Chapter 8 Notes Key

The 3 Functions of Money

•______-money is used for trade & makes trade easier

•______-money is used to assign a value to a good or service

•______-hold wealth in the form of money until people need to use it

______-currency that must be accepted as money for purchases and as payment for debts

What is the legal tender for the U.S. issued by the government?

______

______-the values of a unit of money in terms of what it can buy

The 6 Characteristics of Money

•______-people & business need to accept it

•______-it has to be scarce enough to be valued

•______-people must be able to be carry it with them

•______-must be able to withstand physical wear & tear

•______-must be able to be divided into smaller amounts

•______-needs to look the same to hold value & avoid counterfeiting

Money needs to exhibit all 6 characteristics in order to fulfill the functions.

Brief History of Money

  • Romans & Chinese some of the first to use coined money

______-goods that are used as a medium of exchange

What are some examples from the past?

______

As trade flourished in Europe during the Renaissance, wealthy merchants and nobles needed safe places to store their gold and silver bars and coins.In the larger cities, private banks arose to meet this need.

______

•an early form of paper currency, issued by banks to clients who made deposits of gold or silver;

•these notes could be exchanged for gold or silver “upon demand”

______-banknotes are called commodity-backed-money because they are given in ______

•Money before the early 1970’s was backed by gold

______-currency that ______has declared to be legal tender, but not backed by a physical commodity

______

  • Focus on ______ money for people

Types of Banks

______-Banks for business

______-similar to retail banks, but are not-for-profit

______-banks for personal use & hold checking & saving accountings

______

•Cash checks

•Give loans & deliver loans

•Receive deposits

•Exchange foreign currency

•Financial advice & investments

How to Make a Profit

Banks make money by ______on money they ______.

How can YOU profit from a bank?

______

______-central banking system of the United States. It manages the banking system to ensure that banks operate according to sound financial principles.

FED Main Goals:
*______
*______
*______

The FED does this by:

*Affecting/Changing ______

*Stabilizing the markets ______

The FED affects monetary policy & stabilizes the markets by regulating & promoting banking by providing the following services:

  1. ______-FED requires each bank to keep a fraction of deposits in reserve(part in their own vault and part at the FED)
  2. ______-provides money to the bank
  3. ______-the transfer of funds from one bank or account to another as a result of cashing a check
  4. ______
  5. ______-the paper currency we know as dollars
  6. ______
  7. ______-The FED charges this interest rate for banks to borrow money. Banks use this rate to base the rate they charge consumers to borrow money for loans.

Budgeting Your Money

Why you should budget your money:

Creating a ______helps you to manage your ______.

Your expenses should ______your ______.

How to Create a Budget:

  1. Estimate a ______
  2. Estimate ______
  3. Write out ______

•Some banks offer online tools to help you keep track of your budget

______

  1. Emergencies
  2. College
  3. Retirement
  4. Investments

Sources for Retirement

  1. ______
  2. ______
  3. ______

Invest Your Savings

Money you ______earns ______ over time. Meaning your make ______off of the money ______.

2 Types of Interest

______-interest that is paid annually on the principle

______-interest that is paid both annually on the principle PLUS the interest earned

Things to Consider When Investing your Money

How much does it cost to live in Ashburn VA?

As a group figure out what a single college graduate in Ashburn, VA must spend a month to live.

  • Average salary of someone with a bachelor’s degree is about $50,000.
  • You will have to pay taxes, social security, healthcare, etc... So, 35% of your paycheck has been taken away.
  • You have $2700 a month to spend a month.
  • Use your phones to check the internet for average prices in the Ashburn area, brainstorm ideas, and bargain hunt

Consider the following expenses:

Rent:$______/month

Website link URL______

Food:$______/month

(Car Payment) or Metro/Bus/Train to $______/month Washington DC

Website Link URL______

Car Insurance$______/month

Gas$______/month

(gas/electricity)$______/month

-look up rate and estimate per month use

Website Link URL______

(Phone, cable, internet)$______/month

Website link URL______

Savings$______/month

Other(what would you include) $______/month

$______Total

Group Members:______