Chapter 12 Money and Financial Institutions 12.1 Money and Banking

The Purpose of Money Money: A standard of value and a means of exchange or payment. Monetary System: A system in which goods and services are directly exchanged using money.

Functions of Money Medium of exchange- anything that is generally accepted as a measure of value and wealth Standard of value- a way to measure the value of goods and services Store of value- it holds its values over time and can be stored or saved

Characteristics of Money Money must be accepted. People must be willing to accept money in return for goods and services. Money must be scarce. An overabundance of money will reduce its value.

Functions of Banks Financial Institutions: A firm that manages money. Bank account: A record of the amount of money a customer has deposited into or withdrawn from a bank. Deposit: The money put in a bank account Withdrawal: The money taken out of a bank account Interest: A rate that the bank pays customers for keeping their money

Transferring Money Electronic Funds Transfer: Allows money to be transferred from one bank to another Direct Deposit: The electronic transfer of a payment directly from the payer’s bank account to that of the party being paid

Lending the Money Collateral: Property or goods pledged by a borrower to use as security against a loan if it is not repaid. Mortgage: An agreement in which a borrower gives a lender the right to take the property if the loan is not repaid

Other Services Safe Deposit Box: A secure box in a bank’s vault used for the safe storage of a customer’s valuables.

Homework Type out all definitions for Ch. 12 Complete the 12.1 Reading Activity and Graphic Organizer Review the questions on pg. 200, 1-3