Money and Banks
What is money?
• Economists say:
– Money is anything people are willing to accept
in exchange for goods or services.
• Throughout history:
– Salt, animal hides, gems, and tobacco have
been used.
3 Functions of Money…
1. Medium or form of exchange
•
•
We trade money for goods and services
Without money we would have to barter
2. Serves as a store of value
•
We hold our wealth in the form of money
until we use it
3. Serves as a measure of value
•
Money assigns value to a good or service
Types of Money
• Coins
– The metal form of money like the penny!
• Currency
– paper money and coins
Why does money work?
• It works because we accept that they have
value. We know others will accept it.
The Financial System
Commercial Banks
• offer full banking services such as
checking & savings accounts, loans, lines
of credit, Certificates of Deposits, etc.
• have a large influence on financial industry
Examples:
The Financial System
Savings and Loan Associations
• Traditionally used for home loans
• Accept deposits and issue savings
accounts
• Usually found in smaller towns
The Financial System
Credit Unions
• Not for profit
• Must be a member to use
• Certain business, labor unions and governments
have credit unions
• Usually have lower fees and interest rates
Examples: Teacher Federal Credit Union
Anoka Hennepin Credit Union
How do banks make money?
• You deposit money in a bank
• The bank uses some of that money to
make loans to other customers
• The bank charges interest (a fee to use
the money) on the loan
Safeguarding Our Financial System
• As a result of the financial collapse of the
1920’s, our financial system is regulated
and insured to protect consumers.
• Banks are required to report to one or
more regulatory agencies
• Banks must follow rules and accounting
practices that minimize risk
Safeguarding Our Financial System
FDIC (Federal Deposit Insurance
Corporation)
• created in 1933
• government agency
• protects consumers deposits (up to
$250,000) when a bank fails
• It used to be $100,000 but the raised the
protection
Why don’t they just print more
money?!?!
• http://www.youtube.com/watch?v=rACvkA
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• http://www.youtube.com/watch?v=d_Yrvfpr
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