Chapter 12 Money and Financial Institutions Ch 10, 11, 12 - Slide 2 Learning Objectives 1.Describe...
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Transcript of Chapter 12 Money and Financial Institutions Ch 10, 11, 12 - Slide 2 Learning Objectives 1.Describe...
![Page 1: Chapter 12 Money and Financial Institutions Ch 10, 11, 12 - Slide 2 Learning Objectives 1.Describe 1.Describe the functions and characteristics of money.](https://reader035.fdocuments.us/reader035/viewer/2022062408/56649dff5503460f94ae7e48/html5/thumbnails/1.jpg)
Chapter 12
Money and
Financial Institutions
![Page 2: Chapter 12 Money and Financial Institutions Ch 10, 11, 12 - Slide 2 Learning Objectives 1.Describe 1.Describe the functions and characteristics of money.](https://reader035.fdocuments.us/reader035/viewer/2022062408/56649dff5503460f94ae7e48/html5/thumbnails/2.jpg)
Ch 10, 11, 12 - Slide 2
Learning ObjectivesLearning Objectives
1.1.Describe Describe the functions and characteristics of money.
2.2.ExplainExplain the 3 main functions of a bank.
Why It’s ImportantWhy It’s Important
Understanding the way money and financial institutions work is crucial to understanding the economy.
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Ch 10, 11, 12 - Slide 3
Money Money Monetary system – G&S are exchanged using money; can then be exchanged for other G&S
Money can be anything that people accept as a standard for paymentEX: In other times and places people have used shells, stones, corn, parrot feathers, and even gopher tails for money
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Ch 10, 11, 12 - Slide 4
Functions of Money Functions of Money
Medium of Exchange – rather than barter people exchange money to get the goods and services they want
Standard of Value – Money allows us to place a value on objects (How much does this cost?)
Store of Value – Money holds its value over time…you can also store it and accumulate it to become more wealthy
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Ch 10, 11, 12 - Slide 5
Characteristics of Money Characteristics of Money
Scarcity – a limited amount available (value)
Accepted – people have faith in its value
Divisible – can be broken down into smaller pieces/parts
Portable – can be transported easily
Durable – has a long life/does not fall apart
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Ch 10, 11, 12 - Slide 6
Banking Banking The banking system is the main type of financial institution, or organization for managing money, in our economy
Banks have three main services 1)storing money, 2)transferring money, 3)lending money
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Ch 10, 11, 12 - Slide 7
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• What are three characteristics of money (there are five)?
– Scarcity– Accepted– Divisible– Portable– Durable
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Ch 10, 11, 12 - Slide 8
Storing Money Storing Money
A bank account is a record of how much money a customer has put in to or taken out of a bank
Deposit – money put into a bankWithdrawal – money taken out of the bank
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Ch 10, 11, 12 - Slide 9
Transferring and Lending Money Transferring and Lending Money -Interest - rate the bank pays you for keeping your money there- electronic funds transfer (EFT) used to move money around by using computer networks
- Collateral – item of value you put up for a loan- Mortgage - a deed to give the property to the lender if the loan is not paid back- Safety-deposit boxes – store valuables
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Ch 10, 11, 12 - Slide 10
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• What are the three services banks offer?
– Storing Money– Lending Money– Transferring Money
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Ch 10, 11, 12 - Slide 11
HOMEWORK
• Rd. Pages 201-205
• Questions 1-3 on Pg. 205
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Ch 10, 11, 12 - Slide 12
Learning ObjectivesLearning Objectives
1.1.CompareCompare the 3 types of banks found in our economy.
2.2. IdentifyIdentify the functions of the Federal Reserve System.
Why It’s ImportantWhy It’s ImportantUnderstanding the way money and financial institutions work is crucial to understanding the economy.
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Ch 10, 11, 12 - Slide 13
HOW BANKS DO BUSINESS
Banks are businesses that provide financial services to make a profit.
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Ch 10, 11, 12 - Slide 14
Commercial banks - services such as checking and savings accounts, loans, and financial advice
Credit unions offer members a full range of services, including credit cards, checking accounts, and loans
Savings and Loan Associations purpose was to encourage people to save money and make it easier to buy a home.
Types of BanksTypes of Banks
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Ch 10, 11, 12 - Slide 15
Other Financial InstitutionsOther Financial Institutions
Mortgage companies provide loans specifically for buying a home or business.
Financial companies offer short term loans to businesses
Insurance companies provide protections against things like fire and theft
Brokerage firms sell stocks and bonds, and other financial services
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Ch 10, 11, 12 - Slide 16
The Federal Reserve SystemThe Federal Reserve System
The Federal Reserve System (or Fed) is the central banking organization in the United States
• Set up in 1913 to end the periodic financial panics that occurred during the 1800s and early 1900s
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Ch 10, 11, 12 - Slide 17
Functions of the FedFunctions of the Fed
1. Clearing Checks
2. Acting as Federal Gov’t’s fiscal agent
3. Supervising member banks
4. Regulating the money supply
5. Setting reserve requirements
6. Supplying paper currency
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Ch 10, 11, 12 - Slide 18
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• What is the Federal Reserve?
– The central banking organization of the United States
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Ch 10, 11, 12 - Slide 19
HOMEWORK
• Review Key Concepts – Pg. 206
• Questions 2-5