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Money and the Banking System

CHAPTER 13. Money and the Banking System. SECTION 1: Money SECTION 2: History of U.S. Banking SECTION 3: U.S. Banking Today. SECTION 1. Money. Objectives:. What functions does money serve? What characteristics must an item have to be used as money?

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Money and the Banking System

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  1. CHAPTER 13 Money and the Banking System SECTION 1: Money SECTION 2: History of U.S. Banking SECTION 3: U.S. Banking Today

  2. SECTION 1 Money Objectives: • What functions does money serve? • What characteristics must an item have to be used as money? • What are the sources of money’s value? • What types of money are used in the United States?

  3. SECTION 1 Money Functions of money: • a medium of exchange • a store of value • a standard of value

  4. SECTION 1 Money Characteristics of money: • durability • portability • divisibility • stability in value • acceptability

  5. SECTION 1 Money Sources of money’s value: • commodity money—when an item has a value of its own and is used as money • representative money—when an item can be exchanged for another item of equal value • fiat money—when an item has value because the government decrees it

  6. SECTION 1 Money Types of money used in the United States: • coins • paper money • checks (demand deposits) • near money

  7. SECTION 2 History of U.S. Banking Objectives: • What were the views of Federalists and Antifederalists about U.S. banking? • How did the development in the 1860s of nationally chartered banks affect the power of state-chartered banks? • How did the government reform and regulate the banking system after World War I?

  8. SECTION 2 History of U.S. Banking View of banking: • Federalists—federal control over state banks • Antifederalists—state control over banks

  9. SECTION 2 History of U.S. Banking With the creation of nationally chartered banks, state-chartered banks weakened. Reasons included: • federal government now had power to charter national banks • banks required to hold silver and gold reserves • federal government issued a national currency that led to the elimination of state-bank currencies

  10. SECTION 2 History of U.S. Banking Post-World War I banking reforms: • created the Federal Reserve System to centralize U.S. banking and passed the Banking Act of 1933 to protect deposits • enacted the Gold Reserve Act of 1934 to allow the government to buy all gold held by U.S. banks and remove the gold standard in the U.S.

  11. SECTION 3 U.S. Banking Today Objectives: • What are the most common types of U.S. financial institutions? • How has automation affected banking practices? • What were the results of banking deregulation? • What crises did financial institutions face in the late 1980s?

  12. SECTION 3 U.S. Banking Today Common types of U.S. financial institutions: • commercial banks • savings and loan associations • mutual savings banks • credit unions

  13. SECTION 3 U.S. Banking Today Effects of automation on banking: • increased banks’ efficiency • speeded up banking transactions • saved banks money by reducing the number of workers needed

  14. SECTION 3 U.S. Banking Today Results of banking deregulation: • more competition • growth of regional banking

  15. SECTION 3 U.S. Banking Today Problems financial institutions faced in the late 1980s: • loan defaults • bank failures • S&L crisis

  16. CHAPTER 13 Wrap-Up 1. What are the major functions of money? 2. Identify the types of money used in the United States. 3. Compare the views of Federalists and Antifederalists on banking. 4. How has the role of commercial banks changed over time? 5. How did the U.S. government work to regulate the banking industry during the 1900s?

  17. CHAPTER 13 Wrap-Up 6. How has banking changed as a result of automation? 7. How did the U.S. government respond to the S&L crisis of the 1980s?

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