today’s schedule – 11/28 ppt: money supply & banking rdg: pitfalls of credit card debt bonus...
TRANSCRIPT
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Today’s Schedule – 11/28
• PPT: Money Supply & Banking• Rdg: Pitfalls of Credit Card Debt• Bonus Quiz: Money• HW:• Read 17.2/17.3• Start Studying for Unit 5 Test - FRIDAY
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Supply of Money
• Money Supply: All money available in the U.S. economy–Divided into two (2) categories:
M1 and M2
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M1
• Assets that are liquid –Can easily be used as/converted to cash
• Money held outside of bank vaults–In circulation
• Checking accounts• Traveler’s checks
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M2
• Funds that cannot be used directly as cash–Can be converted as cash fairly easily
• Deposits in savings accounts
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Functions of Financial Institutions
1. Store MoneyStore money in vaultsInsured by government against theft2. Saving MoneyBanks offer: savings accounts, checking
accounts, money market accounts, certificates of deposits (CDs)
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Savings/Checking Accounts
• For people who need to make frequent withdraws• Small annual interest rates
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Money Market Accounts
• Fund that pools money from small savers to purchase short term government and corporate securities• Can only write a limited number of
checks per year typically under a certain amount of money• Interest rates fluctuate
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CDs
• Guaranteed interest rate over a specific amount of time• Funds cannot be withdrawn until set time
is up–If you do there is a penalty
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Functions of Financial Institutions
3. Loans -Banks lend money in order to make
interest = profits for banks -When someone defaults on their loan,
banks lose money
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Functions of Financial Institutions4. MortgagesLoan to purchase real estateRepaid over 15-40 years5. Credit CardsCard issuer immediately pays for goodCard holder repays “loan” monthly
-Accrue interest if not paid monthly
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Interest
Principal: amount of money borrowedInterest: amount paid on borrowed moneyCompound Interest: Interest paid on both
principal and accumulated interest
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Types of Financial Institutions1. Commercial BanksTypically provide services to businesses2. Savings and Loan Associations Originally just for housing loansNow very similar to commercial banks3. Savings BanksSmaller transactions than commercial
banks
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Types of Financial Institutions4. Credit UnionsCooperative lendingUsually for a particular group of peopleHigher interest rates5. Finance CompaniesInstallment loans to customersOne time, high cost purchases like a carHigh interest rates
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Electronic Banking• ATMs: computers used to deposit
money, withdraw cash, transfer funds and obtain account info• Debit Cards: Used to withdraw money–Used like a credit card
• Home Banking: Online banking• Stored Value Cards: Phone/copying/
dining cards with set amount of money