BMF 15.1

Introduction to Money and Banking

• Overview of the content presented by Goodheart-Wilcox Publisher

• Authors include Robert L. Dansby, Chris Gassen, and Brenda Clark

Section Overview: Understanding Money

• Focus on the concept of money, its functions, and the role of the Federal Reserve

Objectives

• Concept of Money: Explain what money is and its significance in the economy

• Federal Reserve Responsibilities: Identify and discuss the responsibilities of the Federal Reserve

• Importance of Financial Exchange: Discuss the significance of financial exchanges in economic systems

Key Terms

• Money: Any object accepted as payment for goods/services

• Banknote: Document certifying payment of a specific amount of money

• Security: Financial investment from a corporation, government, or organization

• Government Bond: Security paying interest over long terms (10-30 years)

• Treasury Notes: Securities with interest over terms of 2-10 years

• Treasury Bills: Short-term securities maturing in one year or less

• Medium of Exchange: Facilitates trade of goods/services

• Unit of Value: Standard measure for worth/price of goods/services

• Store of Value: Ability of money to be saved and used later

• Monetary System: Mechanism for managing a nation's money supply

• Financial Exchange: Process of transferring money

• Credit/Debit Cards: Tools for purchasing either through credit or direct account debit

• Electronic Funds Transfer (EFT): Digitized transfer of funds between bank accounts

Essential Question

• How is money used within an economic system?

Functions of Money

• Medium of Exchange: Enables trade between individuals, businesses, and governments

• Unit of Value: Provides a common measure for valuation of goods/services

• Store of Value: Allows individuals to save money for future use

Properties of Money

• Stable: Maintains value over time

• Recognized: Easily identifiable as authentic

• Divisible: Can be broken into smaller units

• Portable: Easy to carry for transactions

• Durable: Made from long-lasting materials

Federal Reserve System

• Role: Central bank of the United States, managing the monetary system

• Structure: Divided into 12 districts, each responsible for different regions

Core Functions of the Federal Reserve

• Establish Monetary Policy: Manage the money supply and interest rates

• Supervise and Regulate Financial Institutions: Ensure soundness of banks

• Maintain Financial Stability: Control risks in financial markets

• Provide Financial Services: Operations linked to the payment systems

Financial Exchange

• Definition: Transferring money from one person or organization to another

• Types of Financial Exchange:

  • Cash: Physical paper money and coins

  • Credit Card: Allows credit-based purchases

  • Debit Card: Direct payment from checking accounts

  • EFT: Transfer of money between bank accounts electronically

Legal Responsibilities of Financial Exchange

• Regulatory Protection: Laws protecting buyers and sellers

• Responsibilities Involved: Privacy, disclosure, fraud prevention, consumer rights, interest rates regulation

• Transaction Terms: Governed by state and federal laws