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

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Presentation on theme: "Money and Banking $665 billion There is $665 billion in currency [notes & coins]. $37 million $37 million in notes is printed each day."— Presentation transcript:

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 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; It is used for the buying and selling of goods and services. Money enables us to avoid the “coincidence of wants” problem associated in a barter economy.

4 Unit of Account; 2. Unit of Account; We use money as a yardstick for measuring the relative worth 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.

5 Posting the monetary value of G/S require businesses to compete for your dollars. This leads to cheaper prices. Posted monetary values also make economic exchanges are faster and easier; because we do not have to guess or haggle over the value. $ 3.29 Here’s $3.29 for one gallon. “She’s fast.”

6 3. Store of Value; 3. Store of Value; the wealth of money can be stored longer than the wealth of commodities. Inflation is the only thing that can destroy the wealth of money. Greek Coin 2,500 years old

7 Types of Money Types of Money 1. Commodity Money 1. Commodity Money; something that performs the function of money but also has intrinsic value by itself. –Milk, meat, tobacco, corn = 2. Representative money 2. Representative money ; paper currency backed by something of intrinsic value. - $35 of currency could be redeemed for $35 worth of gold or silver.

8 3. Fiat Money 3. Fiat 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.

9 M1 $1,100 Billion (2000) M1 Money: is the narrowest definition of the U.S. money supply. It includes; Currency and coins in the hands ofCurrency and coins in the hands of the public. the public. Checkable deposits. The largest part. Checkable deposits. The largest part. DEFINITIONS OF MONEY 2% 46% 52% 2% 46% 52%

10 M1M2 $1,100 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

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

12 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.

13 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

14 The End


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