1. Money supply- all the money available in the US economy. 2.M1-represents all money that people can gain access to easily and immediately to pay for goods and services. a. Liquidity-ability to be used as or directly converted into cash.

c. M1 also inlcudes depostis in checkin accounts, called demand deposits. 3. M2-Consists of M1, plus near money, which are funds that cannot be converted into cash directly. ex. Deposits into savings accounts. ex. Money Market Mutual funds- a fund that pools $ from small savers to purchase a short term gov’t or corporate security.

1. Storing Money a. Banks provide a safe convenient place to store money. 2. Saving Money a. Savings accounts, checking accounts, money market accounts. 3. Loans a. Money is lent for a price, which is called interest.

1. Mortgage- a type of loan that is used to buy real estate. 2.Credit cards-a card entitling the owner to buy goods and services based on that holder’s promise to pay for the goods and services in the future. 3.Car loans and student loans 4. Simple and Compound Interest a. Interest is the price paid to borrow money. b. Principal is the amount of money borrowed. c. Compound interest is the interest paid on both the principal and the interest in your account.

1. Commercial Banks a. Offer checking services, accept deposits, and make loans. b. Some are chartered by the state, and others are regulated by state authority and by the FDIC c. Commercial banks provide the most services and play the largest role in the economy of any type of bank.

a. Originally chartered to lend money for building homes in the mid-1800’s. b. Members of the association deposited money into a large general fund, and then borrowed enough to buy their own homes. 1. S&L’s are called thrifts because it used to enable thrifty people to save and borrow. 2. S&L’s have taken on many of the functions of commercial banks.

a. Originally intended for people who made smaller deposits and transactions than commercial banks wanted to handle. b.Later, these banks began to sell stock to raise capital. c.These banks became savings banks after a period of time because depositor’s no longer owned them.

a. These institutions are cooperative lending associations for particular groups, usually employees of a specific firm or government agency. b. These institutions are normally small and specialize in mortgages and car loans with low interest rates.

a. These institutions make installment loans to consumers. b. These loans spread the life of the loan over a few months instead of years. c. They generally charge higher interest rates because the loan is paid of quicker.

1. ATM’s 2. Debit Cards- a card used to withdraw money. 3. Home Banking- financial business is being done via Internet. 4. Automatic Clearing Houses-Allow customers to pay bills without writing checks.