Economics Honors UNIT 3 Chapters 10 & 11 Money, Banking, and Finance

What is Money? Money is anything that serves as a medium of exchange, a unit of account, and a store of value.Money is anything that serves as a medium of exchange, a unit of account, and a store of value. Money as Medium of Exchange –A medium of exchange is anything that is used to determine value during the exchange of goods and services. Money as a Unit of Account –A unit of account is a means for comparing the values of goods and services. Money as a Store of Value –A store of value is something that keeps its value if it is stored rather than used.

6 Characteristics of Money Group Activity Count off by 6’s Each group will: 1.Define the characteristic of money assigned 2.Explain the importance of that characteristic. 3.Create a short story (3 sentences or less) illustrating the characteristic.

The Six Characteristics of Money The coins and paper bills used as money in a society are called currency. A currency must meet the following characteristics:

3 Types of Money Commodity money consists of objects that have value in themselves.Commodity money consists of objects that have value in themselves. Representative money has value because the holder can exchange it for something else of value.Representative money has value because the holder can exchange it for something else of value. Fiat money, also called “legal tender,” has value because the government decreed that is an acceptable means to pay debts.Fiat money, also called “legal tender,” has value because the government decreed that is an acceptable means to pay debts.

A now it is time for a brief history of the American Banking system….. Group 1: 1 st and 2 nd National Banks ( )Group 1: 1 st and 2 nd National Banks ( ) Group 2: Jackson and the Era of Free Banking ( )Group 2: Jackson and the Era of Free Banking ( ) Group 3: What the Civil War did for banks ( )Group 3: What the Civil War did for banks ( ) Group 4: The Gold Standard and the Federal Reserve ( )Group 4: The Gold Standard and the Federal Reserve ( ) Group 5: Modern American Banking (Great Depression to the present)Group 5: Modern American Banking (Great Depression to the present)

Presentations 1.When was the Era? Years. 2.Background info. 3.What changes took place? 4. Major PLAYAS!!!!!! 5. How does the Era still impact us today?

What….a quiz……??? A great way to review and see if Honors Econ really understood the history of banking and presentations and money in general would be to have a super-secret QUIZ that nobody saw coming………….

How Banks Work/Modern Banking ( Section 3 Chapter 10 Money Supply M1 M2 Types of accounts from banks: Protect and Save you Money Fractional Reserve Banking Bank Runs Bank Failures The Federal Reserve System The Modern Banking Crisis

The Banking System Film Questions 1.Explain how Fractional Reserve Banking works. 2.What is the Federal Reserve and what is its role in the banking system 3.How did the banking system contribute to the Great Depression? 4.How can banks “grow” or “contract” an economy?

CREDIT: What is it? Definition: borrowed $$ with interest 2 TYPES: The 4 C’s of CREDIT: Pros of Credit Cons of Credit

Let’s Talk About Today’s Economic Crisis Financial Crisis timelineFinancial Crisis timeline Break-it-down: Why did it start? When did it start? How is it impacting us? When will it end?

Inside the Meltdown: Film Questions 1.What is at the ROOT of the meltdown? 2.Why is Bear Sterns saved and Lehman Brothers allowed to fail? 3.What is a subprime mortgage (toxic asset)? 4.Define moral hazard and systemic risk. 5.How could the entire economy “meltdown” because certain companies went bankrupt? 6.In the end, what does the government do to save the economy? Do you agree?

Investing 101 (seE packet for additional info) 1. saving- 2. investment- 3. financial assets- A. Three types of investments: Q: Which type is the best?  diversification-  portfolio-  liquidity-  return-  risk-  single interest-  compounded interest- interest-

Why Invest…why not just “sit on it” 1.? 2.?? 3.???

Investment Investigation Activity Investment Investigation Honors Investment Investigation Honors

Things to know about….. 1.Savings Accounts- 2.Checking Accounts- 3.Debit Cards- 4.Certificates of Deposit- 5.Money Market Accounts-

The Rule of 72

The Magic of Compounding Interest Create your own flowchart that illustrates the “Power of Compounding.”Create your own flowchart that illustrates the “Power of Compounding.” Create an investment scenario using an interest rate between 8%-12%. Use the “Rule of 72.” Assume that compounding occurs annually.Create an investment scenario using an interest rate between 8%-12%. Use the “Rule of 72.” Assume that compounding occurs annually. How much money are you starting with? You must add to this investment every paycheck. Assume you are starting this investment at age 22. How much will you have when you are retirement age (65)?How much money are you starting with? You must add to this investment every paycheck. Assume you are starting this investment at age 22. How much will you have when you are retirement age (65)?

Things to know about BONDS… 1.Definition- 2.Maturity- 3.Par Value 4.Yield- 5.PROS – 6.CONS

Types of Bonds Government Savings- Treasury- Municipal- Private Corporate- Junk-

Stocks and Stuff Terminology 1.Definition- 2.Broker- 3.Exchange- 4.Corporation- 5.Index- 6.Basic investing tips:

Types of Stocks INCOME STOCK- GROWTH STOCK COMMON STOCK- PREFERRED STOCK-

Retirement Type Investments IRAs-IRAs- Mutual Funds-Mutual Funds- 401k-401k-