money and banking

Chapter 14 : 

Chapter 14 Money and Banking

Section One : 

Section One The basis of the market economy is voluntary exchange. Historically in other economies money has been made of everything from bones, whales teeth, to sheep. Three Functions of Money: *medium of exchange *unit of accounting *store of value

Three Functions of Money : 

Three Functions of Money Medium of Exchange: a seller will accept something in exchange for goods or services Unit of Accounting: use of money for comparing the values of goods and services in relation to one another Store of Value: use of money to store purchasing power for later use. * the base unit of measurement in the US is the almighty dollar, greenbacks, bills, Benjamin’s, cash, bones, bank, or coin.

Dough! : 

Dough!

Characteristics of Money : 

Characteristics of Money Durable: must be able to withstand wear and tear in exchange Portable: money must be easy to carry Divisible: money must be able to be divided into smaller parts so change can be given Stable in Value: money must be stable in value; can’t change rapidly Scarce: whatever is used as money must be scarce, that is what gives it value Accepted: must be accepted as a medium exchange in payment of debts

Types of Money : 

Types of Money Commodity Money: oil, cattle, foods, gems Representative Money: money backed by gold or silver Fiat Money: face value occurs through government order, it is declared legal tender

Section Two: History of American Banking : 

Section Two: History of American Banking

Facts about early banking : 

Facts about early banking During the colonial period England did not permit the colonies to print or coin money.

Time Line of American Banking : 

Time Line of American Banking 1780’s: new nation has no reliable medium of exchange. Hamilton wants a national bank, Jefferson says states should control banks 1791: congress establishes the first bank of the united states and grants it a 20 year charter. 1792: congress passes the coinage act, which organizes a mint and establishes the dollar as the basic unit of currency. 1816: congress establishes the second national bank after the financial confusion of the war of 1812 Civil War: to help pay for war, US issues fiat money, bills are called greenbacks and change in value as confidence rises in union army 1913: to control the amount of money in circulation, congress establishes the federal reserve system 1929: the great depression begins 1929-1934: march of 1933 pres. Roosevelt declares a ‘bank holiday’. Banks could not reopen until they proved they were financially stable. Also est. Glass-Steagall Banking Act and Federal Deposit Insurance Corporation (FDIC)

Time Line : 

Time Line 1930’s to 1960’s: banking reforms of the 1930’s allowed the banks to enter period of long term stability 1960’s and 1970’s: series of laws to protect consumers are passed 1980’s to present: fairly stable until recently (2007), then hit period of recession

Section 3: Types of Money : 

Section 3: Types of Money

Money and Near Moneys : 

Money and Near Moneys Currency: * all coins in circulation today are token coins (representation) * most of nations currency is in the form of Federal Reserve Notes * money is printed in denominations of $1, $2, $5, $10, $20, $50, and $100 bills (used to print much larger). Checks Credit and Debit Cards Near Moneys: these are assets that are similar to money

The Money Supply : 

The Money Supply M1 is the measurement of all bills, coins, checks, and travelers checks in circulation in the U.S. (total actual money being used) M2 is all of M1 plus savings accounts, stocks and bonds, money market accounts, mutual funds, and other special accounts (total of ALL money types).