By Tara Fehlis
What are the 3 uses of money?
- Money as Medium of Exchange- anything that is used to determine value during the exchange of goods and services.
- Money as a Unit of Account- means for comparing the values of goods and services.
- Money as a Store of Value- something that keeps its value if it is stored rather than used.
- Durability- objects used as money must withstand physical wear&tear
- Portability- people need to be able to take money with them throughout the days
- Divisibility- money must be easily divided into smaller units of value
- Uniformity- any 2 units of money must be the same in terms of what they will buy
- Limited Supply- money must be available only in limited quantities
- Acceptability- everyone must be able to exchange money for goods&services.
- Commodity money consists of objects that have value in themselves
- Representative money has value because the holder can exchange it for something else of value
- Fiat money also called "legal tender," has value because the government decreed that is an acceptable means to pay debts
History of Banking
What happened in 1832 when the Bank of 1811 lost its charter? President Andrew Jackson removed all federal funds from the bank after his reelecting in 1832 and it ceased operations as a national institution.
What is the Federal Reserve? What is the role of the Federal Reserve today? The Federal Reserve system served as the nations first true central bank. Its duties today are to conduct the nations monetary policy, supervise and regulate banking institutions, maintain stability of the financial system, and provide financial services to depository institutions, the U.S. government, and foreign official institutions.
What is FDIC and when and why was it created? The FDIC is the Federal Deposit Insurance Corporation. It is the U.S. corporation insuring deposits in the U.S. against bank failure. It was created in 1933 to maintain public confidence and encourage stability in the financial system through the promotion of sound banking practices.
What services do banks provide? The store money, save money, give loans, mortgages, and issue credit cards.
How do banks make a profit? The largest source of income for banks is the interest they receive from customers who have taken loans.
What are the different types of financial institutions?
- Commercial banks offer checking services, accept deposits, and make loans
- Savings and Loan Associations were originally chartered to lend money for home-building in the mid-1800s
- Savings Banks traditionally served people who made smaller deposits and transactions than commercial banks wished to handle
- Credit Unions are cooperative lending associations for particular groups
- Finance Companies make installment loans to consumers.
- Customers can use ATMs to deposit money, withdraw cash, and obtain account information.
- Debit cards are used to withdraw money directly from a checking account
- Many banks allow customers to check account balances and make transfers and payments via computer
- An ACH transfers funds automatically from customers accounts to creditors accounts.
- Stored value cards are embedded with magnetic strips or computer chips with account balance information.