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y o utube/watch?v=WCkOmcIl79s

http://www.y o utube.com/watch?v=WCkOmcIl79s. Money and Banking. FUNCTIONS OF MONEY. Medium of Exchange Unit of Account Store of Value. FUNCTIONS OF MONEY. Medium of Exchange Anything that is used to determine value during the exchange of goods and services. FUNCTIONS OF MONEY.

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y o utube/watch?v=WCkOmcIl79s

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  1. http://www.youtube.com/watch?v=WCkOmcIl79s

  2. Money and Banking

  3. FUNCTIONS OF MONEY • Medium of Exchange • Unit of Account • Store of Value

  4. FUNCTIONS OF MONEY • Medium of Exchange • Anything that is used to determine value during the exchange of goods and services

  5. FUNCTIONS OF MONEY • Unit of Account • comparing the values of goods and services

  6. FUNCTIONS OF MONEY • Store of Value • Money keeps its value if you decide to hold onto it or spend it

  7. PAPER MONEY All paper money regardless of issue date is still legal tender

  8. http://www.youtube.com/watch?v=Ll3uipTO-4A

  9. 6 Characteristics of Money Durability Portability Divisibility Uniformity Limited Supply Acceptability

  10. Federal Reserve Notes • 99% of our money • Current Denominations: $1, $2, $5, $10, $20, $50, $100 • Before 1945: $500, $1,000, $5,000, $10,000 • July 14, 1969—Denominations of $500 and larger were retired • Treasury seal & serial numbers are green

  11. United States Notes • Make up less that 1% of currency • Since 1969, only $10 denominations have been issued. • Prior to 1969, $2 and $5 were issued. • 1966, $2 discontinued • 1968, $5 discontinued • Treasury seal and serial numbers are printed in red.

  12. UNFIT MONEY • Average life of $1 bill is 17-18 months • Larger denominations usually last longer • Old, worn, torn, or soiled money is sent to the Federal Reserve Bank to be exchanged for new

  13. Commodity Money • Objects that have value in themselves

  14. Representative Money • Objects that have value because they can be exchanged for something of value

  15. Fiat Money • Government decree of • “legal tender” not to be • refused in settling debts • or making purchases

  16. MONEY SUPPLY Money is defined two ways… M1 • Currency • Token Money • Federal Reserve Notes • Intrinsic Value • Checkable Deposits • Commercial Banks • Thrift Institutions

  17. MONEY SUPPLY M2=M1 plus………….. • Near-monies or Savings Deposits • Money Market Deposit Accounts • Smaller Time Deposits • Money Market Mutual Funds (MMMFs)

  18. MONEY SUPPLY M1 M2 M3 Currency(coins & paper money) plusCheckable deposits equalsM1 $1101 2000 Data (billions of dollars)

  19. MONEY SUPPLY M1 M2 M3 Currency(coins & paper money) plusCheckable deposits equalsM1 plus Savings deposits, including MMDA’s plus Small time deposits plus Money market mutual fund (MMMF) balances equals M2 $1101 $4827 2000 Data (billions of dollars)

  20. MONEY SUPPLY M1 M2 M3 Currency (coins & paper money) plus Checkable deposits equalsM1 plus Savings deposits, including MMDA’s plus Small time deposits plus Money market mutual fund (MMMF) balances equals M2 plus Large time deposits equalsM3 Currency(coins & paper money) plusCheckable deposits equalsM1 plus Savings deposits, including MMDA’s plus Small time deposits plus Money market mutual fund (MMMF) balances equals M2 $1101 $4827 2000 Data (billions of dollars) $6853

  21. WHAT ABOUT CREDIT CARDS?

  22. WHAT BACKS THE MONEY SUPPLY? • Money as Debt • Value of Money • Acceptability • Legal Tender • Relative Scarcity • Money and Prices • Value of the Dollar • D = 1/Price Level • Inflation and Acceptability

  23. So, What Backs the Money Supply? Stable Value! through... • Appropriate Fiscal Policy • Intelligent Management of the Money Supply

  24. THE FEDERAL RESERVE AND THE BANKING SYSTEM Centralization and Public Control • Board of Governors • Assistance & Advice • Federal Open Market Committee • Three Advisory Councils • The 12 Federal Reserve Banks • Central Bank Role • Quasi-Public Banks • Banker’s Banks • Commercial Banks & Thrifts

  25. THE FEDERAL RESERVE AND THE BANKING SYSTEM Open Market Committee Advisory Councils Board of Governors 12 Federal Reserve Banks Commercial Banks Thrift Institutions (Savings & loan associations, mutual savings banks, credit unions) The Public (Households and businesses)

  26. FEDERAL RESERVE • Receive $ from commercial banks and others • Decides if it is fit or unfit • Fit is stored • Unfit is destroyed by machines that shred it to 1/16 of an inch • About 1/3 are unfit

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