Money and Banking

Chapter 16: Money, Banking, and Central bank

Draw

How are you doing today?

Open Ended

From the monopoly game, what have you learned? What strategies makes you win? How can you perform better next time?

Open Ended

What bank do you/your family use for your financial needs?

Open Ended

What happen if there is no money? In what way will you trade?

​The history and the form of money:

The main forms of money used in most countries in the world are coins, notes, and bank account.

The Functions of Money:

• Medium of Exchange: An accepted

form of payment for products and
services

• Store of value: Money can be saved

It will be pointless to save eggs!

• Store of value: Consumers can save

money to use later; money will keep its
value

UNIT of Account : measure of value, enable buyer and seller to agree on what items are worth, relative to each other.

Standard of payments: This means that money allows people to borrow and lend in a country.

The characteristic of money: - Intrinsic and extrinsic.

Multiple Choice

Martin buys a new pair of Vans sneakers and spends $65. Which function of money helps him understand the cost of the shoes?

• Medium of exchange

• Store of value

Multiple Choice

Vanessa used Apple Pay to pay for her recent haircut. Which function of money allowed Vanessa to use this form of payment?

• Medium of exchange

• Store of value

Multiple Choice

Felipe has saved $500 from his job and wants to save all of it for at least one year. Which function of money allows for him to do this?

• Medium of exchange

• Standard of value

• Store of value

Multiple Choice

Money enable people to save.Which function of money does this describe

• Medium of exchange

• Store of value

• Unit of account

• Standard of deffered payments

Multiple Choice

What would make an item unsuitable to act as money?

• Easy to carry

• it is generally acceptable

• it is perishable

• it is recognisable

Commercial bank.

● Commercial bank is also called retail/ high street bank, it is a major industry in a number of a country, it helps people to borrow/ lend money, it is a business organisation which usually seek to make profits
For example: BCA, BNI, BRI, Muamalat.

The role and importance of commercial bank

• To accept deposits/ keep money in safe place

• To lend money: (Overdraft, bank loans, mortgage) interest is charged, and customer need to provide some form of security/Collateral, if they cannot return the loans, the asset can be sold. Before this happen, the bank will do BI Checking very carefully.

• make payments / bank transfer between first and second party.

• Foreign currency

• Financial advisors : Completion of tax forms, purchase and sale of shares,

Islamic finance /Sharia.

• Commercial bank (make profit) VS Sharia law (Islam do not allowed to charge interest on bank loans/ riba,The moslem called this as usury/ sin.

• The islamic finance give loans to the companies, in return the companies need to share their profits to repay the debts.

• many banks in Europe and USA open new branches in Islamic coutries in middle east and Asia and they employ islamic scholars experts who can issue religious edicts.

Goals of the Central bank

*Please

write
this in
your

notes!*

What is a central bank?

● The Most important and influential bank in the country.
Example: The Federal Reserve is the central bank of United states America

Federal Reserve System Structure

12 Reserve Banks

Role and importance of central bank:

• Act as banker to the government (independent authority)

• Operates as banker and controls the banking system to the commercial bank

• Act as lender of last resorts

• manages the national debt

• holds national reserve of gold and foreign currency

• issues bank notes

• implement monetary policy and represent the government

Multiple Choice

What is a function of a central bank

• Controling the money supply

• deciding on the amount of government expenditure

• issuing shares

• raising tax

Multiple Choice

What is the main aim of a commercial bank

• to act as banker to the government

• To issue bank notes

• to make profit

• To manage the national debt