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Money, Banking, Credit

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Money, Banking, Credit & Consumer Rights Ch. 20 Government Regulations Equal Credit Opportunity Act: a person can t be denied credit because of race, religion ... – PowerPoint PPT presentation

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Title: Money, Banking, Credit


1
Money, Banking, Credit Consumer Rights
  • Ch. 20

2
Money
  • Replaced the barter system in traditional
    economies
  • Functions
  • Medium of exchange
  • Used to trade items
  • Store of value
  • Reliability to store, save, and retrieve
  • Measure of value
  • Can be divisible
  • Each one must be equal to the other
  • Not easy to counterfeit

3
Different types of Money
4
What is it called when you get less satisfaction
from eating your 2nd piece of pizza?
  1. Law of Diminishing Returns
  2. Anti-Pizza disease
  3. Full Stomach syndrome
  4. Diminishing Marginal Utility

5
What is not a factor of production?
  1. Unions
  2. Labor
  3. Natural Resources
  4. Capital

6
What type of economy is the U.S.?
  1. Traditional
  2. Market
  3. Mixed
  4. Command

7
Banking
  • Brings savers (sellers) borrowers (buyers)
    together in the market
  • Savers deposits
  • Borrowers loans
  • Banks are a business and have profit motive
  • Make money off of fees and interest on loans
  • Reserve Requirements banks want more deposits
    so they can loan more money

8
What signaled the start of the Great Depression?
  1. Roosevelts Fireside Chats
  2. Bank Holiday
  3. Stock Market Crash
  4. Hoovervilles

9
Types of Deposit Accounts
  • Checking Account
  • Allows customers to write checks, use debit cards
    or withdraw money from an ATM (Automated Teller
    Machine)
  • Money transactions are quick and efficient
  • Money does not stay in the account for long
  • Depositor usually receives no interest
  • Checking/Debit Cards
  • Transfer of funds electronically
  • Tied directly to checking accounts

10
Checking Accounts
11
(No Transcript)
12
Types of Deposit Accounts cont.
  • 2. Savings Account
  • Banks pay interest to customers based on how much
    money is deposited
  • Money grows larger the longer it is there
  • Money remains untouched for longer periods of
    time

13
Savings Account
Sample Bank Book
14
Types of Deposit Accounts cont.
  • 3. Certificate of Deposit (CDs)
  • Customers loan a certain amount to the bank for a
    certain amount of time
  • Ex. I bought a 1,000 CD for 1 year at 4
  • Higher rates of interest than savings
  • Customers cant withdraw their money without a
    penalty

15
What are the type of jobs that usually occur in
manufacturing sectors called?
  1. Rust Belt
  2. Sun Belt
  3. White Collar
  4. Blue Collar

16
Types of Banks
  1. Commercial Banks full service to individuals
    businesses (Most common)
  2. Savings Loan Associations traditionally
    loaned money to people buying homes issued only
    savings accounts
  3. Credit Unions non-profit sponsored by large
    businesses, labor unions or government
    institutions offer full services at usually
    lower prices

17
Commercial Banks
18
Credit Unions
19
FDIC
  • Federal Deposit Insurance Corporation
  • Insures deposited money in the bank up to
    100,000 Right now 250,000
  • Most are FDIC insured

20
What US event caused the formation of the FDIC?
  1. 9/11
  2. Bombing of Pearl Harbor
  3. Stock Market Crash and Bank Runs
  4. The birth of Mr. Cleland

21
Loans
  • Agreement for borrowing money with repayment plus
    interest
  • Used to make expensive purchases
  • Banks make money on the interest paid for a loan
  • In order to make loans, banks have to have money
  • To have the money, banks must attract deposit
    customers
  • Can increase the supply of money
  • Principle amount borrowed
  • Interest cost of borrowing
  • Interest Rate rate of cost to borrow

22
Which of the following best explains why a
business could move from record sales and
production to plant shutdowns and company layoffs?
  1. Diminishing Marginal Utility
  2. Law of Supply
  3. Law of Demand
  4. Law of Diminishing Returns

23
Types of Loans
  1. Fixed interest is set cant be changed
  2. Variable Changes when interest rates change

24
Which of the following best describes scarcity?
  1. Not enough goods for everyone
  2. The amount that people want
  3. Lack of desire to produce enough resources
  4. Not enough resources to provide for every desire

25
Charge Accounts
  • Buy goods services at individual stores pay
    for them later
  • Credit limit maximum amount a person can buy
    with the promise of payment

26
Types of Charge Accounts
  • Installment Account
  • Repaid with equal payments over a certain period
    of time
  • Part of the payment goes towards interest part
    towards the principle
  • Car loan or mortgage
  • Regular Account
  • Billing cycles where a bill is sent at the end
  • No interest is charged if entire bill is paid
  • Account cant be used again until the balance is
    paid
  • Interest is charged on the balance not paid
  • Furniture Stores usually do this. Pay by 2010,
    certain amount each month, but with no interest.
  • Revolving Account
  • Billing cycles where a bill is sent at the end
  • Interest charged on portion not paid
  • Account can still be used until credit limit is
    reached
  • Example Credit Cards

27
What is the governments role in a market economy?
  1. Set price control
  2. Own the means of production
  3. Absolutely no role
  4. Set production quotas

28
Credit Cards
  • Make purchases without having the money
  • Charge high interest rates usually _at_ 18
  • Lower interest rates if the customer is reliable
  • Finance Charges Cost of credit (interest)
    expressed in dollars
  • APR Cost of credit (interest) expressed as a
    percentage

29
Applying for Credit
  • Fill out application
  • Credit Bureau does a credit check
  • Creditor may ask for references
  • Credit checks show your income, debt and ability
    to pay debts in the past

30
Which economic term best explains a consumers
choice of buying a new car instead of opening a
savings account?
  1. Trade-off
  2. Scarcity
  3. Opportunity cost
  4. Comparative advantage

31
Credit Rating
  • Rating of risk Excellent, Good, Average or Poor
  • Ratings have a number associated with them
  • 3 Credit Bureaus Experian, Transunion Equifax
  • Gives lenders an idea of reliability when issuing
    loans
  • Higher Credit Score less interest you are
    charged on a loan saving money
  • Unsecured loans loan based on reputation
  • Secured loans have collateral to back up the
    loan

32
Credit Bureaus
33
Which of the following would have a negative
impact on the GDP?
  1. An increase in exports
  2. An increase in imports
  3. An increase in production
  4. An increase in population

34
Government Regulations
  • Equal Credit Opportunity Act a person cant be
    denied credit because of race, religion, national
    origin, gender, marital status or age
  • Usury Laws Restrict the amount of interest
    companies, not banks, can charge
  • In North Carolina, it is 8. Lend neighbor 100
    loan can only receive 8 from interest

35
What is the unintended side effect of an action?
  1. Utility
  2. Public Goods
  3. Personality
  4. Externality

36
Bankruptcy
  • Debts are so large they cant be paid back
  • Most of what a debtor owns is sold or given to
    creditors
  • Takes 10 years to reestablish credit
  • States can become bankrupt too

37
Why do elephants face the threat of extinction
while cows do not?
  1. Cattle are a valuable resource while elephants
    have no market value.
  2. There is a high demand for products that come
    only from the cow.
  3. There are still lots of cattle that roam free,
    while most elephants are in zoos.
  4. Cattle are owned by ranchers, while elephants are
    owned by no one.

38
Consumer Rights
  • Consumer someone who buys a product or service
    (YOU!)
  • Types of Income
  • Disposable Income money remains after taxes
    taken out.
  • Money to pay for house, car, etc.
  • Discretionary Income money remaining after
    paying for necessities
  • Either save or spend it

39
Consumer Rights cont.
  • Consumerism a movement to educate buyers on
    purchases and to make sure products are safe
  • Congress laws Pure Food and Drug Act in 1906
  • Private groups BBB or Better Business Bureau
  • Consumer Bill of Rights
  • Consumers have
  • Right to a safe product
  • Right to be informed
  • Right to choose
  • Right to be heard
  • Right to redress

40
Consumer Responsibilities
  • Smart Buying Strategies
  • Info on products
  • Watch out for advertising
  • Comparison shopping find out prices on product
    from different stores/internet
  • Brand Name vs. Generic
  • When product fails
  • Report it
  • Check the warranty
  • Keep a copy of records
  • Be calm
  • Make Fair complaints
  • Ex.
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