1. Banks are businesses. How do they earn a profit?

2. Lesson 3.1 The Banking System
Essential Questions: Why are banks (and credit unions) vital to the U.S. economy? How is the banking system organized?

3. What are some potential problems with a barter economy?
Barter Economy – a moneyless economy; trading goods & services for other goods & services
What are some potential problems with a barter economy?

4. What are some potential problems with a barter economy?
Barter Economy – a moneyless economy; trading goods & services for other goods & services *In order for the exchange to take place, there must be a “mutual coincidence of wants” Money – anything that all (or most) of the people of a society are willing to accept as payment for goods and services
What are some potential problems with a barter economy?

5. Commodity Money vs. Fiat Money
Colonial America Buckskins
Native Americans Wampum

6. In Ancient Rome, soldiers were paid in salt

7. In Ancient Rome, soldiers were paid in salt
Salarium → “Salary”

8. Functions of Money Serve as a “Medium of Exchange”
Serve as a “Measure of Value”
Serve as a “Store of Value”

9. Characteristics of Money
Must be Portable
Must be Durable
Characteristics of Money
Must be Divisible
Must be Limited in Availability

10. U.S. Bureau of Printing & Engraving
Video Clip
U.S. Mint
Video Clip

11. What important things do banks do?
Safe place to deposit your money (insured by the FDIC up to $250,000)
Pay you interest on your savings account
Allow easy access to your money (via debit cards and withdraw at an ATM)
Issue credit cards so people can buy things on credit
Process electronic payments (paying with cash is becoming rare)
Loan money to customers make large purchases (houses, cars, etc.)
Loan money to entrepreneurs so they can start businesses

12. What important things do banks do?
Safe place to deposit your money (insured by the FDIC up to $250,000)
Pay you interest on your savings account
Allow easy access to your money (via debit cards and withdraw at an ATM)
Issue credit cards so people can buy things on credit
Process electronic payments (paying with cash is becoming rare)
Loan money to customers make large purchases (houses, cars, etc.)
Loan money to entrepreneurs so they can start businesses
How do banks make profit?
Banks pay low interest on savings deposits and then take most of the money deposited and loan it to customers/borrowers at a much higher rate
Even if some people can’t repay their loans, the bank can absorb the loss

13. What important things do banks do?
Safe place to deposit your money (insured by the FDIC up to $250,000)
Pay you interest on your savings account
Allow easy access to your money (via debit cards and withdraw at an ATM)
Issue credit cards so people can buy things on credit
Process electronic payments (paying with cash is becoming rare)
Loan money to customers make large purchases (houses, cars, etc.)
Loan money to entrepreneurs so they can start businesses
How do banks make profit?
Banks pay low interest on savings deposits and then take most of the money deposited and loan it to customers/borrowers at a much higher rate
Even if some people can’t repay their loans, the bank can absorb the loss
What is a credit union?
Credit unions are non-profit financial institutions that exist for the benefit of their members.
Members put money in their account to loan to other members
When you borrow, you’re borrowing from other members
Interest rates are usually lower, but might not offer mortgages/large loans

14. Structure of the Fed A seven-member Board of Governors
Members of the board are appointed by the President, approved by the Senate (serve 14-year staggered terms)
One member of the board is appointed by the President to be the Chairperson (serves a 4 year term)
The system includes 12 District Banks
The Federal Open Market Committee (made up of the Board of Governors and presidents of the District Banks) decides monetary policy

15. Janet Yellen was the previous Chairperson of the Fed (2014 – 2018).
Chairman of the Fed
President Trump nominated Jerome Powell as Fed Chairperson. His term began in February He will serve a 4-year term.
Janet Yellen was the previous Chairperson of the Fed (2014 – 2018).

16. Fed District Banks

18. Video Clip
In 2008, George W. Bush worked with Congress to create a plan to bail out America’s banks. Why do you think he did this? Explain the overall importance of banks to the U.S. economy in your response.
Respond in 5 to 7 lines