1. Ch. 10
Money

2. Money-Anything that serves as a medium of exchange, a unit of account, and a store of value.

6. 3 Uses of Money
Medium of Exchange-anything used to determine value during the exchange of goods and services.
Unit of Account-money provides a means for comparing the values of goods and services
Store of Value-means that money keeps its value if you decide to hold onto-or store it instead of spending it.
*When an economy experiences inflation, money does not function as well as store of value.

7. 6 Characteristics of Money
Durability-must withstand physical wear and tear.
Portability
Divisibility
Uniformity-money must be the same
Limited Supply
Acceptability-we can spend American Money anywhere in the U.S.

8. Sources of Money’s Value
Commodity money-objects that have value in themselves
Representative Money-makes us of objects that have value because the holder can exchange them for something else of value.
Fiat Money-legal tender, b/c the government says so

9. History of the American Banking System
1791-1st Bank of U.S.
20 years
brought order and stability to American Banking
1816-2nd Bank of the U.S.
restored order
vetoed b/c of lack of distrust
1837 to 1863-Free Banking Era
dominated by state banks

11. National Banking Acts of 1863 & 1864
Power to charter banks
Require banks to hold adequate gold and silver reserves
Issue national currency
Gold Standard-a monetary system in which paper money and coins are equal to the value of a certain amount of gold.
1913-Federal Reserve System
-nation’s first central bank
1933-Federal Deposit Insurance Corporation (FDIC)-insures customer deposits if a bank fails

12. Money Supply All the money available in the United States Economy M1
Assets that have liquidity or the ability to use or convert into cash M2
All assets in M1 plus Saving Deposits, Small Denomination CD’s and Money Market Funds

13. Banking Today Federal Reserve Note
National currency we use today in the U.S.

14. Loans Default Mortgage Interest Principal Failure to pay back a loan
Used to purchase real estate
Interest
Price paid for use of borrowed money
Principal
Amount of money borrowed