Understanding Money and Banking: Basics and Systems

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Money and Banking
 
Section 1
 
Money
 is anything that serves as a medium of
exchange, a unit of account and a store of
value
 
1) 
Medium of exchange
- anything that is
used to determine value during the exchange
of goods and services
2) 
Unit of account
- a means of comparing the
values of goods and services
3) 
Store of value
- something that keeps its
value if it is stored rather than used
 
The coins and paper bills used as money in a
society are called 
currency
.
 
1) 
Durability
- Objects used as money must
withstand wear and tear
2) 
Portability
- Easy to carry around and
transfer
3) 
Divisibility
- Easily divided into smaller
amounts
 
4) 
Uniformity
- all units of money must be
identical
5) 
Limited Supply
- Federal Reserve System
controls supply of money in circulation
6) 
Acceptability
- everyone in economy must
be able to exchange the objects that serve as
money for goods and services
 
Section 2
 
In 1913,the Federal Reserve System Act
established the Federal Reserve System. The
Fed is the nations central bank that creates
national currency called Federal Reserve
Notes.
 
After the Great Depression, the Federal
Deposit Insurance Corporation (FDIC) was
created to instill trust in banking system.
Today the FDIC insures customer deposits up
to $250,000 if a bank fails.
 
Section 3
 
The 
money supply
  is all the money available
in the U.S. economy.
 
Banks perform many functions and offer
many services to consumers
1) Store money- its safe and convenient
2) Credit Cards- cards entitling their holders
to buy goods and services based on the card
holders promise to pay
 
3) Saving money- the most common options
are:
Savings accounts
Checking accounts
Money Market Accounts
Certificates of Deposits (CDs)
 
4) Loans- Make loans to help new businesses
and help established businesses' grow
5) Mortgages- a specific loan used to
purchase real estate
 
Banks make money of interest rates they
receive from consumers who have taken
loans
Interest is the price paid on the use of
borrowed money
 
The rise of computers in banking as
increased dramatically
Automated Teller Machines (ATM)- can
deposit, withdraw cash and obtain account
information
Debit Cards- used to withdraw money from
checking account
 
Automatic Clearing Houses (ACH)- transfer
funds from customers’ accounts into
creditors’ accounts
Home Banking- can check balances or make
transfers from home computer
Store Value Cards- have magnetic strips or
computer chips with account balance
information
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Money and banking concepts explained with emphasis on the functions of money as a medium of exchange, unit of account, and store of value. Details on currency, characteristics of money, Federal Reserve System, and the role of FDIC post the Great Depression are covered.


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  1. Money and Banking

  2. Section 1

  3. Money exchange, a unit of account and a store of value Money is anything that serves as a medium of

  4. 1) Medium of exchange used to determine value during the exchange of goods and services 2) Unit of account values of goods and services 3) Store of value value if it is stored rather than used Medium of exchange- anything that is Unit of account- a means of comparing the Store of value- something that keeps its

  5. The coins and paper bills used as money in a society are called currency currency.

  6. 1) Durability withstand wear and tear 2) Portability transfer 3) Divisibility amounts Durability- Objects used as money must Portability- Easy to carry around and Divisibility- Easily divided into smaller

  7. 4) Uniformity identical 5) Limited Supply controls supply of money in circulation 6) Acceptability be able to exchange the objects that serve as money for goods and services Uniformity- all units of money must be Limited Supply- Federal Reserve System Acceptability- everyone in economy must

  8. Section 2

  9. In 1913,the Federal Reserve System Act established the Federal Reserve System. The Fed is the nations central bank that creates national currency called Federal Reserve Notes.

  10. After the Great Depression, the Federal Deposit Insurance Corporation (FDIC) was created to instill trust in banking system. Today the FDIC insures customer deposits up to $250,000 if a bank fails.

  11. Section 3

  12. The money supply in the U.S. economy. money supply is all the money available

  13. Banks perform many functions and offer many services to consumers 1) Store money- its safe and convenient 2) Credit Cards- cards entitling their holders to buy goods and services based on the card holders promise to pay

  14. 3) Saving money- the most common options are: Savings accounts Checking accounts Money Market Accounts Certificates of Deposits (CDs)

  15. 4) Loans- Make loans to help new businesses and help established businesses' grow 5) Mortgages- a specific loan used to purchase real estate

  16. Banks make money of interest rates they receive from consumers who have taken loans Interest is the price paid on the use of borrowed money

  17. The rise of computers in banking as increased dramatically Automated Teller Machines (ATM)- can deposit, withdraw cash and obtain account information Debit Cards- used to withdraw money from checking account

  18. Automatic Clearing Houses (ACH)- transfer funds from customers accounts into creditors accounts Home Banking- can check balances or make transfers from home computer Store Value Cards- have magnetic strips or computer chips with account balance information

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