Chapter Nineteen The American Economy Personal Finances ~~~~~ Money and Credit

Money items that have been accepted as money cows, pigs, guns, playing cards, furs, salt, olive oil, stones, knives, tobacco, copper, iron, wampum beads, shells, rings, silver, diamonds currency another term for coins and paper money every country in the world has one all share three common features 1.must be easy to carry take up little space so people can carry it with them for everyday use 2.must be durable, or last a long time it should not wear out too quickly or fall apart people must be able to keep currency until they are ready to spend it 3.must be made in a standard form and must be guaranteed by the government of the country that issues it citizens can be certain that their coins and bills will be accepted in exchange for goods and services

legal tender all U.S. paper money and coins the law requires that every American accept it as payment in exchange for all goods and services the Constitution grants Congress the sole right "to coin money, [regulating] the value thereof.... mint plant where coins are made coins for general circulation Philadelphia, Pennsylvania Denver, Colorado commemorative, or special occasion, coins San Francisco, California (closed) West Point, New York U.S. Money

coins called hard money because usually made of hard metal all coins are alloys, or mixtures, of metals copper-coated zinc copper and nickel for many years the value of a coin was equal to the value of the metal that it contained silver dollar yielded about a dollar's worth of silver when melted down government supply of gold and silver bullion helps strengthen the country's financial position depository at Fort Knox, Kentucky six coins used in the U.S. penny 1¢, nickel 5¢, dime 10¢, quarter 25¢, half-dollar 50¢, dollar coin paper money Bureau of Engraving and Printing in Washington, D.C denominations used in the U.S. $1, $2, $5, $10, $20, $50, and $100 bills recently redesigned to make it more difficult to counterfeit denominations of $500, $1,000, $5,000, $10,000 no longer issued removed from circulation by banks

checks bank deposits are amounts of money in bank accounts represents the amount of credit held in personal or business accounts amount of money the bank makes available for personal or business use a person or business can spend the money in a checking account at any time by writing a check account maintained by depositing cash or checks from others they are not legal tender because they are not issued and guaranteed by the federal government signature on a check is a promise that there is sufficient credit in an account to cover the amount of a check fines or criminal penalties for people who knowingly write bad checks overdraft fees charged by most banks and businesses banks send customers monthly statements of account activities debit cards small cards that operate the same way that checks do money is instantly deducted from the account when the card is used Checking Accounts

charge account method by which a store extends credit to customers charge cards allow them to buy things without paying cash amount of the purchases is added to their accounts customers receive a monthly bill customer writes a check for all or part of the bill interest is charged on the unpaid portion store deposits the check in its own bank, which then sends the check to the customer's bank customer's bank subtracts the amount of the check from the customer's account credit cards American Express, VISA, MasterCard, Discover issued by banks and other major lending institutions customer presents the credit card when making a purchase business charges the credit card company the purchase amount credit card company then pays the store or business and charges the customer for the amount of the purchase customer pays all or part of the bill once a month interest is charged on the unpaid portion Charge Accounts & Credit Cards

Credit business credit used in most sales involving large amounts of goods allows them to purchase a large quantity of goods now and pay at the end of the month or within 90 days large finance charges will be added to any unpaid balance creditors may demand immediate payment might be forced to sell the business to pay the debts family credit can help a family make emergency purchases short-term credit pay off an item within a few weeks or months long-term credit pay a certain amount each month until the total has been paid large purchases - homes, automobiles, large appliances, furniture unable to pay credit bills repossession businesses take back the purchases bankruptcy legal declaration that a person or business cannot pay debts owed hurts credit rating for years

Credit in the Economy credit plays several important roles in the buying and selling of goods and services in a free market plays an important role in the successful operation of the U.S. economy as a whole healthy economic system the supply of money must increase or decrease in relation to the economy's general condition free-flowing money in the form of credit makes it possible for consumers to buy whenever there are goods to be sold when production is high and business is doing well tightening credit discourages people from borrowing money and can also reduce consumer spending when production slows and prices may begin rising