2 ObjectivesExplain how the money supply in the United States is measured.Describe the services that banks provide.Identify different types of financial institutions.Analyze the changes brought about by electronic banking.
3 RiddleI have 3 coins that total 25 cents and one of the coins is not a nickel. What are the three coins?
4 Money Supply Categories LiquidityMoney that can be easily accessed and immediately used for goods and servicesCurrencyFunds in checking accountsTraveler’s checks“Near money”Cannot be used as cash directly but can be converted fairly easilySavings Account FundsMoney Market Mutual FundsCertificates of DepositMoney Supply Categories
5 M1 or M2? Checking account Dollar bill Personal check A new car Traveler’s check1-carat diamondCertificate of DepositSavings bondIndividual Retirement Account
6 Banking Services Storing Money Saving Money Insured from robbery and bank failureSaving MoneySavings and CheckingMoney Market AccountsMin amt of checks, interest rate can varyCertificates of DepositDon’t touch for 1 or 2 yr, highfixed int. rate
7 Services… Loans Mortgages Fractional reserve banking Lend money to people and charges interestDefaultMortgagesA loan for buying real estateInterest
9 Services Credit Cards Simple Interest Compound Interest Mini loansSimple InterestMoney paid on the principalCompound InterestMoney paid on the principal and simple interestThe amount of interest paid out by banks is less than the interest charged on loans
10 For ExampleYou deposit $100 in a savings account at 5% simple interest. You will make $5 in a year if paid annually.If you leave that $105 in account your compound interest would be 5% on $105 = $5.25. Instead of just 5% on the. $100