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Chapter 10 Money and Banking


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									   Chapter 10
Money and Banking
Section 1 - Money
    The Three Uses of Money
 Economics  define money in terms of its
  three uses…..
 Money is anything that serves as a,
  _______________, ____________ and a
  store of_________.
 Money as a Medium of Exchange
A   medium of exchange – is anything that
  is used to _________ _______ during the
  _________ of goods and services.
 Without money, people acquire goods and
  services through, _________ – the direct
  exchange of one set of goods or services
  for _________.
 Still used in many parts of the world today –
  especially in a ___________ Economic System
  in Asia, Africa and Latin America.
 People in barter economics spend a great deal
  of ____ and _____ exchanging the goods they
  have for the goods they need and want.
 As an economy becomes more ___________
  bartering becomes too ________ and ____
  consuming to be practical.
   Money as a Unit of Account
     of Account – allows money to act as a
 Unit
 means for ________ the ______ of goods
 and services
    Money as a Store of Value
 This means that money _____ its _____ if
  a person decided to hold on to it or store it
  instead of spending it.
 Money is a good store of value except in a
  period of rapid _________ or a general
  _______ in prices
 During a period of inflation, money does
  ___ function as well as a store of value
    The Six Characteristics of Money
 _________ is the coins and paper bills used as
 Other forms of currency throughout history have
  been: Cattle, _____, Dried Fish, Furs, Precious
  Stones, Gold, Silver, ______ _____, Olive Oil,
  Rice, Wheat, Porpoise Teeth, ______, Cotton
 None of the currency forms listed above would
  work today, because each one lacks at least one
  of the ___ characteristics that economists use to
  judge how well an item serves as currency
The Six Characteristics of Money –
   Characteristic Number One
 _________
 Objects  used as money must _________
  the physical____ and _____ that comes
  with being used over and over again.
 If money _____ ____ or is easily
  _________ it cannot be trusted to serve as
  a store of value.
The Six Characteristics of Money –
   Characteristic Number Two
 ___________
 People need to be able to ____ ______
  ____ ____ as they go about their daily
 People need to be able to easily ________
  money from one person to another when
  making purchases
The Six Characteristics of Money –
  Characteristic Number Three
 ____________
 To be useful, money must be easily
  ________ into _______ denominations or
  units of value
 When money is ________, people only
  have to use as ____ of it as necessary for
  an exchange
The Six Characteristics of Money –
  Characteristic Number Four
 Uniformity
 Any  two units of money must be uniform,
  that is the same in terms of what they will
 People must be able to count and
  measure money accurately
The Six Characteristics of Money –
   Characteristic Number Five
 _______- Supply
 In the United States, the Federal _______
  System controls the supply of money in
 The Federal Reserve is able to keep just
  the _____ ______+ of money available
The Six Characteristics of Money –
    Characteristic Number Six
 ____________
 Everyone in the economy must be able to
  ________ the _______ that serve as
  money for goods and services
 Money is accepted _______ the owner of
  the “store” can _____ it elsewhere to buy
  something he or she needs or wants
   Sources of Money’s Value
 The  United States money (bills and coins)
  is ______, portable, easily _______,
  uniform, in _______ supply and ________
  throughout the country.
 However, convenient and practical, bills
  and coins have _____ ______ value in of
    So….what then,
     makes money
   The answer is that there are actually
several possible sources of money‟s value,
   depending on whether the money is
Commodity, ___________, or Fiat Money.
            Commodity Money
 A commodity is an _______, so….
 Commodity Money consists of objects that have
  _______ in and of _________ and that are also
  ____ as money
       Salt, Corn, Cattle – all at one time used as money, but
        can also be used as food
   Commodity Money tends to ____ several of the
    Characteristics that make objects good sources
    of money
       Not portable, Durable or Divisible
       Only Works in simple Economies
      Representative Money
 Makes  use of ______ that have value
  because the holder can ________ them
  for something else of value
 A receipt of an IOU
   A History of Representative
 Earlyin World History, Gold and Silver
 was too _____ to carry. It also had to be
 _______ and tested. People started
 leaving it in a Goldsmith‟s ____ and
 carrying around a _______ from the
 Goldsmith telling how much gold they had
 and its value. The receipts were taken by
 businesses = the ________ form of _____
        The United States History of
          Representative Money
   Early in US History, Massachusetts Bay Colony issued
    _________________ – a form showing how much money a
    colonist had given to the colony/king to help fight King William‟s
    War – The “Bills of Credit” could be redeemed for _____ (gold
    or silver coins).
   Bills of Credit, called ___________ did not work well during the
    American Revolution, because there was no money. The
    Second Continental Congress and then later Congress, under
    the Articles of Confederation, had no power to ____ the people.
    The only money the government had was voluntary state
   Later in the US, the government issued gold and silver
    __________. These certificates were ______ by gold and silver
    and could be _________ for gold or silver at any bank location.
    This caused a problem, because the US _________ had to
    keep gold and silver on hand to _______ the certificates from
    paper to gold or silver. Most gold and silver certificates went
    ___ in the _____, but some silver certificates were in circulation
    until 1971.
                    Fiat Money
   A Fiat is an _____ or decree
   Fiat money is also called _____________” and has
    value because the __________ has decreed that it is an
    __________ means to pay debts.
   On the back of a US dollar you will see, “This note is
    legal tender for all _____, public and private”.
   Our money has _____ because our
    government _____ it does, and the Federal Reserve
    keeps it in _______ supply” (which makes it Valuable)
   The _______ of the money supply is _________ for a
    Fiat system to work.
  A Bank is an institution for
receiving, keeping and lending
   money near your home.

            Section 2 -
           The History of
          American Banking
 Banking as we know
it, developed over the
course of the nation‟s
  history, to meet the           Banks were not always popular
  needs of a growing                      in the US
     and changing
       American Banking Before
            the Civil War
 Banks   ____ very ________ businesses
  that merchants managed in addition to
  their regular trade
 ___ ____ ____:
     What happened if the business went out of
     What happened if the business was
American Banking Before the
         Civil War
            Two Views of Banking –
      _________ or _____-Federalist
 After the American Revolution, the leaders of the new
 nation agreed that one of their ____ _____, must be to
   establish a ____, stable banking system. This was
important for increasing _____ with other countries and
     ensuring the economic ______ of the new US.
 How the bank would be ___________ became part of
 the _______ on the ____ of the _______ Government
                would play in the country?
    A brief US History lesson…..
 Remember that under the Articles of
  Confederation the Federal Government had little
  to no power.
 Starting in October 1787, we are trying to get the
  Constitution ratified (or approved).
 Our “Founding Fathers” have divided up on two
       The Federalist – who wanted a ______ central
       The Anti-Federalist – who wanted a ____ central
        government and all the power to ______ with the
    A brief US History lesson…..
 After we get the Constitution passed, we will still be in
  conflict on what the Federal Government has the power
  to do.
 However, when George Washington becomes president
  he appoints, _________ _________ (a strong
  _________) as Secretary of the Treasury
 One of the first things Hamilton does is ______ a
  National Bank (a bank _________ or licensed, by the
  ________ Government)
 The new National Bank could ______ a ______ currency
  for the entire nation, ______ the Federal Governments
  funds, and _______ other _____ throughout the country.
  A brief US History lesson…..
 But….is  a National Bank
 Keep in mind, that to get a National Bank,
  our Founding Fathers had to use “_____
  Interpretation” of the Constitution.
 Or the _________ and ______
The First Bank of the United States
 In____ – Congress set up the Bank of the
  United States
      Granted it a ___ ____ charter or _______ to
The First Bank of the United States
   Had the Following Purposes
 1. To ____ the money that the _________
  collected in ______
 2. To help the government _____ out its powers
  to ___, borrow ______ in the public interest, and
  ________ interstate and _________ commerce
 3. To ______ that _____-chartered banks ____
  __________ gold and silver to ________ for
  bank notes should the demand arise
 4. To______ Representative _____ in the form
  of bank _____ – b_______ by gold and
Alexander Hamilton was killed
  in a duel in 1804 by Aaron
    Burr. When he dies, the
  National Bank lost its main
   It finally closed in 1811 when its
  charter expired……what resulted
  was _____ in American Banking.
    Chaos in American Banking
   _____ banks (banks chartered by state governments)
    began _______ bank _____ that they could ___ back
    with specie.
   States also chartered many banks ______ considering
    whether these banks would be ______ and credit-
   Due to __ __________, financial ________ resulted,
    _____ rose rapidly…which meant
     No ___________ in the currency
    * _____ different currencies
     Bankers printed money, even though they ___ ___ gold or silver
      to ____ it up
     Merchants had to keep _____ of which notes were redeemable
      by gold and silver and which had ___ backing
        The Second Bank of
         the United States
 To ____ the _____, Congress chartered
  the Second Bank of the United States in
 Limited it to a __ year _______
 The Second Bank of the United States,
  slowly managed to _______ people‟s
  __________, but it was still ______ by
  many Americans including President
  Andrew _______.
            The Second Bank of
             the United States
 Nicholas  ______ was named _________
  of the Second Bank of the United States in
 His ____ goal was _________ stability.
     He would _____ each bank in the country
      “secretly” and turn in a large amount of g____
      and s_______ certificates. If the bank could
      ___ meet the demand, the bank was c_____.
      Other banks l________ quickly!
          The Second Bank of
           the United States
 The S________ C_____ ruled the National Bank
  “C_____________” in 1819 with the court case
  Mc_________ vs. M_______.
 However, even though it was ruled
  “Constitutional”, President _______ vetoed the
  bank‟s renewal in ____.
 With the ____ of the Second Bank of the United
  States, a period d________ by s____-charted
  banks will begin = _____ Banking Era.
         Free Banking or “Wildcat” Era -1837 to 1863
   During this period, the number of banks and different currencies gave rise
    to _____ main problems
        Bank R____ and P_____
          • State banks did not keep enough gold and silver on hand to back up notes. People would go in
            to exchange certificates and there would be no money. This would cause a bank run –
            widespread panic in which a great number of people try to redeem their paper money.
          • People‟s confidence fell
          • A severe panic occurred in 1837
        W_________ B_____
          • Banks located on the edge of settled areas – only “wildcats” lived in that area
          • Very high failure rate
        F_____
          • Some banks completed out and out cheating
          • Issued bank notes and collected gold and silver from people who brought the notes, bank
            “owners” disappeared.
        M_____ Different C____________
          • State-chartered banks, cities, private banks, stores, churches, and individuals were allowed to
            issue currency.
          • Notes of the same denominations often had different values
          • Many notes were counterfeits (worthless imitations of real notes)
         The Later 1800’s
 By 1860 there was an estimated
  ________ different banks/currencies in
  only 28 states
 F_______ government played ___ role in
  providing paper c_______ or r__________
  res________ of gold or silver.
 The Civil War, which started in 1861,
  made problems ________.
Currency in the North and South
 Both sides needed money to _______ the war
 1861 – US Government issued its f_____ paper
  m____ since the Continental
       Called “G___________” because of the green ink –
        that is why our money is still green today
       Official Name was “d______ notes”
       This made paying soldiers easier
   S______ issued money backed by c______ – as
    the war progressed the value d_________ until
    eventually worthless
          Unifying American Banks
   As the Civil War raged, the Northern (Federal)
    Government enacted r_______ to restore confidence in
    paper currency.
   These reforms resulted in the N_______ B_______ Acts
    of 1863 and 1864. These acts gave the federal
    government three important powers.
    1.) The power to __________ banks.
    2.) The power to _________ banks to ______ adequate gold and
       silver __________ to cover their bank notes
    3.) The power to _______ a s_________ national currency.

    **Number Three led to the elimination of many different state
      currencies and helped ____________ the country‟s money
 Even though the National
Banking Acts were passed
there was _____ problems
   in the US until………
                 The Gold Standard
 In the 1870‟s the nation adopted the Gold
  Standard – a monetary system in which p____
  money and coins are e____ to the value of a
  certain amount of GOLD
 Two Advantages of the Gold Standard
       1.It set a ________ _____ for the dollar
         • I ounce of gold = approximately $20
         • Since rate was set – Americans could redeem the value of
           their paper money at any time
         • _____ people ___________ in paper money, which was
           more convenient (lighter and comfortable to carry around)
       2.The government could issue currency _____ if it
        had gold in the treasury to ____ the notes
         • Pre_________ the government from printing an unlimited
           number of notes
The Gold Standard fulfilled
      an __________
requirement of the banking

  A _________ currency that
  inspires the confidence of
          the public
                Banking in the Early
                 Twentieth Century
 1. Creation of a _______ national currency and the Gold
  Standard helped stabilize American banking.
 2. However, they did not provide for a central-decision making
 3. An _________ that could help banks provide _____ for
  growth and ________ the money supply based on what the
  economy needs.
 4. Continuing problems with the nation‟s banks resulted in the
  ______ of 1907 (banks did not have adequate reserves,
  many banks had to ____ exchanging gold for paper money)
 5.The Panic of 1907 caused several long-standing New York
  banks to ________ and many people lost their jobs because
  businesses had no access to money.
 As a _______ of the Panic of 1907 – the government made
  plans to _________ a central bank.
 The Federal Reserve System
 Passed  in _____
 The F______ R______ A___ established
  the Federal Reserve System
 The Federal Reserve System (FED)
  serves as the nation‟s _____ t____
  c______ bank, or bank that can ______
  money to ______ banks in time of need
    The FED organized the Federal
    Banking System to look like…..
 Member Banks -___ regional Federal Reserve
  banks would be located throughout the country
 ___ banks ________ by the n________
  government were ________ to become
  members of the FED.
 The Federal Reserve Banks were the
  _________ Banks for their _________. Member
  banks that ______ to the FED, store some of
  their cash ________ at the Federal Reserve
  Bank at their district bank.
    The Federal Reserve System
   The Federal Reserve Broad
       all the Federal Reserve Banks were ____________ by the Federal
        Reserve Board.
       Board members are __________ the President of the United States
       _______________ in Washington, DC
   Short Term Loans
       Each regional Federal Reserve Bank allows member banks to
        ______ money to meet short-term demands (national disasters)
         • Done to prevent a “_____” and bank failures when a large number of
           people withdrawal funds at one time
   Federal Reserve Notes
       Created the currency we use today – or the Federal Reserve Note
       The Federal Reserve can __________ or ________ the amount of
        money in ___________ according to the business needs
 Banking and the
 Great Depression
 FED restored confidence in the
  banking system but could ___
 prevent the Great Depression –
the severe economic decline that
 began in 1929 and lasted more
         than a decade.
Some of the problems that caused
     the Great Depression
   1.) In the 1920‟s banks loaned large sums of money to
    ____ risk businesses – businesses could ___ repay
   2.) Farmers (who had been encouraged to buy land on
    credit – “US feeding the world after WWI”) Could not
    repay loans due to ____ _________ and no one to buy
    their products
   3.) 1929 – October 29, 1929 – The ______ Market
    _______ – resulting in wide spread bank runs

   ALL OF THESE LEAD TO 1000‟S OF BANK _________
                Banking Reforms
           During the Great Depression
 1933 Franklin D. Roosevelt becomes president
 Acts to _______ public confidence in the nation‟s banking system (part of the
  ___ ____)

       March 5, 1933 – National “Banking _________”
         • Closed all banks, inspected, safe banks were reopened
         • This was a desperate last resort to restore trust in the nation‟s financial system.

       Later in 1933 – Congress established the F_______ D______ I________
        C__________ (FDIC)
         • Insures customers‟ deposits if a bank fails
         • Started at $2500 per account
         • Today at $100,000 per account

       Later during the Great Depression
         • Federal government severely restricted individuals ability to redeem
           dollars for gold.

         Eventually our money becomes _____ Money –
          backed only be the government’s decree.
                 Banking in the later
                 Twentieth Century
   Banks closely ___________ from 1933 through 1960‟s
   Government restrictions included the _________ rates
    banks could pay and charge
   Government also said banks could _____ lend money to
    people who had a history of ______ loans on time
   ____‟s banks started looking for relief on government
   Late 1970‟s and 1980‟s – Congress passed laws to
    __________ several industries (including banking)
       Deregulation is the removal or __________ of government
        restrictions on business
   Unfortunately this deregulation led to a ______ in a class
    of banks known as Savings and Loans (S&L‟s)
                   Inadequate Capital

   ____ Main Causes of the
   Savings and Loan Crisis
               High Interest Rates
         Four Main Causes of the
         Savings and Loan Crisis
 Bad   _____
     Risky Loans in the 1980‟s
     Businesses not paying
 De___________
     Previously protected by government
     Not prepared for competition after
           Four Main Causes of the
           Savings and Loan Crisis
   Fraud
       A few important S&L‟s fraudulently made large loans
        to businesses that had little chance of succeeding
       Businesses failed
       Put pressure on the FSLIC – Federal Agency that
        insured S&L‟s – reserves were hit hard
   High Interest Rates
       During the 1970‟s, Savings and Loans made long-
        term loans at low interest rates
       By the 1980‟s, ________ rates had sky-rocketed
         • S&L‟s were paying out large amounts of money, but taking in
           little in the form of interest
 1989 – Congress passed
  the Financial Institution
  Reform, Recovery and
Enforcement Act (FIRREA)
  This _)________ the independence of
    Savings and Loans and put them
            under the FDIC.
              Recent Trends
 1999  was the year of the most sweeping
  legislation since the Great Depression
 Repealed the 1933 G____-S_______ Act
     B_____ can now s____ stocks and bonds
     Established new _______ rules for customer
       through 2000‟s growing trend in
 1990‟s
 banking __________
            Section 3 –
           Banking Today
                People use more than paper
                currency to make purchases

                         Credit Cards        ATM
 Measuring the Money Supply
 What   is the Money Supply?
     All the money _________ in the US economy
 What   makes up the Money Supply?
     Currency, Travelers Checks, Checking
      Account Deposits, etc…..
 Tokeep track of the Money Supply,
 Economists divide the Money Supply into
 several categories, ___ and ___ are the
 main ones
 In July of 2003 – valued at $1,272,600,000
 Money that people can gain access to easily and
  immediately to pay for goods and services
 Consists of assets that have _________ – the ability to be
  used as, or directly converted, into cash
 About 50% is made up of currency held by the public (or
  _______ bank vaults)
 About 25% is made up of deposits into ________ accounts
       These deposits are called demand deposits – because checks can
        be paid “on demand” or at any time
       Until the 1980‟s, checking accounts did not pay interest – had to
        create a new category called other checkable deposits – checking
        accounts that did not pay interest
         • Term not used a great deal today
   Traveler's checks are a very small part of M1 because they
    are like personal checks
 In July of 2003 valued at $6,052,500,000
 All of M1 plus additional funds that ______ be
  used as ____ directly, but can be converted
  to cash fairly ______ (near money)
 Examples: Savings Accounts and Money
  Market _______ Funds
      Money Market Mutual Funds – a fund that _____
       money from small savers to purchase short-term
       government and corporate securities
        • These funds earn interest and can be used to cover a
          certain minimum amount
                              Six Functions of
                            Financial Institutions
   1.)     Essential to managing the money supply
   2.)     Storing Money
         Banks provide a safe, convenient place to store money
            •   Fireproof vaults and money is insured
   3.)     Saving Money
         A variety of ways people can save money
         Four most common ways people save money
            • Savings Accounts
                      Most Common
                      Useful for people who make frequent withdrawals
                      Pays small interest rates
            • Checking Accounts
                      Useful for people who make frequent withdrawals
                      Allows people to still write checks
                      Pays small interest rates
            • Money Market Accounts
                      Allows people to save money but write a limited number of checks
                      Interest rate higher than Savings Accounts and Checking Accounts
                      Interest rates are not fixed – Variable Rate
            • Certificates of Deposits (CD)
                      Interest rate higher than Savings Accounts and Checking Accounts
                      Interest rates are Fixed
                      Have to put money in for a certain set of months – if you take your money out before the time period is
                       put – you must pay a penalty
             Types of Interest
 Interest is the price paid for the ___ of
  borrowed money
 Principal – _______ originally borrowed
 Simple Interest – the interest paid ____ on
  the principal
 Compound Interest – the interest paid on
  ____ the principal and accumulated
                   Six Functions of
                 Financial Institutions
   4.) Loans
       Started with the Goldsmith‟s lending gold when people just
        needed the “receipts”
         • Goldsmith‟s learned that the people that stored their gold only
           withdrew a portion of the amount – excess just sat there – lend it out
           and charge interest
       Fractional Reserve Banking            – a banking system that keeps
        only a fraction of the funds on hand and lends out the remainder
       The more money a bank lender can lend and the higher interest
        rate a bank charges the more money it will make
       Banks must consider who they are loaning money to. A bank
        does not want to loan money to a business or a person that will
        default – or fail to pay back their loan
            Six Functions of
          Financial Institutions
 5.) Mortgages  – a specific type of loan that
  is used to buy _____ _______
 Most common mortgage lengths 15, 25,
  30 years
 Remember you pay interest the entire time
 Math Problems……
                    Six Functions of
                  Financial Institutions
 6.) Credit Cards – cards that entitle their holders to buy goods and
  services on the cardholder‟s promise to pay for these goods and services
 VISA, MASTERCARD – Somewhere on the card is the bank‟s name
 Charges….
       Credit Limit – the _________ amount the credit card company allows you to
       Minimum Monthly Payment – __________ amount the credit card company
        allows you to pay every month
       Late Fee – amount the credit card company charges if you ____ your bill _____
       Annual Fees – Fees the cardholder ____ pay to carry the card
       Promotions
         • „Sky Miles‟
         • Cash Back
       30 Days “Free”
   Math Problems
            Banks and Profits
 Largest source of income for banks is the
  ___________ they receive from customers
  that have taken out loans
 Banks pay out interest but it is less then
  they charge – so they make a _____ and
  cover costs
                             Finance Companies
Commercial Banks

        Types of Financial
        All more similar than dissimilar
                                           Savings Banks

Savings and Loan           Credit Unions
              Commercial Banks
 Traditionally provided services to businesses
 Provide the most services and play the _______
  role in the economy of any other Financial
 Offer a ____ range of service to customers
       Checking, Savings and Loans
 Some charted by states and regulated by the
  state authorities and FDIC
 1/3rd are National Banks = part of the Federal
  Reserve System
    Savings and Loan Associations
 Originally charted to lend money for people
  building ______ during the mid-1800‟s
 Members deposit funds into a large _______
  fund and they borrow enough money to buy their
  own houses
 Also called “______” – because they originally
  enabled “thrifty” working class people (people
  who were careful with their money) a chance to
  save up and borrow enough money to buy their
  own home
 Today offers many functions of a commercial
                    Savings Banks
 _______ Savings Banks (MSB) originated in the early
  1800‟s to serve people who made smaller deposits and
  transactions than commercial banks wished to handle
 ______ by the depositors – share in the profits
 Began to sell stock to raise additional capital – became
  savings banks because deposits no longer owned them
 Generally located in the Northeast
 Had an important influence on the national economy
       IN 1972 the Consumer‟s Savings Bank of Worcester
        Massachusetts introduced a Negotiable Order of Withdrawal
        (NOW) Account – a type of checking account that pays interest
       NOW Accounts became available nationwide in 1980.
            Credit Unions
 Cooperative   lending associations for
  particular _______ – usually _________ of
  a specific firm or government agency
 Generally small
 __________ in home mortgages and car
 Some offer checking and savings
 Interest rates are ____ ____ for members
        Finance Companies
 Makes   ___________ loans – spread the
  cost of a major purchase (Computer, cars,
  appliances, RV‟s, etc…..) over a set
  number of months
 ____ Interest Rates
 Generally a person‟s ____ resort
          Electronic Banking
 Early 1970‟s banks began using
  computers to keep track of transactions
 _________ role in banking has increased
 May change banking in a way “paper
  currency” did
Automatic Teller Machine (ATM)
 Most  common type of _________ banking
 Convenient for banks and customers
 Customer can deposit money, withdrawal
  cash, obtain account information,
  etc……..during non-business hours
 ATM‟s _____banks _____ on labor costs
 Likely a permanent feature of modern
             Debit Cards
 Used  to withdraw money at an ATM or in
  stores equipped with special machines
 When you swipe the card, a message
  goes to the bank to transfer money from
  your ________ account directly to the
  store‟s account
 For security, debit cards require a PIN
  (Personal Identification Number) to
  authorize the transaction
          Home Banking
 Via the________, a customer can check
 account balances, transfer money to
 different accounts, pay bills and use
 automatic paycheck deposits
Automatic Clearing Houses (ACH)
 Located  at _______ Reserve Banks and
  their branches
 Customers can pay bills without writing
  checks (ACH transfers funds automatically
  from customer‟s account to creditor‟s
     ________ – a person or institution to whom
      money is owed
     This service saves time, postage costs and
      any worry about forgetting to make a
Stored Value Cards (Smart Cards)
 Similar to Debit Cards
 Cards are ________ with either a
  magnetic strip or a computer chip with
  account balance information
 Can be a card issued to a college student
  to get cafeteria food, copying in the
  Library, etc…..
 Prepaid phone cards and ____ cards are
  also smart cards
Will this new technology
“money” replace paper
 currency someday?
The Path of a Check

  1. Check Writer         2. Recipient

 4. Check Writer’s Bank    3. Federal Reserve Bank

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