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A merican C ivicsHOLT HOLT, RINEHART AND WINSTON1 Chapter 19 Managing Money Section 1:Money and Credit Section 2:Banks and Banking Section 3:Saving and Investing Section 4:Insurance Against Hardship
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A merican C ivicsHOLT HOLT, RINEHART AND WINSTON2 Chapter 19 OBJECTIVES What are the four basic characteristics of currency? Why do people and businesses accept checks as payment instead of cash? How is credit important in families and in the economy as a whole? Section 1:Money and Credit
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A merican C ivicsHOLT HOLT, RINEHART AND WINSTON3 Chapter 19 Four basic characteristics of currency: Must be easy to carry and take up little space Based on system of units easy to multiply and divide Must be durable Must be in a standard form and guaranteed by the government Section 1:Money and Credit
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A merican C ivicsHOLT HOLT, RINEHART AND WINSTON4 Chapter 19 Why do people and businesses accept checks? Much of the U.S. money supply is in the form of bank deposits. A check is a promise of funds sufficient to cover stated amount. Insufficient funds and overdrafts are punished with fines or criminal penalties. Section 1:Money and Credit
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A merican C ivicsHOLT HOLT, RINEHART AND WINSTON5 Chapter 19 The Importance of Credit Credit allows wholesalers to buy a larger quantity of goods at once. Families use credit for emergency purchases and large purchases. Credit enables consumers to buy when production is high and goods are being sold. Consumer spending encourages economic growth. Section 1:Money and Credit
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A merican C ivicsHOLT HOLT, RINEHART AND WINSTON6 Chapter 19 OBJECTIVES What is the FDIC, and how does it help depositors? What caused the savings and loan crisis in the 1980s? How and why does the Federal Reserve System regulate the amount of money in circulation? Section 2:Banks and Banking
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A merican C ivicsHOLT HOLT, RINEHART AND WINSTON7 Chapter 19 The FDIC: FDIC—Federal Deposit Insurance Corporation A government agency Insures accounts in commercial and savings banks for up to $100,000 Section 2:Banks and Banking
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A merican C ivicsHOLT HOLT, RINEHART AND WINSTON8 Chapter 19 The savings and loan crisis: 1980s—many of the banks involved in risky loans, bad investments, and fraud Hundreds of the banks failed The FSLIC ran out of money, and debt was passed on to the FDIC. The Resolution Trusts Corporation was established to sort out the crisis. 1999—cost to taxpayers estimated at $165 billion Section 2:Banks and Banking
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A merican C ivicsHOLT HOLT, RINEHART AND WINSTON9 Chapter 19 The Federal Reserve System regulates the money in circulation: Regulation prevents bank failure. The Fed controls money circulation to keep the economy healthy. The Fed buys government bonds from banks and individuals to increase circulation and speed economic growth. The Fed sells government bonds to take money out of circulation when economy grows too fast. Member banks can borrow money from the Fed to increase their reserves. Section 2:Banks and Banking
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A merican C ivicsHOLT HOLT, RINEHART AND WINSTON10 Chapter 19 OBJECTIVES Why is it important to save money? What are some ways people save and invest their money? How does saving money help the U.S. economy? Section 3:Saving and Investing
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A merican C ivicsHOLT HOLT, RINEHART AND WINSTON11 Chapter 19 The importance of saving money: People save for education, emergencies, retirement, and large purchases. Credit purchases often require a down payment in cash. Ability to make a large down payment reduces monthly payments and the total interest on a loan. Section 3:Saving and Investing
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A merican C ivicsHOLT HOLT, RINEHART AND WINSTON12 Chapter 19 Ways of saving and investing: Purchasing items that may increase in value Regular installments to a savings account that is earning interest Certificates of deposit (CDs)—interest is paid when CD matures Stocks—common and preferred stock; mutual funds; money market funds Bonds—low risk; money and earned interest is returned when bond matures Section 3:Saving and Investing
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A merican C ivicsHOLT HOLT, RINEHART AND WINSTON13 Chapter 19 Saving money helps the U.S. economy: Expansion of the economy requires capital; money in savings is used for expansion. Money saved is also money invested in the economy. Companies’ ability to raise capital promotes the country’s prosperity. Banks use money in savings to make loans to businesspeople. Businesses that save are able to reinvest in themselves. Section 3:Saving and Investing
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A merican C ivicsHOLT HOLT, RINEHART AND WINSTON14 Chapter 19 OBJECTIVES How are insurance companies able to cover the hardship costs of so many people? What is the difference between private insurance and social insurance? Why was Social Security created, and why are some people concerned about its future? Section 4:Insurance Against Hardship
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A merican C ivicsHOLT HOLT, RINEHART AND WINSTON15 Chapter 19 Insurance companies cover many people: Premiums are collected from millions of policyholders. Money is held in a reserve fund. Laws specify how much must be held in the fund. Claims are paid from the fund. Relatively few policyholders make claims each year. Other moneys are invested and profits are used to run the company. Section 4:Insurance Against Hardship
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A merican C ivicsHOLT HOLT, RINEHART AND WINSTON16 Chapter 19 Private Insurance and Social Insurance Private insurance—voluntary insurance paid by individuals and companies: life insurance, health insurance, property and liability insurance Social insurance—government programs meant to protect individuals from future hardships: Social Security Social Security includes old age, survivors, and disability insurance, unemployment compensation and workers’ compensation Section 4:Insurance Against Hardship
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A merican C ivicsHOLT HOLT, RINEHART AND WINSTON17 Chapter 19 Social Security and Its Future Social Security Act of 1935—part of the New Deal; intended to protect citizens from future hardships Retirement population is growing while birthrate is dropping. Fewer workers will be supporting growing group of retirees. Critics argue the tax will continue to rise and prefer to abolish the program. Section 4:Insurance Against Hardship
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