Money and Banking

By David Jara


What is money?

  • Anything that serves as a medium of exchange, a unit of account, and a store value.

What is money?

  • Money as a Medium of exchange, something that is used to determine value during the exchange of goods and services
  • Money as a unit of account, 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.
What are six characteristics of Money?

  • Durability- Must withstand physical abuse
  • Portability- money needs to be easily transportable
  • Divisibility- money must be easily divided into smaller portions of units
  • Acceptability- Everyone must be able to exchange money for goods and services
  • Limited supply- money must be available only in limited quantities.
  • Uniformity- units of money must be uniform in what they can buy.
What are the sources of moneys value?

  • 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 a legal tender. has value because the government said it was acceptable.
What is the source of value for the money in the United States economy?

  • Fiat Money or Legal Tenders

History of Banking

What was the role of the First Bank of the United States created in 1791?

  • To stabilize the nations credit.
What happened in 1832 when the Bank of 1811 lost its charter?

  • Andrew Jackson Vetoed it.
What is the Federal Reserve?

  • The federal reserve is a central bank that can loan money to smaller banks. It is the bank that all banks go to.
What is the FDIC and when and why was it created?

  • The Federal Deposit Insurance Corporation, preserves and promotes public confidence in the U.S. financial system.

Banking Today

How do economist measure the U.S. money supply?

  • there are two methods, they M1 and the M2. The M1 measures paper currency and coins while the M2 measures fiat money and demand deposits.
What services do banks provide?

  • Money protection, accounts, loans, and pays you interest.
How do banks make a profit?

  • When you take loans from the bank you have to pay them back the amount you initially took and then a certain percent more. Also in fees and over charges.
What are the different types of financial institutions?

  • Depository institutions and contractual institutions.
How has electronic banking affected the banking world?

  • Increase in criminal activity, Limits teller transactions, Financial integration, and 24 hour acess