Download history of money and banking

MONEY AND BANKING
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BASIC FUNCTIONS
CHARACTERISTICS
TYPES OF MONEY
HISTORY OF
MONEY AND
BANKING
FUNCTIONS OF MONEY
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MEDIUM OF EXCHANGEACCEPTED in exchange for a
good/service
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UNIT OF ACCOUNT- measures
the VALUES of goods/services
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STORE OF VALUE- purchasing
power of the dollar over TIME
CHARACTERISTICS OF MONEY
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DURABLE
PORTABLE
DIVISIBLE
STABLE IN VALUE
SCARCE
ACCEPTED
TYPES OF MONEY
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COMMODITY MONEY- an item
uses as money that has value as
a good aside from being money.
Example: cows, gold, diamonds
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REPRESENTATIVE MONEYmoney that is backed by an item
of value. (gold, silver)
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FIAT MONEY- money that has
value because the government
says so. (LEGAL TENDER)
accepted for payments of public
and private debts.
FIAT MONEY (LEGAL TENDER)
 M1- currency, coins,
checking accounts, debit
cards. (LIQUID) Can be
used in exchange for
G/S now.
 M2- savings deposits,
time deposits, CD’s,
mutual funds, etc (NEAR
or BRAOD MONEY)
HISTORY OF MONEY AND
BANKING
 P. 382-83 (READ)
 14-2 Worksheet
 VIDEO: MODERN
MARVELS: History of
American Money
MONETARY POLICY
 The process of the FED changing the SUPPLY of MONEY and the
cost of CREDIT.
 3 MAJOR TOOLS
 DISCOUNT RATE: interest rate the FED charges on loans to
member banks. (Affects what your bank will charge you in interest)
 OPEN-MARKET OPERATIONS: the buying and selling of
government bonds (securities)
 RESERVE REQUIREMENTS: the percent amount of cash banks
need to keep in their vaults or in deposit in the closest FED
Reserve bank. (Fractional Reserve banking)
MONETARY POLICY
 TIGHT MONETARY POLICY:
makes credit more expensive
and puts money in shorter
supply. (slow the economy
down)
 LOOSE MONETARY
POLICY: makes credit less
expensive and puts more
money in supply. (speed the
economy up)
 CHAIRMAN OF THE FED is
BEN BERNANKE.