The Role of Money:The History

What is money?

Something of value Over the last 10,000 years the

material form that money has taken has changed considerably from cattle and cowrie shells to today’s

electronic currency

Before there was currency…

Barter is the exchange of resources or services for mutual advantage

Dates back tens of thousands of years possibly the dawn of modern humans

Barter pre-dates the use of money

What can you barter and trade? One the back of your notesheet:

You live in a barter economy…what are five things you need to live that you must barter for?

What good or services can you offer to get these? Think of your skills and abilities, what do you

have to offer? What can you trade? Make a list of bartering in today’s society. Barter and trade with each of your classmates. ▪ Example: I bake a lot but Mrs. Hahn does not. Mrs.

Hahn has a Chicken Soup book I really want to read. So, I am going to offer to bake for the party she is planning next week in return for using her Chicken Soup books.

9000 B.C.- 806 A.D.

Cattle (9000-6000 B.C.) Cowrie Shells (1200 B.C.) First Metal Money and Coinage

(China, 1000 B.C.) Modern Coinage (Turkey, 500 B.C.) Leather Money (China, 118 B.C.) “The Nose” (Ireland, 800-900 A.D.) Paper Currency (China, 806 A.D.)

Currency in the “New World”

Potlach (1500)- the exchange of gifts at banquets, dances, and various rituals

Wampum (1535)- strings of beads made from clam shells used by North American Indians as money. Wampum means white, the color of the

clam shells and the beads

United States Currency

1816-England made gold a benchmark of value Value of currency was pegged to a

certain number of ounces of gold Helped to prevent inflation of currency

1900- U.S. went to the gold standard 1930- Because of the depression the

U.S. began a world wide movement to end tying currency to gold

The Role of Money:Our Currency

Purpose of U.S. Currency

Money serves three purposes: Medium of Exchange- People accept

money in trade for goods and services Standard of Value- the value of a good

or service can be measured with money

Store of Value- money can be saved and used in the future

Characteristics of U.S. Currency

Scarce Durable Portable Divisible Stable Acceptable

Worth of U.S. Currency

Fiat money- money with no real value except the government’s power that backs it “Cash” “Legal Tender”

U.S. Currency is no longer backed by gold

Features of U.S. Currency

Cotton and linen rag paper, which has a distinctive, pliable feel and has tiny red and blue fibers embedded in it

Color-shifting ink Denominations

$1, $2, $5, $10, $20, $50, $100▪ Nearly all purchases we make involve

amounts less than $20

Other Important Features

Series Serial Number Portraits and Emblems Size “In God We Trust”

Currency Design

Currency Design

Independence Hall

The White House

LincolnMemorial

U.S. Treasury Building

Signing of theDeclaration of Independence

Great Seal of the U.S.

U.S. Capitol Building

Security Features of U.S. Currency

FDIC and Federal Reserve

Who is FDIC?

Federal Deposit Insurance Corporation

Part of the federal government Makes rules for banks in all 50

states, District of Columbia, Virgin Islands, Guam, and Puerto Rico

Where?

Located in Washington, DC with regional offices throughout the U.S.

What does FDIC do?

The FDIC's biggest job is insuring the savings of millions of Americans in all the FDIC insured banks across the U.S.

Visits banks on a regular basis to ensure they are following all rules and regulations Operating profitably and fairly

What does FDIC do?

When a bank has a sign on it that says "Insured by FDIC" it means that if the bank doesn't have enough money to pay back the people it owes money to, including the bank's depositors, and is closed, the FDIC will make sure all of the depositors get their money Up to 250,000 per depositor, per bank.

Why was it created?

The Great Depression of the late 1920’s and early 1930’s caused financial problems

Stock Market crashes led to “bank runs”

People who had money in banks lost some or all of their money

Why was it created?

Why was it created?

President Franklin D. Roosevelt June 1933- FDIC was created to

provide a federal government guarantee of deposits

The guarantee says a person's money, within certain limits, would be safe.

Since the start of FDIC insurance, no one has lost a cent of insured money because of a bank failure

Federal Reserve

“the Fed” or “banker’s bank” Central bank of the U.S. Created by congress

Provide safer, more flexible, more stable monetary and financial system

December 23, 1913- President Woodrow Wilson signed the Federal Reserve Act into law

Federal Reserve’s role

Conducting the nation's monetary policy influencing money and credit conditions in the

economy Supervising and regulating banks and other

important financial institutions ensure the safety and soundness of the nation's

banking and financial system protect the credit rights of consumers

Providing certain financial services to the U.S. government, U.S. financial institutions, and foreign official institutions Plays a major role in operating and overseeing the

nation's payments systems.

Federal Reserve’s Role

Bureau of

Engraving and Printing

Federal Reserve

Your bank

You

Calculating Interest

When money is put into an interest bearing account (Savings, CD’s, mutual funds, and some checking accounts) interest is earned

Interest (in this unit) is money paid to customers for using their account

Calculating Interest

I= p x r x t or I=prt I= interest p= principal- the amount in the

account r= interest rate- annual percentage

of the principal that is accruing interest

t= time- length of time the money is in the account

Calculating Interest

What if money is invested for less than 1 year? Time will be expressed as part of a year

(ex. 6 months= ½ year or .5, 180 days = 180/360 or .5)

Calculating Interest

What fraction of a year are the following times, assuming there are 360 days in a year?

180 days ______________ 90 days _______________ 365 days ______________ 3 months ______________ 9 month ______________

Calculating Interest

Principal Rate Time Interest

i.e. $300.00 6% 6 months $9

$4500.00 9% 180 days

$800.00 5% 90 days

$3000.00 10% 365 days

$9500.00 12% 3 months

$1000.00 10% 9 months

$45280.00

14% 6 months

Calculating Interest

Interest Rate As a Percent

Divide by 100 Interest Rate As a Decimal

10% 10/100 .10

6% 6/100 .06

6.25% 6.25/100 .0625

125% 125/100 1.25

Calculating Interest Exit Slip

Answer the following questions on your own.

1) Isabella deposited $500 into a savings account at a local bank that earned 5 ½ % interest per year. How much interest does she earn per year? _______________

2) How much interest does a $10,000 investment earn at 5.6% over 18 years?

_________________

Calculating Interest Exit Slip

Complete the table below:Principal Rate Time Interest

i.e. $300.00 6 6 months $9

1 $700.00 9 ¼ 180 days

2 $800.00 5 ½ 90 days

3 $3000.00 10 ¾ 365 days

4 $9500.00 12 ¼ 3 months

5 $5125.00 10 ¾ 3 years

6 $2250.00 5 165 days

Calculating Interest

When time is more than one year

Principal Rate Time (years)

Interest Total Paid

Ex. $450.00 6% 2 $54.00 $504.00

1 $4500.00 9% 6

2 $800.00 5% 3

3 $3000.00 10% 5

4 $9500.00 12% 2

5 $1000.00 10% 1

6 $45280.00

14% 2

Calculating Interest

To find the rate you must convert your percent into a fraction

Interest Rate As a Percent

Divide by 100 Interest Rate As a Decimal

10% 10/100 .10

6% 6/100 .06

6.25% 6.25/100 .0625

125% 125/100 1.25

Calculating Interest

To find the time (t), if less than one year, you must divide by the number of days or number of months

Ex. 3 months would be divided by 12, the number of months in a year, to find what portion of the year you are calculating in months. 3 months = .25 year

Ex. 180 days would be divided by 365 (or 360 if stated) to find what portion of the year you are calculating in days.

Calculating Interest

Karen invests $300 into a CD for 5 months at a rate of 6%. What will Karen make in interest? What will Karen make total?

Karen invests $500 into a CD at a different bank for 9 months at a rate of 3 ¾%. What will Karen make in interest? What will Karen make total?