Money, Banking, Saving and Investing Economics Chapter 8

Money, Banking, Saving
and Investing
Chapter 8
Money and Banking
• SWBT identify the roles
of money, banking, and
financial institutions in the
U.S. economy
• CBM #4 (Ch 7-8)
• Oral Presentations
Market Structures
• Chapter 8 ppt + Notes
• Exit Activity – Origins of
• Imagine your Grandma gives you $5,000!
• What would you choose to do with your
money? Why?
• What other options would you consider?
• In the long term, do you think this would be
the wisest choice?
– Bank
– Asset
– Credit card
– Debit card
– Saving
– Interest
– Principal
– Investing
– Diversification
How do these words help you answer the
“How should you spend, save and invest
your money?”
Red Paper Clip
• Did Kyle MacDonald use
“money” to get his house?
What Makes Money…Money?
• Money – anything that is generally accepted as
a means of payment
• 3 Functions of Money:
– Medium of Exchange – legal tender
– Standard of Value (one scale – US$)
– Store of Value – holds its value over
time -- purchasing power (quantity
of goods and services that can be
bought with a particular sum of money)
Money Has 6 Main
1. Acceptability
• Throughout the
traders accepted salt
as a medium of
• Roman soldiers
received salt as their
salarium -- salary
Money Has 6 Main
2. Scarcity
• In the ancient world, salt
was scarce in most
places – yet demand was
– Preserved food
– Used in religious
• Scarcity made it valuable
– Traded equally with gold in
Money Has 6 Main
3. Portability
• Salt is portable to
some extent
• Imagine lugging
several large bags of
salt to the mall
• How messy is it to
buy a pair of jeans for
three cups of salt?
Money Has 6 Main
4. Durability
• In the ancient world
(and today) salt can
last a long time – but
only if kept dry
• How would you feel if
a rainstorm washed
away your fortune?
Money Has 6 Main
5. Divisibility
• A bag of salt can be
easily split into
smaller parts
• This divisibility made
it useful medium of
Money Has 6 Main
6. Uniformity
• Like dollar bills, in the
ancient world, all salt
was pretty much the
A Brief History of Money
• Commodity Money – gold, silver, salt,
tobacco, cattle – goods that had value in
• Bank: a business that receives deposits
and makes loans
Loan: transaction in which a
lender gives money to a
borrower who agrees to pay
it back
A Brief History of Money
• Commodity Backed Money –
banknotes given in exchange
for gold and silver
– Banknotes – forerunners of printed money issued
by governments
• Paper Money today is no longer backed by gold
or silver – now its called fiat money (based on
govt regulation or law)
• US Dollars are backed by the full faith and credit
of the US Government
What Counts as Money Today?
• Currency – bills and coins circulating
throughout the economy
• What else counts as money? -- Assets
– Liquid assets – anything that can be easily
converted to cash
– Checkable deposits – deposits in checking
– Travelers Checks – not
used much anymore
What Else Counts As Money?
• Are savings accounts considered money?
– No, it is “near money” not used to directly buy things
• Are Credit Cards Money?
– No, credit is an arrangement that allows
you to buy now with borrowed “money”
but pay later
• Are Debit Cards Money?
– No, they are similar to checks, they instruct a bank
who to pay
Exit Ticket
• Using your class notes, complete the handout
on The Origins of Money
• List and define the 3 functions of money
• Then consider former mediums of exchange
and analyze each in terms of how well it
functions as money
Exit Ticket:
Complete the
Diagram and
hand it in
Money Today
Functions of
What Makes
Money …
Historical Types
of Money
of Money