MONEY AND BANKING What is Money Money anything

MONEY AND BANKING

What is Money? Money- anything that people are willing to accept in exchange for goods Types of Money Coins- metallic forms of money Currency- Coins and paper money

What is money? Why do we value and accept money? We are sure that others will accept its value It has value because we accept it has value In America, money used to be “backed” by gold or silver, but this went out in the 1930’s

Banking Bank- an institution for receiving, keeping, and lending money Early Banking in the US Very informal A merchant would allow customers to deposit money and charge a small fee; This was not always safe… what if the merchant goes out of business or is not trustworthy?

Financial Institutions Commercial Banks- financial institutions that offer full banking services to individuals and businesses Savings and Loan Associations- financial institutions that traditionally loaned money to people buying homes; they also take deposits and issue saving accounts Credit Unions- financial institutions that work on a not-for-profit basis; open for members of a certain group only

Safeguarding our Financial System The financial system of the US is one of the safest in the world because of regulation and insurance The FDIC or Federal Deposit Insurance Corporation- the national corporation that insures that individual accounts up to $250, 000; was created after the bank collapse of the 1930’s (Great Depression)

The Federal Reserve System The Federal Reserve System- central bank of the US; The Fed regulates the US monetary & financial system; It is also the government’s bank 12 regional Federal Reserve Banks throughout the country; NC is part of the Richmond Federal Reserve District Federal Reserve Board- supervises the banks, members appointed by the president

The Federal Reserve System

The Federal Reserve System The Fed as a Regulatorq Regulates large commercial banks q Regulates mergers of banks q Enforces laws that deal with consumer borrowing q Implement Monetary Policy q Ex. During times of recession and depression the Fed decreases interest rates. (this encourages lending and discourages savings)

The Federal Reserve System The Fed as the Government’s Bank Holds the government’s money Sells US government bonds Controls coins and bills in circulation Control the amount of currency that is made and destroyed on a daily basis

Government Finances Part 1

Government Finances Each year the President and Congress work together to create a budget; the President writes the budget and then congress approves the budget

Government Finances Types of Spending Mandatory spending that does not need the annual approval of Congress � Examples- Social Security benefit checks and interest payments on government debt Discretionary spendinggovernment expenditures that must be approved each year � Examples- Money spent on defense and highway construction

Government Finances Appropriations Bills- laws that approve spending for a particular activity Appropriations Bills always start in the House of Representatives

Parts of the US Budget Revenues- money taken in by the government � Taken in by- income taxes (16 th Amendment), payroll taxes, excise taxes, estate taxes, & other fees Expenditures- money spent by the government

Types of Taxes Progressive tax- the higher one’s income the higher the percentage of tax (income tax) Regressive tax- tax imposed at a flat rate (sales tax) Excise- tax on manufacture, sale, and consumption of goods; often called “hidden tax” (tax on fuel, alcohol, tobacco) Proportional tax- tax that takes the same percentage of income regardless of how much is earned

Local Government Finances State and local government receive revenue from Sales tax State income taxes Property taxes Fines and fees Utilities What are 3 expenditures at the local level?