This document provides an overview of money and banking concepts. It discusses the characteristics of money, the functions of money, and components of the money supply. It also describes the US financial system including financial institutions like commercial banks and the Federal Reserve System. The role of the Fed in controlling the money supply and conducting monetary policy is explained. Finally, the document discusses changing banking technologies and the roles of international banking organizations.
Latino Buying Power - May 2024 Presentation for Latino Caucus
Chap 19 understanding money and banking
1. Chapter 19
19 Understanding Money and
Banking
http://www.slideshare.net/Subjectmaterial
2. Sr. Chapter Chapter Heading
No.No.
1. 3 Understanding the Global context of business (110212)
2. 4 Conducting Business Ethically and Responsibly (250212)
3. 6 Organizing the Business Enterprise (030312)
4. 7 Understanding Entrepreneurship and Small Business (100312)
5. 8 Managing Human Resources (240312)
6. 9 Understanding Employee Motivating, Satisfying & Leadership (3103, 0704)
7. 11 Understanding Marketing Processes and Consumer Behavior (140412)
8. 16 Managing Quality and Productivity (280412)
9. 17 Managing Information Systems and Communication Technology (0505)
10. 19 Understanding Money and Banking (1205)
11. 20 Intermediate Term and Lease Financing
3. 1. WHAT IS MONEY
2. THE US FINANCIAL SYSTEM
3. THE FEDERAL RESERVE SYSTEM
4. THE CHANGING MONEY AND BANKING
SYSTEM
5. INTERNATIONAL BANKING AND FINANCE
4. Money
Any object that portable, divisible, durable,
and stable and serves as a medium of
exchange, a store of value, and a unit of
account
Any object generally accepted as payment
for goods and services
5. Characteristics of
a Good Money System
Divisible
Portable
Durable 12
TH E UN IT ED ST AT ES OF A M ER ICA
TH E U N ITED STAT ES OF AM ERIC A
T H I S N O T E IS L E G A L T E N D E R
F O R A L L D E B T S , P U B L I C A N D P R IV A T E
A
FED ER AL RE SE RVE N O TE
L 70 7 44 62 9F
W A S H IN G T O N , D .C. 12
Hard to
H 293
L 70 74 46 29 F
12 S E RIES 12
19 85
O N E D O LLA R
O N E D O LLAR
Counterfeit
Stable in Value
6. Functions of Money
Medium of exchange
a single medium of exchange for goods
and services instead of barter
Store of value
can be used for future purchases
Unit of account
allows measurement of the relative value
of goods and services
7. Credit Cards
Plastic money
They are popular because
Convenient
Safe
Very profitable for the issuer
11 to 20 % interest on dues paid to card issuers
Merchants pay fee to card issuers
7
8. The Money Supply
Time Deposits
Demand Total
Currency + = Total + & Money =
Deposits M1 Market Accts. M2 *SA
*SA = Seasonally Adjusted
9. The money supply could be explained as follows
Liquidity is how fast something can be turned into cash. Students
may recall this concept from Chapter 18.
Currency includes all coins and paper money spent to purchase goods
and services. To the surprise of many, currency is a small portion of
the money supply (only about 20-25%). Traveler’s checks, money
orders, and cashier’s checks are all considered currency.
Demand deposits are the other part of M1. These are deposits held
at banks that depositors can write checks on for immediate payments.
No specific notice has to be provided to the banks. Checks are used in
about 70% of the transactions in the U.S. but numbers are decreasing
as more consumers begin to use online services and automatic
payment options.
Total M1 includes the currency and demand deposits of the money
supply.
Total M2 includes time deposits and money market accounts (funds of
short term, low risk fin securities purchased with the assets of investor
owners, pooled by a non-bank institution) plus the total currency and
demand deposits from M1. Students should be aware that time
deposits are generally referred to as savings accounts.
10. Financial Institutions
Traditionally consisted of four financial pillars
Chartered banks
Alternate banks (trust companies, credit unions)
Life insurance companies and specialized lending and saving
intermediaries
Investment dealers
Commercial Bank: Federal or state-chartered
financial institutions accepting deposits that it
uses to make loans and earn profits
Differences are now blurred due to changes in financial industry regulations
11. Special Financial Services
Pension and Trust Services
International Services
Currency exchange
Letter of Credit (LC)
Financial Advice and Brokerage Service
Automated teller machine ATM
Electronic Fund Transfers
11
12. THE FEDERAL RESERVE SYSTEM
Central bank, which acts as the
government’s bank, serves member
commercial banks, and controls the
nation’s money supply
12
13. Functions of Fed
1. The govt bank:
How many notes (bills) to produce, how many to destroy
Lends money to the govt
2. The Banker’s bank
Banks borrow money on interest from fed
3. Check Clearing
4. Controlling the money supply
5. Monetary policy;
money supply and interest rates
13
14. THE CHANGING MONEY AND
BANKING SYSTEM
Electronic Technologies
Debit Cards:
Plastic card that allows an individual to transfer
money between accoutns
Point of Sale Terminal
Electric device that accepts debit card transactions
E-cash
Money that moves among consumers and
businesses via digital electronic transmissions
14
15. International Bank Structure
World Bank
UN agency that provides a limited scope of
financial services, such as funding national
improvement in undeveloped countries
International Monetary Fund (IMF)
UN agency consisting of about 150 nations that
have combined resources to promote stable
exchange rates, provide temporary short-term
loans, and serve other purposes
15