16.1 Origins of Money 16.2 Origins of Banking and the Federal Reserve System 16.3 Money, Near Money, and Credit Cards
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1 CHAPTER 16 Money and Banking 16.1 Origins of Money 16.2 Origins of Banking and the Federal Reserve System 16.3 Money, Near Money, and Credit Cards 1 CONTEMPORARY ECONOMICS: LESSON 16.1
2 Consider CHAPTER 16 Money and Banking Why are you willing to exchange a piece of paper bearing Alexander Hamilton s portrait and the number 10 in each corner for a pepperoni pizza? Why is paper money more efficient than gold coins? Why was a Montana bank willing to cash a check written on a clean but frayed pair of underpants? How do banks create money? When were thousands of different currencies circulating in the U.S. economy? Why is there so much fascination with money, anyway? 2 CONTEMPORARY ECONOMICS: LESSON 16.1
3 Objectives LESSON 16.1 Origins of Money Trace the evolution from barter to money. Describe the three functions of money. Identify the properties of ideal commodity money. 3 CONTEMPORARY ECONOMICS: LESSON 16.1
4 Key Terms LESSON 16.1 Origins of Money medium of exchange commodity money 4 CONTEMPORARY ECONOMICS: LESSON 16.1
5 The Evolution of Money Problems with barter The birth of money 5 CONTEMPORARY ECONOMICS: LESSON 16.1
6 Three Functions of Money Medium of exchange Unit of account Store of value 6 CONTEMPORARY ECONOMICS: LESSON 16.1
7 Commodity Money Limitations of commodity money durable portable divisible uniform quality low opportunity cost supply or demand must not fluctuate erratically limited supply Coins 7 CONTEMPORARY ECONOMICS: LESSON 16.1
8 LESSON 16.2 Objectives Origins of Banking and the Federal Reserve System Describe how the earliest banks made loans. Based on whom they lend to, identify two types of depository institutions. Explain when and why the Federal Reserve System was created. 8 CONTEMPORARY ECONOMICS: LESSON 16.2
9 LESSON 16.2 Key Terms Origins of Banking and the Federal Reserve System check fractional reserve banking system representative money fiat money commercial banks Federal Reserve System (the Fed) reserves discount rate Federal Open Market Committee (FOMC) open-market operations 9 CONTEMPORARY ECONOMICS: LESSON 16.2
10 The Earliest Banks Bank checks Bank loans Bank notes Fiat money 10 CONTEMPORARY ECONOMICS: LESSON 16.2
11 Depository Institutions Commercial banks Thrifts Savings and loan associations Mutual savings banks Credit unions Dual banking system State banks National banks 11 CONTEMPORARY ECONOMICS: LESSON 16.2
12 The Federal Reserve System Birth of the Federal Reserve System Powers of the Federal Reserve System Reserves Discount rate Directing monetary policy Federal Open Market Committee (FOMC) 12 CONTEMPORARY ECONOMICS: LESSON 16.2
13 Organizational Chart for the Federal Reserve System 13 CONTEMPORARY ECONOMICS: LESSON 16.2
14 LESSON 16.3 Objectives Money, Near Money, and Credit Cards Describe the narrow definition of money. Explain why distinctions among definitions of money have become less meaningful over time. 14 CONTEMPORARY ECONOMICS: LESSON 16.3
15 LESSON 16.3 Key Terms Money, Near Money, and Credit Cards M1 checkable deposits M2 15 CONTEMPORARY ECONOMICS: LESSON 16.3
16 Narrow Definition of Money: M1 Currency in circulation U.S. currency abroad Counterfeiting Checkable deposits Traveler s checks 16 CONTEMPORARY ECONOMICS: LESSON 16.3
17 Broader Definitions of Money Savings deposits Time deposits Money market mutual fund accounts M2 and M3 Debit cards but not credit cards Electronic money 17 CONTEMPORARY ECONOMICS: LESSON 16.3
18 Alternative Measure of the Money Supply, April CONTEMPORARY ECONOMICS: LESSON 16.3
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