Ch. 15 Money & Banking

15

Money and

Banking

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Section 15.1

Understanding Money

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Objectives

• Explain the concept of money.
• Identify the responsibilities of the Federal Reserve.
• Discuss the importance of financial exchange.

Multiple Choice

Which of the following is a FUNCTION of Money?

• Store of value

• Unit of value

• Medium of exchange

• All of the above

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Money

• Properties of money:

– Stable: Maintain its value over time
– Recognized: Authentic money immediately recognizable
– Divisible: Divide money into smaller units
– Portable: People must be able to carry money
– Durable: Made of a strong and lasting material

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Federal Reserve

• Federal Reserve System is the central bank of

United States
– Divided into 12 districts
– Responsible for monetary system.

• Monetary system is the mechanism a nation uses to

provide and manage money for itself

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Federal Reserve

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Federal Reserve

• Core functions of the Federal Reserve:

– Establish monetary policy
– Supervise and regulate financial institutions
– Maintain stability of the nation’s financial system
– Provide financial services

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Federal Reserve

• Monetary policy is action taken to manage supply of

money and interest rates

• Supervise and regulate financial institutions to ensure

soundness of country’s banking system
– Federal Deposit Insurance Corporation (FDIC)

• Maintain stability by controlling risks in financial

markets

• Provides financial services and oversees payment

systems

Multiple Choice

The Federal Reserve System is divided into ___ districts.

• 10

• 12

• 13

• 23

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Section 15.2

Banking

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Objectives

• Describe two types of financial institutions.
• Identify financial services provided by banks.
• Explain the importance of banking regulations.

Multiple Choice

A ______ institution accepts money from customers and deposits it into the customer's account.

• money

• depository

• nondepository

• legal

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Financial Services

• Some banking services are specifically for business

customers
– Business checking accounts
– Line of credit is a prearranged amount of credit that is

available for a business to use as needed

– Long-term business loans
– International banking services
– Letter of credit is a document guaranteeing that a

buyer will pay the seller the agreed-upon amount and
within the time specified

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Banking Regulations

• Federal and state regulations apply to financial

institutions

• Deposit insurance in case of bank failure
• Must comply with consumer protection laws

– Truth in Lending Act
– Equal Credit Opportunity Act
– Community Reinvestment Act

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Banking Regulations