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Do Now

Do Now. In a few sentences, describe the barter system. What are its advantages and disadvantages? If you had to function within a barter system, what would you produce to trade, and why?. Banking Today. Measuring Money Supply.

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Do Now

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  1. Do Now • In a few sentences, describe the barter system. What are its advantages and disadvantages? If you had to function within a barter system, what would you produce to trade, and why?

  2. Banking Today

  3. Measuring Money Supply • Currency – the bills and coins we carry to pay for things – is money. • What else is considered currency???? • The Money Supply: all the money available in the US economy

  4. Measuring Money Supply M1 – represents money that people can gain access to easily and immediately to pay for goods and services • These assets are said to be LIQUID – able to be used as or easily changed to cash • Made up of all currency held outside of bank vaults, demand deposits ($ in checking accounts), and traveler’s checks

  5. Measuring Money Supply • M2 consists of all the assets in M1, plus several additional assets that cannot be used as cash directly, but can be converted to cash fairly easily (called near money) • Includes savings accounts and money market mutual funds (funds that pools money from small savers to purchase short-term government and corporate securities)

  6. Functions of Financial Institutions 1. Storing Money – a safe, convenient place to store money

  7. Functions of Financial Institutions 2. Saving Money: banks offer a variety of ways for people to save money – savings accounts, checking accounts, money market accounts, and certificates of deposit (CDs)

  8. Functions of Financial Institutions 3. Loans: by making loans, banks help new businesses get started, and they help established businesses grow. Banks make money from the interest they charge on loans – unless the borrower defaults, or fails to pay back their loan

  9. Functions of Financial Institutions 4. Mortgages: a specific type of loan that is used to buy real estate

  10. Functions of Financial Institutions 5. Credit Cards: a card entitling its owner to buy goods and services based on the owner’s promise to pay for those goods and services

  11. Types of Financial Institutions • Commercial banks • Savings and Loan Associations • Savings banks • Credit Unions • Finance companies

  12. Types of Financial Institutions • Electronic banking • ATM • Debit cards • Home banking • Automated clearing house • Stored-value cards

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