3 What is Money?Money is anything that serves as a medium of exchange, a unit of account and a store of value
4 The Three Uses of Money1) Medium of exchange- anything that is used to determine value during the exchange of goods and services2) Unit of account- a means of comparing the values of goods and services3) Store of value- something that keeps its value if it is stored rather than used
5 What is Currency?The coins and paper bills used as money in a society are called currency.
6 6 Characteristics of Money 1) Durability- Objects used as money must withstand wear and tear2) Probability- Easy to carry around and transfer3) Divisibility- Easily divided into smaller amounts
7 6 Characteristics of Money 4) Uniformity- all units of money must be identical5) Limited Supply- Federal Reserve System controls supply of money in circulation6) Acceptability- everyone in economy must be able to exchange the objects that serve as money for goods and services
9 History of American Banking In 1913,the Federal Reserve System Act established the Federal Reserve System. The Fed is the nations central bank that creates national currency called Federal Reserve Notes.
10 History of American Banking After the Great Depression, the Federal Deposit Insurance Corporation (FDIC) was created to instill trust in banking system. Today the FDIC insures customer deposits up to 250,000 if a bank fails.
12 Measuring the Money Supply The money supply is all the money available in the U.S. economy.
13 Banking ServicesBanks perform many functions and offer many services to consumers1) Store money- its safe and convenient2) Credit Cards- cards entitling their holders to buy goods and services based on the card holders promise to pay
14 Banking Services 3) Saving money- the most common options are: Savings accountsChecking accountsMoney Market AccountsCertificates of Deposits (CDs)
15 Banking Services4) Loans- Make loans to help new businesses and help established businesses' grow5) Mortgages- a specific loan used to purchase real estate
16 How Banks Make a ProfitBanks make money of interest rates they receive from consumers who have taken loansInterest is the price paid on the use of borrowed money
17 Electronic BankingThe rise of computers in banking as increased dramaticallyAutomated Teller Machines (ATM)- can deposit, withdraw cash and obtain account informationDebit Cards- used to withdraw money from checking account
18 Electronic BankingAutomatic Clearing Houses (ACH)- transfer funds from customers’ accounts into creditors’ accountsHome Banking- can check balances or make transfers from home computerStore Value Cards- have magnetic strips or computer chips with account balance information