Presentation on theme: "Money and Financial Institutions"— Presentation transcript:
1 Money and Financial Institutions Chapter 12Money andFinancial Institutions
2 Describe the functions and characteristics of money. Learning ObjectivesDescribe the functions and characteristics of money.Explain the 3 main functions of a bank.Why It’s ImportantUnderstanding the way money and financial institutions work is crucial to understanding the economy.
3 MoneyMonetary system – G&S are exchanged using money; can then be exchanged for other G&SMoney can be anything that people accept as a standard for paymentEX: In other times and places people have used shells, stones, corn, parrot feathers, and even gopher tails for money
4 Functions of MoneyMedium of Exchange – rather than barter people exchange money to get the goods and services they wantStandard of Value – Money allows us to place a value on objects (How much does this cost?)Store of Value – Money holds its value over time…you can also store it and accumulate it to become more wealthy
5 Characteristics of Money Scarcity – a limited amount available (value)Accepted – people have faith in its valueDivisible – can be broken down into smaller pieces/partsPortable – can be transported easilyDurable – has a long life/does not fall apart
6 BankingThe banking system is the main type of financial institution, or organization for managing money, in our economyBanks have three main services 1)storing money, 2)transferring money, 3)lending money
7 ?????????????????????????What are three characteristics of money (there are five)?ScarcityAcceptedDivisiblePortableDurable
8 Storing Money Deposit – money put into a bank A bank account is a record of how much money a customer has put in to or taken out of a bankDeposit – money put into a bankWithdrawal – money taken out of the bank
9 Transferring and Lending Money Interest - rate the bank pays you for keeping your money thereelectronic funds transfer (EFT) used to move money around by using computer networks- Collateral – item of value you put up for a loan- Mortgage - a deed to give the property to the lender if the loan is not paid back- Safety-deposit boxes – store valuables
10 ????????????????????????? What are the three services banks offer? Storing MoneyLending MoneyTransferring Money
12 Compare the 3 types of banks found in our economy. Learning ObjectivesCompare the 3 types of banks found in our economy.Identify the functions of the Federal Reserve System.Why It’s ImportantUnderstanding the way money and financial institutions work is crucial to understanding the economy.
13 Banks are businesses that provide financial services to make a profit. HOW BANKS DO BUSINESSBanks are businesses that provide financial services to make a profit.
14 Types of BanksCommercial banks - services such as checking and savings accounts, loans, and financial adviceCredit unions offer members a full range of services, including credit cards, checking accounts, and loansSavings and Loan Associations purpose was to encourage people to save money and make it easier to buy a home.
15 Other Financial Institutions Mortgage companies provide loans specifically for buying a home or business.Financial companies offer short term loans to businessesInsurance companies provide protections against things like fire and theftBrokerage firms sell stocks and bonds, and other financial services
16 The Federal Reserve System The Federal Reserve System (or Fed) is the central banking organization in the United StatesSet up in 1913 to end the periodic financial panics that occurred during the 1800s and early 1900s
17 Functions of the Fed Clearing Checks Acting as Federal Gov’t’s fiscal agentSupervising member banksRegulating the money supplySetting reserve requirementsSupplying paper currency
18 What is the Federal Reserve? ?????????????????????????What is the Federal Reserve?The central banking organization of the United States