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Chapter 20 - Money, Financial Institutions, and the Federal Reserve
20-46
PPT 20-36
Smart Cards
SMART CARDS
20-36
LO 20-6
• Smart Card -- A
combination of a credit card,
debit card, phone card,
driver’s license, and more.
Chapter 20 - Money, Financial Institutions, and the Federal Reserve
20-47
a. Transfer funds from one account to another.
b. Pay bills.
c. Check account balances.
d. Apply for a car loan or mortgage.
e. Buy and sell stocks and bonds.
2. Internet banks such as E*Trade Bank offer online
banking only, not physical branches.
a. They can offer slightly higher interest rates
and lower fees.
b. Some people are nervous about online securi-
ty and fear putting their money into online
banks.
c. Others want to talk to a banking professional
in person.
learning objective 7
Evaluate the role and importance of international banking, the World Bank,
and the International Monetary Fund.
VII. INTERNATIONAL BANKING AND BANKING
SERVICES
A. Banks help businesses conduct business in other
countries by providing three services.
1. A LETTER OF CREDIT is a promise by the bank
to pay the seller a given amount if certain condi-
tions are met.
2. A BANKER’S ACCEPTANCE is a promise that
Chapter 20 - Money, Financial Institutions, and the Federal Reserve
20-48
Chapter 20 - Money, Financial Institutions, and the Federal Reserve
20-49
the bank will pay some specified amount at a par-
ticular time.
3 CURRENCY EXCHANGE is the exchange of one
country’s currency for another country’s currency.
4. ATMs now may provide foreign currency.
B. LEADERS IN INTERNATIONAL BANKING
1. In the future, many crucial financial issues will be
international in scope.
2. Today’s money markets form a GLOBAL MAR-
KET SYSTEM.
a. Large international banks make investments
in any country where they can earn maximum
return.
b. World economies are linked into ONE IN-
TERRELATED SYSTEM with NO REGULA-
TORY CONTROL.
c. American firms must compete for funds with
firms all over the world.
3. Banking is no longer a domestic issue—it is an in-
ternational issue.
4. The world economy has evolved, financed by in-
ternational banks.
C. THE WORLD BANK AND THE INTERNATIONAL
MONETARY FUND (IMF)
1. The World Bank and the IMF are twin intergov-
ernmental pillars that support the structure of the
world’s banking community.
Chapter 20 - Money, Financial Institutions, and the Federal Reserve
20-50
PPT 20-37
Making Transactions in Other
Countries
MAKING TRANSACTIONS in
OTHER COUNTRIES
20-37
LO 20-7
• Letter of Credit -- A promise by the bank to pay the
seller a given amount if certain conditions are met.
• Banker’s Acceptance -- A promise the bank will
pay some specified amount at a particular time.
• Money exchange allows companies to go to a
bank and exchange currencies to use in a
particular country (i.e. dollars for euros).
Chapter 20 - Money, Financial Institutions, and the Federal Reserve
20-51
2. The WORLD BANK is the bank primarily re-
sponsible for financing economic development; it
is also known as the INTERNATIONAL BANK
FOR RECONSTRUCTION AND DEVELOP-
MENT.
a. Today, most of the money is lent to develop-
ing nations to raise productivity and raise the
standard of living.
b. Recently, the World Bank has received con-
siderable criticism regarding human rights,
AIDS, and the environment.
c. Some want the bank to forgive the debts of
less developed countries or stop making
loans until the country makes economic re-
forms.
3. The INTERNATIONAL MONETARY FUND
(IMF) is an organization that assists the smooth
flow of money among nations.
a. About 185 countries are voluntary members
of the IMF.
b. It requires members to allow their own mon-
ey to be exchanged for foreign currencies
freely and keep the IMF informed about
changes in monetary policy.
c. The IMF is not primarily a lending institution,
rather an OVERSEER of member countries
monetary and exchange rate policies.
d. The IMF has allowed some countries like
Chapter 20 - Money, Financial Institutions, and the Federal Reserve
20-52
PPT 20-38
Leading Institutions in International
Banking
LEADING INSTITUTIONS in
INTERNATIONAL BANKING
20-38
LO 20-7
• World Bank -- Lends most of its
money to less-developed nations to
improve their productivity and help
raise standards of living and quality of
life.
• International Monetary Fund
(IMF) -- Fosters cooperative
monetary policies that stabilize the
exchange of one national currency for
another. About 188 countries are a
part of the IMF.
REACHING BEYOND
our borders
PPT 20-39
New Day, New Issues Across the
Globe
NEW DAY, NEW ISSUES
ACROSS the GLOBE
20-39
• The IMF and the World Bank are both trying to come up
with answers to the global issues that have become very
serious.
• Christine Lagarde, managing director of the IMF, fears
the financial crisis did lasting harm to the potential pace
of growth in many global economies.
• The IMF and World Bank are both trying to solve key
global issues before there is another serious crisis.
Chapter 20 - Money, Financial Institutions, and the Federal Reserve
20-53
Brazil, South Korea, and Turkey to put up
barriers to protect their currencies from infla-
tion.
VIII. SUMMARY
Chapter 20 - Money, Financial Institutions, and the Federal Reserve
20-54
test
prep
PPT 20-40
Test Prep
TEST PREP
20-40
• What are some of the causes for the banking
crisis?
• What is the role of the FDIC?
• How does a debit card differ from a credit card?
• What is the World Bank and what does it do?
• What is the IMF and what does it do?
Chapter 20 - Money, Financial Institutions, and the Federal Reserve
20-55
PowerPoint slide notes
PPT 20-1
Chapter Title
Copyright © 2015 by the McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
Money,
Financial
Institutions,
and the Federal
Reserve
CHAPTER 20
PPT 20-2
Learning Objectives
LEARNING OBJECTIVES
20-2
1. Explain what money is and what makes money
useful.
2. Describe how the Federal Reserve controls the
money supply.
3. Trace the history of banking and the Federal
Reserve System.
4. Classify the various institutions in the U.S. banking
system.
PPT 20-3
Learning Objectives
LEARNING OBJECTIVES
20-3
5. Briefly trace the causes of the banking crisis, and
explain how the government protects your funds
during such crises.
6. Describe how technology helps make banking more
efficient.
7. Evaluate the role and importance of international
banking, the World Bank, and the International
Monetary Fund.
Chapter 20 - Money, Financial Institutions, and the Federal Reserve
20-56
PPT 20-4
Janet Yellen
JANET YELLEN
Federal Reserve
20-4
• The first female chair of the
Federal Reserve.
• Earned her doctorate in
economics from Yale and
was appointed to the Federal
Reserve Board of Governors
by President Clinton.
• Almost every factor related to
the economy is influenced by
the decisions she makes.
PPT 20-5
Name That Company
NAME that COMPANY
20-5
This company recently opened an online store using
a new form of money.
Name that company and what currency it uses!
Company: Mango
PPT 20-6
What’s Money?
• Money -- Anything people generally accept as
payment for goods and services.
WHAT’S MONEY?
20-6
LO 20-1
• Barter -- The direct trading of
goods or services for other
goods or services.
Chapter 20 - Money, Financial Institutions, and the Federal Reserve
20-57
PPT 20-7
Standards for a Useful Form of Money
STANDARDS for a
USEFUL FORM of MONEY
20-7
LO 20-1
• Portability
• Divisibility
• Stability
• Durability
• Uniqueness
The new $100 bill has features like a 3-D ribbon, as well
as ink with microscopic flakes that shift color.
PPT 20-8
The Bitcoin is in the Mail
The BITCOIN is in the MAIL
20-8
• Bitcoin is a digital currency
created in 2008.
• It is attractive to many users
because there is no central
regulating authority.
• Transactions are between only
two people without middlemen.
• This, however, makes valuing
Bitcoin difficult.
PPT 20-9
The Money Supply
The MONEY SUPPLY
20-9
LO 20-2
• Money Supply -- The amount of money the Federal
Reserve makes available for people. The money
supply is referred to as:
- M1 -- Money that can be accessed quickly (coins,
paper money, travelers
’
checks, etc.).
- M2 -- M1 + money that may take a little time to
obtain (savings accounts, mutual funds, etc.).
- M3 -- M2 + big deposits like institutional money
market funds.
Chapter 20 - Money, Financial Institutions, and the Federal Reserve
20-58
PPT 20-10
New Money
NEW MONEY
Paper Money Printed in 2010 (In $ Billions)
Source: Bloomberg Businessweek, www.businessweek.com, accessed November 2014. 20-10
LO 20-2
1. This slide shows the value of different bills printed
in 2010.
2. In 2010 over 1 billion $1 bills, 2 billion $20 bills,
and over 2 billion $100 bills were printed.
3. Most of the value of U.S. currency is $100 bills.
4. In 2010 the U.S. printed more bills in every catego-
ry but $1s and $50s when compared to 2009.
PPT 20-11
How Long Does Paper Money Last?
HOW LONG DOES
PAPER MONEY LAST?
Source: Federal Reserve, www.federalreserve.gov, accessed November 2014. 20-11
Bill How Long it Lasts
$1 21 Months
$5 16 Months
$10 18 Months
$20 24 Months
$50 55 Months
$100 89 Months
LO 20-2
1. This slide gives the students an idea of the life
span of paper money in circulation.
2. The largest denomination ever printed was a
$100,000 gold certificate.
3. Share with students some interesting facts regard-
ing U.S. currency:
• Originally, U.S. currency included denomi-
nations of $500, $1,000, $5,000, and
$10,000. No currency printed today is great-
er than $100.
• The percentage of U.S. counterfeit currency
in circulation is estimated to be .02%.
• U.S. currency bills are 2.61 inches wide, 6.14
inches long, and .0043 inch thick, and weigh
1 gram.
• It costs 4.2 cents to produce a U.S. bill.
PPT 20-12
Money Milestones
MONEY MILESTONES
20-12
Year Milestone
1956 Congress set the minimum wage at $1 an hour
1960 $10 million presidential campaign by candidate Richard Nixon
1985 $100,000 bottle of wine sold at auction at Christie’s
1995 $1 million cost for a 30-second commercial during Super Bowl XXIX
2001 $10 movie ticket in New York
2004 $100 million Picasso painting sold at Sotheby’s
2007 $1 billion stadium built in London (Wembley)
LO 20-2
1. This slide illustrates some interesting dates re-
garding U.S. money
2. Have students look through the dates. Which do
they find most interesting or surprising and why?
3. Ask students: How do some of the amounts listed
compare to today?
Chapter 20 - Money, Financial Institutions, and the Federal Reserve
20-59
PPT 20-13
Money Facts
MONEY FACTS
What You Might Not Know About What’s in Your Wallet
Source: Fast Company, wwww.fastcompany.com, accessed November 2014. 20-13
LO 20-2
• In 2009, the U.S. printed 26,000,000 bills a day!
• Each penny costs 1.6¢ and each nickel costs 6¢
to make.
• The most-tracked bill on WheresGeorge.com has
travelled over 4,100 miles in 3 years!
• 2/3 of all U.S. $100 bills are outside the U.S.
• 90% of paper money has traces of cocaine!
PPT 20-14
Exchanging Money Globally
EXCHANGING MONEY GLOBALLY
20-14
LO 20-2
• Falling dollar value: The amount of goods and
services you can buy with a dollar decreases.
• Rising dollar value: The amount of goods and
services you can buy with a dollar increases.
• What makes the dollar fall or rise is the position of
the U.S. economy relative to other global
economies.
Since the United States abandoned the gold standard, the
U.S. dollar has depreciated by approximately 90%.
PPT 20-15
The Impact of a Falling Dollar
The IMPACT of a
FALLING DOLLAR
• Overseas demand for U.S. products rise.
• A favorable exchange rate for U.S. companies
increases profits in foreign markets.
20-15
LO 20-2
• U.S. tourism increases
which is good for hotels,
resorts, theme parks, and
retailers that serve
international travelers.
1. This slide highlights some of the issues related to a
falling dollar.
2. While these points are positive, the long term impli-
cations of a falling dollar are more serious.
3. A declining dollar will eventually result in the fol-
lowing:
• Higher interest rates on government and con-
sumer debt.
• Higher inflation due to a rise in the price of
imports, and commodity prices increase since
most are priced in terms of U.S. dollars.
Chapter 20 - Money, Financial Institutions, and the Federal Reserve
20-60
PPT 20-16
Five Major Parts of the Federal Reserve
System
FIVE MAJOR PARTS of the
FEDERAL RESERVE SYSTEM
20-16
LO 20-2
1. The Board of Governors
2. The Federal Open
Market Committee
3. 12 Federal Reserve
Banks
4. 3 Advisory Councils
5. The member banks of
the system
The Federal Reserve is a quasi-governmental agency not
under the direct control of the U.S. government.
PPT 20-17
The 12 Federal Reserve District Banks
The 12 FEDERAL RESERVE
DISTRICT BANKS
20-17
LO 20-2
PPT 20-18
Managing the Money Supply
MANAGING the MONEY SUPPLY
20-18
LO 20-2
