Money and Banking Industry
Moon Young Jang
What are the three uses of money?
- Money as Medium of Exchange
– A medium of exchange is anything that is used to determine value during the exchange of goods and services.
- Money as a Unit of Account
– A unit of account is a means for comparing the values of
goods and services.
- Money as a Store of Value
– A store of value is something that keeps its value if it is
stored rather than used.
What are the six characteristics of money?
- know what is acceptable to exchange for a good.in our country its money
Easily Counted and Measured
- when you exchange this much of this and you get that much of that
- money can be destroyed depending on its value
- large amounts of coins are not easily transported so we dont really use them
- we need a continuous supply of money silver and gold are hard to find so they are hard to predict
Inexpensive to Produce
-gold, and silver are expensive because they are hard to find and mine
What are the sources of money’s value?
1. Commodity Money
- Consists of objects that have value in and of themselves and that are also used as money.
- For example, salt, cattle, and precious stones have been used in various societies as commodity money.
2. Representative Money
- Makes use of objects that have value because that holder can exchange them for something of value.
- For example, if your brother/sister gives you an IOU, the price of paper itself is worth nothing.
3. Fiat Money
- This is an order or decree. It is also called "legal tender."
What is the source of value for the money in the United States economy?
History of Banking
What was the role of the First Bank of the United States created in 1791?
What happened in 1832 when the Bank of 1811 lost its charter?
What is the Federal Reserve? What is the role of the Federal Reserve today?
The Federal Reserve System, often referred to as the Federal Reserve or simply "the Fed," is the central bank of the United States. It was created by the Congress to provide the nation with a safer, more flexible, and more stable monetary and financial system.
What is FDIC and when and why was it created?
The FDIC was created to provide stability to the economy and the failing banking system.
How do economists measure the U.S. money supply?
What services do banks provide? How do banks make a profit?
Commercial banks commonly provide checking accounts, savings accounts and various types of loans. Some of their services may overlap with those of investment banks, which focus on speculative transactions such as buying and selling stock.
Banks basically make money by lending money at rates higher than the cost of the money they lend. More specifically, banks collect interest on loans and interest payments from the debt securities they own, and pay interest on deposits, CDs, and short-term borrowings.
What are the different types of financial institutions?
- Depositary institutions – deposit- taking institutions that accept and manage deposits and make loans, including banks, builiding societies, credit unions, trust companies and mortgage loan companies;
- Contractual institutions – insurance companies and pension funds;
- Investment institutions – investment banks, underwriters and brokerage firms.