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Chapter 10

Chapter 10. Money and Banking. Chapter 10. Section 1. What is Money?. Money is anything that serves as a medium of exchange, a unit of account and a store of value. The Three Uses of Money.

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Chapter 10

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  1. Chapter 10 Money and Banking

  2. Chapter 10 Section 1

  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 Money • 1) Medium of exchange- anything that is used to determine value during the exchange of goods and services • 2) Unit of account- a means of comparing the values of goods and services • 3) 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 tear • 2) Probability- Easy to carry around and transfer • 3) Divisibility- Easily divided into smaller amounts

  7. 6 Characteristics of Money • 4) Uniformity- all units of money must be identical • 5) Limited Supply- Federal Reserve System controls supply of money in circulation • 6) Acceptability- everyone in economy must be able to exchange the objects that serve as money for goods and services

  8. Chapter 10 Section 2

  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.

  11. Chapter 10 Section 3

  12. Measuring the Money Supply • The money supply is all the money available in the U.S. economy.

  13. Banking Services • Banks perform many functions and offer many services to consumers • 1) Store money- its safe and convenient • 2) 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 accounts • Checking accounts • Money Market Accounts • Certificates of Deposits (CDs)

  15. Banking Services • 4) Loans- Make loans to help new businesses and help established businesses' grow • 5) Mortgages- a specific loan used to purchase real estate

  16. How Banks Make a Profit • Banks make money of interest rates they receive from consumers who have taken loans • Interest is the price paid on the use of borrowed money

  17. Electronic Banking • The rise of computers in banking as increased dramatically • Automated Teller Machines (ATM)- can deposit, withdraw cash and obtain account information • Debit Cards- used to withdraw money from checking account

  18. Electronic Banking • Automatic Clearing Houses (ACH)- transfer funds from customers’ accounts into creditors’ accounts • Home Banking- can check balances or make transfers from home computer • Store Value Cards- have magnetic strips or computer chips with account balance information

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