Group 3
FINANCIAL
SECTOR
1
2
What is Money?
Process of Creating
Money
3
Financial
Intermediation
4
Financial Institutions
in The Philippines
FINANCIAL
SECTOR
BARTERING
IS A SYSTEM OF EXCHANGE IN WHICH PARTICIPANTS IN
A TRANSACTION DIRECTLY EXCHANGE GOODS OR
SERVICES FOR OTHER GOODS OR SERVICES WITHOUT
USING A MEDIUM OF EXCHANGE, SUCH AS MONEY.
FINANCIAL
SECTOR
Medium of
exchange
Standard of
Value
Store of
value
-Money can easily be used to
buy goods and services with no
complications of the barter
system.
-Money
is
the
expected
standard for measuring the
relative worth of goods and
services.
-Money allows you to store
purchasing power for the future.
-Money’s value can be retained
over time. It is a convenient way
to store wealth.
FINANCIAL
SECTOR
-Is the most liquid form of money circulating in an economy.
Narrow
Money
(M0/ M1)
FINANCIAL
SECTOR
-Is a category for measuring the amount of money circulating in an economy. It is the most
inclusive method of calculating a country's money supply.
-It includes little money and other assets that can be easily converted into cash to buy goods and
services.
Reserves: 25% OR 1/4
PHP 100,000
Reserves: PHP 25,000 (25%/ 1/4 OF 100,000)
PHP 75,000
PHP 75,000
Reserves: PHP 18,750 (25%/ 1/4 OF 100,000)
PHP 56,250
PHP 56,250
Deposits:
First Deposit
Second Deposit
Third Deposit
Fourth Deposit
Fifth Deposit
PHP 100,000
PHP 75,000
PHP 18,063
PHP 42,187
PHP 36,641
------------------FINAL DEPOSIT & MONEY CREATED PHP 400,000
=
1
=
0.25
4
Total Money Supply = Money Multiplier x Total Deposits
=100,000 x 4
=400,000
Sample problem:
Assume the required reserve ratio is 20% and someone deposits PHP 5,000 in a bank.
What is the total change in the money supply?
Sample problem:
Assume the required reserve ratio is 20% and someone deposits PHP 5,000 in a bank.
What is the total change in the money supply?
Money Multiplier =
1
=
0.2
5
Total Money Supply = Money Multiplier x Total Deposits
= PHP 5,000 x 5
= PHP 25,000
BANKS
- crucial in the creation of money.
FINANCIAL INTERMEDIATION
- Another essential function of banks and other financial
institutions is to link the savers to the investors in the
economy.
NONCONSUMPTION
-household income that is not spent on
consumption.
DISEQUILIBRIUM
Investment
-This will occur in an economy if no
corresponding inflow to the counter equals
this outflow.
Savings
1.Banking institutions
2.Non-Banking institutions
Project Finance
Corporate Finance
Small- Medium
Enterprises
Retail
Short-Term
Finance
Housing
•
• Commercial Banks
• Thrift Banks
• Rural Banks
• Specialized
Government Banks
• Universal Banks
•
Examples:
•
Examples:
•
3. Thrift Banks
Examples:
3. Thrift Banks
Non-Banking
institutions
Examples:
Non-Banking
institutions
Non-Banking institutions
•
Insurance
Companies
Non-Banking institutions
•
•
Non-Banking institutions
•
FINANCIAL SECTOR
THANK YOU