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Money and Banking

Money and Banking. What is it Worth?. What is something worth? What is value? If everyone does not value something the same, does it really have worth?. Uses of Money. Medium of exchange Without money, we have to barter for goods Unit of account We can use it to compare goods

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Money and Banking

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  1. Money and Banking

  2. What is it Worth? • What is something worth? What is value? If everyone does not value something the same, does it really have worth?

  3. Uses of Money • Medium of exchange • Without money, we have to barter for goods • Unit of account • We can use it to compare goods • Store of value • Keeps it’s “value” over time

  4. Characteristics of Money • Durability - Lasts a while • Portability - Easy to carry • Divisibility - 100 pennies to the dollar • Uniformity - All $1 are worth the same • Limited Supply - Amount in circulation • Acceptability - Everyone accepts the face value

  5. Types of Money • Commodity Money – Difficult to use as money. Salt used to be used to pay Roman Legionaries • Representative Money – Based on the value of a certain commodity, like gold or silver. Limited to the amount the bank/government has • Fiat Money – Because we say so

  6. Banking History • Central Bank or State Banks • What standards? Gold? Silver? Cotton? • Different banks all issuing notes • Banking, speculation, Great Depression • Federal Deposit Insurance Corporation (FDIC) • Deregulation

  7. Banking • Federal Reserve (or “The Fed”) • Fractional Reserve • Checks • Loans • Credit Cards • Debit Cards

  8. Money Supply The money supply is the amount of “cash” that the U.S. has in circulation. The more “cash” available, the less it is worth, relative to Gross Domestic Product (GDP)

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