1. Banking Today

2. Measuring Money Supply
All the available in the U.S. M1
Liquid Money (Easy Access)
44%= Currency, money not in an account
55%= Checking Accounts M2
M1 + Near Money (Interest Bearing)
Exp. Savings Accounts, CD, Money Market

3. Banking Services Storing Money Saving Money
Safe place to keep money
Saving Money
Savings, Checking, Money Market, CDs
Loans (More money out than in)
Lending helps economy function, money in hands of consumers increases demand, money in investors’ hands leads to more businesses
Banks loose money if borrowers default on loans, do not pay back

4. Banking services, cont. Mortgages Credit Cards Loan to buy real estate
Down Payment, minimum of 20% to avoid insurance fees
Period of time, usually 30 years
Credit Cards
Interest Based Loans
bank lend at time of purchase and consumer repays in bill

5. Types of interest Interest = price paid to use borrowed money
Principal = initial amount of borrowed money
Simple interest is only applied on the principal
Compound interest is applied to both principal and accumulated interest

6. Types of Financial Institutions
Commercial banks
Traditionally provided services to businesses
Offer checking, savings, and loans
Some state chartered others are national
Savings and Loan Associations
Traditionally just savings accounts and loans for homes
Thrifts- loans for working class people
Savings Banks
Offered savings and checking accounts for people with less deposits than commercial banks

7. More Financial Institutions
Credit Unions
Co-ops that specialize in lending and some offer checking accounts
Finance Companies
Offer consumer installment loans for large cost items
Higher rates due to better chance of defaults

8. Electronic Banking Automated Teller Machines Debit Cards Home Banking
Replaces the need for some tellers
Debit Cards
Able to withdraw money from a checking account from ATM or purchase goods at stores with an ‘electronic check’
Home Banking
Internet banking, paying bills and other banking services
Automatic Clearing Houses
Regular payments in place of writing physical checks for bills
Stored Value Cards
Pre-paid cards, electronic gift cards, rebate cards