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Money

Money. Chapter 10. What is Money?. Use of money is a social custom Its role is to facilitate exchange

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Money

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  1. Money Chapter 10

  2. What is Money? • Use of money is a social custom • Its role is to facilitate exchange • Money itself is any asset accepted as paymentfor goods or services • Without money we would barter like traditional societies • Although barter works it can be complex and inefficient

  3. Functions of Money Medium of Exchange: commonly accepted payment Unit of Account: standardized and easily measured Store of Value: holds purchasing power over time

  4. Characteristics of Money Durable—lasts for an extended period Portable—easy to carry & exchange Divisible—easily broken into measurable units Uniform—similar in appearance and has a standard value Scarce—Not overly printed or in too great abundance Accepted—Society is certain that it has value

  5. Types of Money • Fiat—has value because the government says so • “legal tender” • Representative— stands in for money • IOU, silver certificate • Commodity—has other uses besides acting as money • Tobacco, water

  6. How Much Money is Out There? http://www.youtube.com/watch?v=S-bJYM_7MLw • Money supplyall the money available in the economy • This includes money in and out of banks • Liquidity refers to how easily an asset can be turned into cash • Federal Reserve tracks the amount of money “in circulation” or in the economy

  7. What if We Redesigned the Dollar?

  8. What Images Are Important?

  9. Should We Just Use Presidents?

  10. Finance • The Financial System—various markets, players and institutions that coordinate the channeling of funds between borrowers and savers • Borrowers—demand money from the system with the knowledge that they will have to pay it back with interest • Savers—supply money to the system with the expectation that it will be paid back to them with interest

  11. Banks and Institutions • Investment Banks—raise money for companies (perhaps even nations)and manage wealth of private investors (merchant bank) • JPMorgan, Goldman Sachs • Credit Unions—cooperative lending for specific groups • Marshland, Teachers • Commercial Banks—offer a wide range of lending services to the public (retail bank) • Bank of America, United Community

  12. Functions of a Bank https://www.youtube.com/watch?v=RH_bNdlOoiA • Banks serve several purposes: • Store Money—safe and insured • Vehicle for Saving— variety of accounts available • Loans—renting money at a cost • Credit—form of deferred payment • Principle is amount owed • Interest is cost of renting the principle

  13. FDIC preserves and promotes public confidence in the U.S. financial system by • insuring depositors • identifying, monitoring and addressing risks to the deposit insurance funds • limiting the effect on the economy and the financial system when a bank or thrift institution fails

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