1. Money and Banking $665 billion There is $665 billion in currency [notes & coins]. $37 million $37 million in notes is printed each day.

2. Money is the grease that lubricates the economic machinery of our economy. It reduces the friction of the economic exchanges. Too little oil can leave auto parts creaking; too much oil can gum up the engine. Similarly, too little or too much in currency in circulation makes exchange difficult and creates economic problems. “Money is the only commodity that is good for nothing but to be gotten rid of. It will not feed you, cloth you, shelter you, or amuse you unless you spend it or invest it. People will do almost anything for money but money will do nothing (by itself) for people.

3. FUNCTIONS OF MONEY 1.Medium of Exchange; 1. Medium of Exchange; Something usable for the buying and selling of goods and services. Money enables society to escape the complication of bartering by Avoiding the “coincidence of wants” problem.

4. The problem with a barter system is that there has to be a “coincidence of wants”. Each trader has to have something the other wants. I’ll trade you a chicken for a pair of shoes. I would love to sell you these shoes but I can’t eat chicken, due to my bad teeth, caused by smoking. Barter – trading goods and services for good and services.

5. Unit of Account; 2. Unit of Account; Society uses money as a yardstick for measuring the relative worth of a wide variety of goods, Services, and resources. Example: A new car selling for $32,000, is worth 32,000 monetary units. A $2 item is twice as valuable as a $1 item.

6. It is less expensive to use money; because by having posted monetary values (prices) businesses have to compete for your dollars. Economic exchanges are faster and easier; because whatever the price is, that’s the price you pay (except in Cancun), there is no haggling. $ 2.00 Here’s $3.29 for one gallon. “She’s fast.”

7. 3. Store of Value; 3. Store of Value; money can be stored as wealth for future use. Money does not wear out like commodities; but it can wear out from too much inflation. Too much inflation can cause money to loose its function as a store of value. Greek Coin 2,500 years old

8. Types of Money Types of Money Commodity MoneyCommodity Money; something that performs the function of money but also has intrinsic value by itself. –Milk, meat, tabacco, corn = Representative money Representative money ; paper currency backed by something of intrinsic value. - $35 of currency could be redeemed for $35 worth of gold or silver. The nation’s supply of precious metals could not keep up with the growing economy, so we ended in 1963.

9. Fiat MoneyFiat Money: paper currency backed by nothing of intrinsic value other than the government command that it will be used as a medium of exchange. –Federal Reserve Notes & coins (token money). And pay me with the paper I’ve printed.

10. M1 $1,236 billion M1 Money: is the narrowest definition of the U.S. money supply. It includes; Currency in the hands of the public.Currency in the hands of the public. Checkable deposits. Checkable deposits. MONEY DEFINITION 2-3% 46% 52%

11. M1M2 $1,236 billion $5,899 billion M2 Money: is called “near- monies” because it contains very liquid assets that do not function directly as a medium of exchange, but can be converted into currency easily. Savings accounts Money market accounts Timed deposits Money Market Mutual Funds

12. M1M2M3 $1,236 billion $5,899 billion $8,595 billions M3 Money: includes all large ($100,000 or more) time deposits =

13. WHAT ABOUTCREDIT CARDS? WHAT ABOUT CREDIT CARDS? Are They Money? No they are not “plastic money.” They are simply a means of obtaining a short-term loan from the bank that issued the card. Credit cards are merely a means of deferring payment Till the future.

14. WHAT ABOUTDebit CARDS? WHAT ABOUT Debit CARDS? Are They Money? Debit cards are considered M1 money; because purchases are deducted from a checking account. They serve as a plastic check. Debit Card

15. Money & Prices The purchasing power of money is the amount of goods and services a unit of money (dollar) will buy. When money loses its purchasing power, it loses its role as money.

16. The amount a dollar will buy varies inversely with the price level. When the consumer price index or “cost-of-living” index goes up, the value of the dollar goes down. Value of Money Prices D = 1/PL

17. The Federal Reserve - 1913

18. Structure of the Fed 1.Seven Board of Governors - oversees the Federal Reserve System. - appointed by the President and confirmed by the Senate - serve 14-year terms (one replaced each two years) - long terms isolate them from political pressure of Congress - the Chairman serves four years but can be reappointed

19. Federal Open Market Committee [FOMC] 2. Federal Open Market Committee [FOMC] -Sets the Fed’s monetary policy and directs the purchase & sale of government securities -includes the board governors, NY Federal Reserve Bank President, & 4 other Federal Reserve bank presidents -they meet every six weeks

20. 3. Twelve Federal Reserve Banks -Collectively serving as the nation’s “central bank.” - They implement the policies of the Board of Governors.

21. Quasi-Public Banks The 12 banks are instruments of the federal government and must follow federal guidelines But the government does not owned the Federal Reserve. The over 5,000 banks in the 12 districts buy stock ($1 per share) in their district bank. So private banks are the owners.FED

22. Functions of the Fed Issuing currency; the Fed is in charge of putting money into circulation. Setting reserve requirements & holding reserves; the Fed requires banks to keep a fraction of their account balances in reserve in their regional Federal Reserve. Lending money to banks; the interest charged for these loans are called the discount rate. Clearing checks; the Fed collects and clears all personal checks, by deducting the amount from the checks bank and adding the amount to the cashiers banks.

23. Functions of the Fed Fiscal agent; the Fed collects, and stores tax revenue, as well as pays government purchases. Supervising banks; the Fed makes periodic examinations to assess a banks assets and debts. Controlling the money supply; the Fed’s most important function is utilizing monetary policy to stabilize the economy.

24. Scored 1590 on SAT Just quit

25. The End