the US monetary & financial system; It is also the government’s bank
12 regional Federal Reserve Banks throughout the country; NC is part of the Richmond Federal Reserve District
Federal Reserve Board- supervises the banks, members appointed by the president

8. The Federal Reserve System

9. The Federal Reserve System
The Fed as a Regulator-
Regulates large commercial banks
Regulates mergers of banks
Enforces laws that deal with consumer borrowing
Implement Monetary Policy
Ex. During times of recession and depression the Fed decreases interest rates. (this encourages lending and discourages savings)

10. The Federal Reserve System
The Fed as the Government’s Bank-
Holds the government’s money
Sells US government bonds
Controls coins and bills in circulation
Control the amount of currency that is made and destroyed on a daily basis

11. Part 1
GOVERNMENT FINANCES

12. Government Finances
Each year the President and Congress work together to create a budget; the President writes the budget and then congress approves the budget

13. Government Finances Types of Spending
Mandatory spending- spending that does not need the annual approval of Congress
Examples- Social Security benefit checks and interest payments on government debt
Discretionary spending- government expenditures that must be approved each year
Examples- Money spent on defense and highway construction

14. Government Finances
Appropriations Bills- laws that approve spending for a particular activity
Appropriations Bills always start in the House of Representatives

15. Parts of the US Budget Revenues- money taken in by the government
Taken in by- income taxes (16th Amendment), payroll taxes, excise taxes, estate taxes, & other fees
Expenditures- money spent by the government

16. Types of Taxes
Progressive tax- the higher one’s income the higher the percentage of tax (income tax)
Regressive tax- tax imposed at a flat rate (sales tax)
Excise- tax on manufacture, sale, and consumption of goods; often called “hidden tax” (tax on fuel, alcohol, tobacco)
Proportional tax- tax that takes the same percentage of income regardless of how much is earned

17. Local Government Finances
State and local government receive revenue from-
Sales tax
State income taxes
Property taxes
Fines and fees
Utilities
What are 3 expenditures at the local level?

18. AN INTERDEPENDENT WORLD
Part 3
AN INTERDEPENDENT WORLD

19. Global Interdependence
Global Interdependence means that people and nations all over the world depend on one another for goods and services
Nations compete and cooperate to make trade beneficial for everyone

20. Why do countries trade?
International trade allows nations to produce a limited number of goods based on their resources while consuming a variety of goods
Comparative Advantage is ability to produce a product most efficiently given all the other products it could produce
The Law of Comparative Advantage states a nation is better off producing goods and services for which it has a comparative advantage

21. Export- a good sent to another country
Import- a good brought in from another country
Trade Balance- the relationship between a nation’s imports and its exports
Trade surplus- nation exports more than it imports
Trade deficit- nation imports more than it exports
Tariff- a tax on imported good
Embargo- complete barrier of trade with a country; NO trade (Cuba)

22. The US and Trade
The US imports more than 2/3 of the oil it uses (this number is growing)
The Us imports many minerals used in industries
The US sells computers, aircraft, medical equipment, and machinery around the world
Poor countries look to the US for food, medicine and weapons

23. Economic Development Around the World
Historically, economists divided the world’s nations into 3 categories-
1st World Countries- the Wealthiest countries
2nd World Countries- Communist countries
3rd World Countries- the poorest countries

24. Economic Development Around the World
Now, economists just use 2 categories-
Developed Countries- the wealthiest countries (US, Canada, Japan)
Less Developed Countries or Developing Countries- poorer countries (this includes the poorest countries in the world, and countries that haven’t reached a high standard of living for most citizens)