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Money. Chapter 10. What is Money?. Use of money is a social custom Its role is to facilitate exchange - PowerPoint PPT PresentationTRANSCRIPT
Money
MoneyChapter 10
What is Money?Use of money is a social custom Its role is to facilitate exchangeMoney itself is any asset accepted as payment for goods or servicesWithout money we would barter like traditional societiesAlthough barter works it can be complex and inefficient
Functions of MoneyMedium of Exchange: commonly accepted payment
Unit of Account: standardized and easily measured
Store of Value: holds purchasing power over time
Characteristics of MoneyDurablelasts for an extended periodPortableeasy to carry & exchangeDivisibleeasily broken into measurable unitsUniformsimilar in appearance and has a standard valueScarceNot overly printed or in too great abundance AcceptedSociety is certain that it has value
Types of MoneyFiathas value because the government says solegal tender Representative stands in for moneyIOU, silver certificateCommodityhas other uses besides acting as money Tobacco, water
How Much Money is Out There?Money supply all the money available in the economyThis includes money in and out of banksLiquidity refers to how easily an asset can be turned into cashFederal Reserve tracks the amount of money in circulation or in the economy
http://www.youtube.com/watch?v=S-bJYM_7MLw
What if We Redesigned the Dollar?
What Images Are Important?
Should We Just Use Presidents?
FinanceThe Financial Systemvarious markets, players and institutions that coordinate the channeling of funds between borrowers and savers Borrowersdemand money from the system with the knowledge that they will have to pay it back with interestSaverssupply money to the system with the expectation that it will be paid back to them with interest MarketsFinancial Markets places where savers can lend their money to borrowers
Stock Marketfirms sell a portion of their profits (stock) which can be resold
Bond Marketfirms issue bonds (IOUs) which can be resold Any stake in an asset traded on a financial market is called a securityBanks and InstitutionsInvestment Banksraise money for companies (perhaps even nations) and manage wealth of private investors (merchant bank)JPMorgan, Goldman SachsCredit Unionscooperative lending for specific groupsMarshland, TeachersCommercial Banksoffer a wide range of lending services to the public (retail bank)Bank of America, United Community
Functions of a BankBanks serve several purposes:Store Moneysafe and insuredVehicle for Saving variety of accounts availableLoansrenting money at a costCreditform of deferred payment Principle is amount owedInterest is cost of renting the principle
https://www.youtube.com/watch?v=RH_bNdlOoiA
FDIC preserves and promotes public confidence in the U.S. financial system byinsuring depositors identifying, monitoring and addressing risks to the deposit insurance fundslimiting the effect on the economy and the financial system when a bank or thrift institution fails