About This Chapter
Money and Financial Institutions: Chapter Summary and Learning Objectives
Understanding money, financial reserve systems, and the United States banking system are not only part of the foundation for creating a successful business, but are also important for increasing an individual's standard of living and personal wealth. In this chapter, our instructor discusses money and the monetary system, different types of financial reserve systems, private investment and real interest rates, the financial tools and policies of the U.S. banking system, and the roles of the government and technology in the marketplace of monetary exchange. In addition, students will be introduced to several important vocabulary terms in order to help them grasp all the different aspects of this complex topic. At the end of this chapter, you should be to:
- Define money and explain its four basic functions
- Describe the Fractional Reserve System and the Federal Reserve System
- Understand the money market's supply and demand curves
- Describe the U.S. banking system and identify its main institutions
- Explain how the government protects your money and how technology improves banking
- Evaluate the importance of the World Bank and the International Monetary Fund
|The Four Basic Functions of Money||Learn the four basic functions of money.|
|Money and Multiplier Effect: Formula and Reserve Ratio||Understand the Money Multiplier and be able to use it to calculate cumulative changes in the supply of money.|
|Private Investment and Real Interest Rates||Identify the impact of changes in interest rates on loanable funds' supply and demand and drive investment.|
|What is the Federal Reserve System?||Learn about the monetary goals and responsibilities of the central bank.|
|Reserve Requirement, Open Market Operations and the Discount Rate||Understand the central bank's three main tools.|
|Institutions of the U.S. Banking System||Know the institutions of the U.S. banking system, including ex-commercial banks, credit unions, savings and loans associations, and nonbanks.|
|How the Government Protects Your Money During a Financial Crisis||Understand the causes of the banking crisis of 2008-2009 and funds are protected by the government during crises like this.|
|How Technology Makes Banking More Efficient||Describe how technology improves banking efficiency.|
|International Banking and Services||Evaluate the role and importance of international banking.|
|The World Bank, IMF & Other International Banking Organizations||Explain the role of the World Bank, International Monetary Fund, International Bank for Reconstruction and Development, and Bank for International Settlements.|
1. The Four Basic Functions of Money
This lesson uses real-world examples to describe the four basic functions that money serves in an economy. These basic functions help to create the foundation of the money system.
2. Money and Multiplier Effect: Formula and Reserve Ratio
In this lesson, explore the concept of the multiplier effect and the money multiplier. Then, learn the formula for calculating changes in the money supply.
3. Private Investment and Real Interest Rates
When you borrow money, where does that money come from and why is it available? In this lesson, you'll learn about the market for loanable funds, where savers deposit money and entrepreneurs borrow money to finance private investment.
4. What is the Federal Reserve System?
Have you ever wondered why interest rates go up and down, seemingly at random? Of course you have! Discover what the Federal Reserve is, what its goals are and how those goals are achieved in this introductory lesson explaining the central bank of the United States.
5. Reserve Requirement, Open Market Operations and the Discount Rate
This lesson outlines the three main tools used by the central bank to conduct monetary policy, including open market operations, required reserves and the discount rate.
6. Institutions of the U.S. Banking System
The United States banking system is diverse and consists of many different types of institutions. In this lesson, you'll learn about commercial banks, savings and loan associations, credit unions, and investment banks.
7. How the Government Protects Your Money During a Financial Crisis
In this lesson, you'll learn about some of the causes of the financial crisis of 2008 that brought us the Great Recession. You'll also learn what steps the federal government can take to help protect your money when the next financial crisis hits.
8. How Technology Makes Banking More Efficient
If you've ever heard the cliché 'banker's hours,' you know that banking traditionally has not been a fast and efficient process. In this lesson, you'll learn about how technology has improved the efficiency of banking for customers.
9. International Banking and Services
Business never stops in the global economy. Companies need banking services 24 hours a day on different continents. In this lesson, you'll learn about international banking, including services provided and types of banks.
10. The World Bank, IMF & Other International Banking Organizations
International banking and financial organizations exist to encourage economic and financial stability, help facilitate trade, and help with economic development. In this lesson, you'll learn about some of these important organizations.
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Other chapters within the Business 100: Intro to Business course
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- Business in Global Markets
- Forms of Business Ownership
- Entrepreneurship and Small Business
- Managing and Leading in Business
- Leadership Styles in Business
- Organizational Management
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- Basics of Human Resources
- Managing the Employer-Worker Relationship
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- Product Distribution & Supply Chain Management
- Pricing Strategy in Marketing
- Product Promotion in Business
- MIS Basics in Business
- Implications of Information Technology
- Risk Management in Business
- Accounting Basics
- Financial Management in Business
- Securities Markets and Business
- Studying for Business 100