Today, you’ll need out… Your notebook Vocab sheet [10-11] One separate sheet of paper w/ name at top

Chapter 10

Section 1

1. How long have people been using money? 2. Besides the paper money we use today, what else do you think may have been used as money in the past?

How can we define money? How can we define money? Money is: Money is: Anything that serves as a _________, a ______________, and Anything that serves as a _________, a ______________, and a ______________.

How can we define money? How can we define money? Money is: Money is: Anything that serves as a medium of exchange, a _____________, and Anything that serves as a medium of exchange, a _____________, and a ____________.

How can we define money? How can we define money? Money is: Money is: Anything that serves as a medium of exchange, a unit of account, and Anything that serves as a medium of exchange, a unit of account, and a ____________.

How can we define money? How can we define money? Money is: Money is: Anything that serves as a medium of exchange, a unit of account, and Anything that serves as a medium of exchange, a unit of account, and a store of value.

Medium of ExchangeMedium of Exchange – Physically exchanged for goods and services Unit of Account – Unit of Account – – A means for comparing the values of goods/services Store of Value –Store of Value – – Something that keeps its value if it is stored rather than used

How did people survive before money was “invented” ??? How did people survive before money was “invented” ??? Barter – the direct exchange of one set of goods/services for anotherBarter – the direct exchange of one set of goods/services for another

Money that is in the form of paper bills and coins is called currency. Money that is in the form of paper bills and coins is called currency. In the past, societies have used many different objects as their own form of money. In the past, societies have used many different objects as their own form of money. Experts say that for an object to work well as money… it would need 6 characteristics. Experts say that for an object to work well as money… it would need 6 characteristics. What are they?

Must be able to withstand the physical wear and tear that comes with being used over and over again Must be able to withstand the physical wear and tear that comes with being used over and over again

People need to be able to take money with them as they go about their daily business People need to be able to take money with them as they go about their daily business

Must be easily divided into smaller denominations or units Must be easily divided into smaller denominations or units – Ex. 100’s, 20’s, 10’s, 5’s, 1’s, quarters, dimes…

Any two units must be the same in terms of what they will buy. Any two units must be the same in terms of what they will buy. – Each identical unit needs to be the same size, weight, dimensions…

“Money would not be useful if it grew on trees.” “Money would not be useful if it grew on trees.” – Why? The supply must stay somewhat constant, or controlled, otherwise rapid inflation would occur.

People must be able to take this money nearly anywhere and others will accept it as having a certain value. People must be able to take this money nearly anywhere and others will accept it as having a certain value. – Can you take money to the mall, to the grocery store, to the bank, and will others be willing to trade you for it?

Commodity Money Commodity Money – Has value, but is also used as money Representative Money Representative Money – Has value because it represents a good of value, and can be exchanged for that anytime Fiat Money Fiat Money – Money that has value because the government says that it has value

CommodityMoneyFiatMoney RepresentativeMoney

1)What are the 3 uses for money? 2)How does money make doing business easier? 3)What was it like before there was money? 4)What characteristics must money have to be useful? (6 – as many as you can) 5)What is the difference between commodity money and representative money? 6)Why does the US use fiat money today?

Section 2

A Bank is: A Bank is: an institution that exists to RECEIVE, KEEP, and LEND money

When the United States of America had just been formed, there were some serious arguments about how the country should be founded. When the United States of America had just been formed, there were some serious arguments about how the country should be founded. One of the most important divisions that arose was between Thomas Jefferson and Alexander Hamilton. One of the most important divisions that arose was between Thomas Jefferson and Alexander Hamilton.

Thomas Jefferson : Secretary of State under George Washington Alexander Hamilton : Secretary of Treasury under George Washington Can’t we all just get along???

Most historians agree that the creation of a central, or national BANK OF THE UNITED STATES, helped the country to avoid many problems. Most historians agree that the creation of a central, or national BANK OF THE UNITED STATES, helped the country to avoid many problems. By following Hamilton’s advice, the US built up credit and good faith among other nations. This helped the US to grow to industrial dominance a century later. By following Hamilton’s advice, the US built up credit and good faith among other nations. This helped the US to grow to industrial dominance a century later.

Bank Run – Widespread panic in which many people try to redeem their paper money at the bank Bank Run – Widespread panic in which many people try to redeem their paper money at the bank Throughout the 1800s, Banks were far from perfect. Throughout the 1800s, Banks were far from perfect. In times of crisis, panic occasionally set off a BANK RUN. In times of crisis, panic occasionally set off a BANK RUN.

By the 1870s, the US adopted a system called the GOLD STANDARD By the 1870s, the US adopted a system called the GOLD STANDARD Gold Standard – A system in which paper money and coins are equal to a certain amount of gold. Gold Standard – A system in which paper money and coins are equal to a certain amount of gold. Thus, if you had a $50 bill, there was 50 dollars worth of gold sitting somewhere (like Fort Knox) backing up that paper money.Thus, if you had a $50 bill, there was 50 dollars worth of gold sitting somewhere (like Fort Knox) backing up that paper money.

The FED The first true CENTRAL BANK The first true CENTRAL BANK A system of 12 Regional Federal Reserve Banks across the US. A system of 12 Regional Federal Reserve Banks across the US.

Jobs of the FED: To act as the Bank’s Bank To act as the Bank’s Bank Banks may store extra money in a FED accountBanks may store extra money in a FED account Banks may borrow short-term loans from the FEDBanks may borrow short-term loans from the FED To maintain the money supply… creating FEDERAL RESERVE NOTES – in the US mints To maintain the money supply… creating FEDERAL RESERVE NOTES – in the US mints To control the money supply by setting the interest rate To control the money supply by setting the interest rate

The Money Supply is: all the money available in the US Economy. This includes: This includes: Cash Cash Checking & Savings Deposits Checking & Savings Deposits Money Market Funds Money Market Funds

What do you remember about the Great Depression? What do you remember about the Great Depression? – What were the causes? – How was it really depressing? – How did the US get out of the depression?

Federal Deposit Insurance Corporation (FDIC) The FDIC insures customers deposits if a bank fails. The FDIC insures customers deposits if a bank fails. Today, the amount insured is up to $100,000 per account. Today, the amount insured is up to $100,000 per account.

1)How did the creation of a National Bank help the United States to survive its early years? 2)Who’s idea was it to create a BANK of the US? 3)Why was Jefferson opposed to the idea of focusing on building up the US industry 4)Why did the US begin using the Gold Standard? Why isn’t US money backed by gold today? 5)How has the FDIC helped people to have more trust in their banks?

Section 3

What is a Mortgage? What is a Mortgage? A specific type of loan that is used A specific type of loan that is used to buy real estate [ land/property/housing ]

When you take out a loan, the bank gives you the amount of dollars, and you agree to pay it back over time (usually in monthly installments) When you take out a loan, the bank gives you the amount of dollars, and you agree to pay it back over time (usually in monthly installments) – Principal – The amount that goes toward actually paying down the debt – Interest – The price charged for the use of this borrowed money

What are the ADVANTAGES? What are the ADVANTAGES? What are the DISADVANTAGES? What are the DISADVANTAGES? – What YOU should be aware of regarding your Credit Cards? Interest Rate (APR) LimitFeesOnline? Any Rewards? Special Deals to sign up?

Just about any loan or credit card you apply for will COMPOUND the interest you owe. Just about any loan or credit card you apply for will COMPOUND the interest you owe. How does Compound Interest work? How does Compound Interest work? – Check out figure 10.7 (p. 261) to see what this looks like. How can this work against you?How can this work against you? How can this work for you?How can this work for you?

Convenience Convenience – Is it out of the way? Customer service? Online Banking (if you plan to use it) Services Services – Savings, Checking, ATM, Debit Card, … Watch out for Fees! Watch out for Fees! What is the Interest Rate? What is the Interest Rate?

1)What are the 3 primary functions of a BANK? 2)What is a real estate loan commonly called? 3)What is the difference between principal and interest? 4)Name three factors you should consider in choosing what bank you will do business with 5)Name three things you should find out before applying for any credit card 6)Has technology improved the banking industry? Why / Why not?

TOPIC: The Future of Money TOPIC: The Future of Money – Read pp – Answer Questions 1-4 – We will discuss your thoughts on this issue