1. TECHNICAL DEFINITION (ridiculous)
CH. 10: MONEY WHAT IS MONEY?
TECHNICAL DEFINITION (ridiculous)
:anything that can be used as a “medium
of exchange,” “unit of account” and “store of value?”

2. Medium of Exchange
YOU CAN USE IT BUY GOODS/SERVICES

3. STORE OF VALUE IT HOLDS ITS VALUE
Ex: one dollar will always equal one dollar (what it can buy may change due to inflation)

4. UNIT OF ACCOUNT $29 MP3 Player
CONSUMERS KNOW THE VALUE OF SOMETHING WHEN YOU ASSIGN A MONEY AMOUNT TO IT
$29 MP3 Player
$129 MP3 Player

5. MONEY HAVE THESE 6 CHARACTERISTICS:
DURABLE: last a long time
PORTABLE: easy to carry
DIVISIBLE: easily broken down into
smaller units
UNIFORM: easily counted and measured
LIMITED: (self explanatory)
ACCEPTABLE: everyone in the economy uses it

6. TYPES OF MONEY FIAT: the government says its valuable COMMODITY:
in and of itself
REPRESENTATIVE:
it stands for
something of value
FIAT:
the government
says its valuable

7. Banking in America

8. Two views on banking :
Federalists believed in a strong central government
Alexander Hamilton believed in a central bank
Anti-federalists against strong central government
Thomas Jefferson wanted individual states to monitor banking

9. The free banking era
Bank runs and panic – great numbers of people all tried to take money out
at the same time.
Wild cat banks – banks that were chartered under state law, suffered from high
rate of failure

10. During the Civil War: The North used fiat $$ called “greenbacks”
The South used $$ backed by cotton

11. THE FEDERAL RESERVE REGULATES OUR BANKING SYSTEM (CH. 16)

12. BANKS HELP TO: MEASURE THE MONEY SUPPLY
Easy Access Money:
Cash
Checks
Debit Card
Slower Access Money:
Savings Accounts
Mutual Funds
CDs

13. BANKS ALSO: KEEP YOUR MONEY SAFE ALLOW YOU TO SAVE MONEY
LOAN MONEY FOR HOMES, CARS, ETC.
CREDIT CARDS AND MORE!

14. 5 TYPES OF BANKS: Commercial Savings and Loan Savings Credit Unions
Finance Companies

15. Types of bank accounts –
Savings
Checking
Money Market
Certificate of Deposit

16. HOW DO BANKS MAKE MONEY? The Federal Reserve requires that banks
FRACTIONAL RESERVE SYSTEM:
The Federal Reserve requires that banks
keep a portion of all deposits on hand

17. THEY LOAN THE REST TO OTHER PEOPLE...
PRINCIPAL:
What you borrow
INTEREST:
What you pay the bank
in exchange for
borrowing
DEFAULT:
If you do not pay it back

18. BANKS ARE NOW ELECTRONIC!!