Presentation on theme: "CHAPTER 10 ECONOMICS, MR. VIOLANTI Money, Banking, and the Federal Reserve System."— Presentation transcript:
CHAPTER 10 ECONOMICS, MR. VIOLANTI Money, Banking, and the Federal Reserve System
What is Money??? A History of Money, Part ONEPart ONE Developed through history Barter System: Trade, many difficulties A medium of exchange was needed
What gives money value? General acceptability, and scarcity. Money lowers transaction costs over a barter economy. Three Functions of Money Medium of Exchange Unit of Account Store of Value Beginnings of Banking: Transportation of Gold, issue paper receipts. Leads to FRACTIONAL RESERVE BANKING.
The Money Supply Money Supply (M1) consists of 3 components Currency (coins, paper money) Checking Accounts Traveler’s Checks August, 2005: $710 Billion currency in circulation, $619 Checking Accounts, $7 traveler’s checks Near Money: Savings accounts, non-checking bank accounts Credit Cards are considered loans US Dollar Symbology
Federal Reserve System 1913, Congress passes the Federal Reserve Act Sets up Federal Reserve System, “The Fed” Central Bank, chief monetary authority Central Bank determines: Determines Money Supply Supply economy with Federal Reserve Notes (Money) Holds Bank reserves Supervises Banks Lender of Last Resort 12 Federal Reserve District Banks