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The The EconomyEconomy

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Word BankWord Bank

bank accountbank account

banksbanks

interest ratesinterest rates

loansloans

moneymoney

currencycurrency

Federal ReserveFederal Reserve

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www.perrylocal.org/dialbClass MaterialsAmerican Government 4th Quarter 2014-2015

Banks & Credit Power Point [Bottom of the Page]

Click the coins to take a Click the coins to take a virtual tour of the U.S. Mint:virtual tour of the U.S. Mint:

Do they make $10,000 bills? Do they make $10,000 bills? Click Ben Franklin to find out:Click Ben Franklin to find out:

A “note” is an I.O.U. Paper A “note” is an I.O.U. Paper money in the U.S. is referred to money in the U.S. is referred to as Federal Reserve Notes. That as Federal Reserve Notes. That means the Fed owes you $1 in means the Fed owes you $1 in exchange for this bill.exchange for this bill.

If you kept going, If you kept going, you’d find out you’d find out that Mary’s $100 that Mary’s $100 will add $1,000 to will add $1,000 to the money the money supply.supply.

Click to watch a video about the Click to watch a video about the Federal Reserve:Federal Reserve:

Click the calculator to access Click the calculator to access the inflation calculator at the the inflation calculator at the U.S. Bureau of Labor U.S. Bureau of Labor Statistics:Statistics:

When I was a When I was a kid, candy bars kid, candy bars cost 5 cents!cost 5 cents!

Ever heard anyone say Ever heard anyone say something like this? something like this? Inflation makes prices Inflation makes prices go up over time. go up over time.

Think about something Think about something you bought recently. you bought recently. How much did you How much did you pay? How much might pay? How much might it have cost years ago?it have cost years ago?

Click to view Hands On Banking’s Click to view Hands On Banking’s tutorial about credit:tutorial about credit:

Click for Click for

Financial Financial Literacy Literacy VideosVideos

1) Can you exchange 1) Can you exchange money for goods and money for goods and services?services?

YesYes

NoNoMoney is the “medium of exchange” that people Money is the “medium of exchange” that people use to pay for things.use to pay for things.

2) Does “money” ONLY 2) Does “money” ONLY refer to currency?refer to currency?

YesYes

NoNoMoney includes currency and bank account Money includes currency and bank account balances, which can be turned into currency.balances, which can be turned into currency.

3) Can you make 3) Can you make unlimited withdrawals unlimited withdrawals from a savings account?from a savings account?

YesYes

NoNoFederal law limits the number of certain kinds of Federal law limits the number of certain kinds of withdrawals you can make each month.withdrawals you can make each month.

4) Is it safe to keep your 4) Is it safe to keep your money in the bank?money in the bank?

YesYes

NoNoThe federal government insures bank deposits up The federal government insures bank deposits up to a certain amount of money.to a certain amount of money.

5) Do banks pay people 5) Do banks pay people more for savings more for savings accounts than they accounts than they charge for loans?charge for loans?

YesYes

NoNoSavings accounts pay a TINY amount of interest. Savings accounts pay a TINY amount of interest. Interest you pay on loans is much higher.Interest you pay on loans is much higher.

6) Could most people 6) Could most people start a business without start a business without a loan?a loan?

YesYes

NoNoStarting a business can be expensive. Loans Starting a business can be expensive. Loans provide money for equipment and startup costs.provide money for equipment and startup costs.

7) Does lending make 7) Does lending make more money available to more money available to spend?spend?

YesYes

NoNoLending actually multiplies the amount of money Lending actually multiplies the amount of money out in the community.out in the community.

8) Are banks required to 8) Are banks required to keep some money in keep some money in reserve?reserve?

YesYes

NoNoBanks must keep a certain percent of deposits in Banks must keep a certain percent of deposits in reserve.reserve.

9) Does anyone 9) Does anyone supervise the banking supervise the banking industry?industry?

YesYes

NoNoThe Federal Reserve and other federal agencies The Federal Reserve and other federal agencies supervise the banking industry.supervise the banking industry.

10) Does the Fed want 10) Does the Fed want the economy to swing the economy to swing wildly up and down?wildly up and down?

YesYes

NoNoThe Fed’s goal is to keep the economy in balance.The Fed’s goal is to keep the economy in balance.

11) Does increased 11) Does increased lending make the lending make the economy slow down?economy slow down?

YesYes

NoNoIncreased lending = more spending, which helps Increased lending = more spending, which helps fire up the economy.fire up the economy.

12) Do some loans help 12) Do some loans help you increase your ability you increase your ability to produce?to produce?

YesYes

NoNoA loan to start or expand a business, or a loan to A loan to start or expand a business, or a loan to get an education, can help you earn more.get an education, can help you earn more.

13) Is an entrepreneur 13) Is an entrepreneur likely to start his or her likely to start his or her own business?own business?

YesYes

NoNo““Entrepreneurs” take risks to start new businesses.Entrepreneurs” take risks to start new businesses.

14) Does paying for 14) Does paying for something with a loan something with a loan cost less than paying for cost less than paying for it outright?it outright?

YesYes

NoNoPaying with a loan always costs MORE than paying Paying with a loan always costs MORE than paying for something outright!for something outright!

15) Does anyone keep 15) Does anyone keep track of your credit track of your credit history?history?

YesYes

NoNoLenders report your credit history to the three Lenders report your credit history to the three credit reporting bureaus.credit reporting bureaus.

Read & Complete the packet “Banks, Credit, & the Economy

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