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You and your students can visit ett.glencoe.com—the Web site companion to Economics Today andTomorrow. This innovative integration of electronic andprint media offers your students a wealth of opportuni-ties. The student text directs students to the Web site forthe following options:
• Chapter Overviews • Student Web Activities
• Self-Check Quizzes • Textbook Updates
Answers are provided for you in the Web ActivityLesson Plan. Additional Web resources and InteractivePuzzles are also available.
Use the Glencoe Web site for additional resources. All essential content is covered in the Student Edition.
ECONOMICS
Reading for the TeacherCarr, Glenna D., et al. Finance: Money, Banks, and Credit,
revised ed. Gainesville, FL: Center for Economic Education.Ideas on how to teach the functions and uses of money.
Multimedia Material“The Banking System”—Economics USA. The Annenberg/
CPB Collection, 19 Gregory Drive, South Burlington, VT05403. Color videos, 60 min. each.
Additional Resources
Spanish Economic Concepts Transparency 6
Spanish Vocabulary Activity 14
Spanish Reteaching Activity 14
Spanish Section Quizzes for Chapter 14
Spanish Chapter 14 Audio Program, Activity, and Test
Spanish Resources
Vocabulary PuzzleMaker Software
Interactive Tutor Self-Assessment Software
ExamView® Pro Testmaker
NBR Economics & You Video Program (English/Spanish)
Presentation Plus!
Glencoe Skillbuilder Interactive Workbook CD-ROM,Level 2
Interactive Lesson Planner
MindJogger Videoquiz
Interactive Economics! CD-ROM
Audio Program (English or Spanish)
Technology and Multimedia
Assessment and Evaluation
ExamView® Pro Testmaker
PROCEDURE
1. Put the pictures on the chalkboard in random order. Have the students, first as individuals, determine the orderof value, choosing number 1 as the most valuable and number 10 as the least valuable. Have them also try toguess how much each good costs.
2. Then, as a class, they should put the products in order, again from most valuable to least valuable. Once theyhave come to a consensus on the order, let them decide as a class the price of each item.
3. Ask the students what a minimum wage is, and have one student calculate the number of hours someonewould have to work to earn each of these items. Ask them how many of them would be willing to work for “x”amount of hours for these items. How many would be willing to receive the same items each time they workedthe required number of hours? (Obviously, they are not willing to do this. Ask: Why not? Eventually, money willcome into the discussion.)
4. Discuss with students that they have just illustrated two of the functions of money: a standard of value (the pricehelped them determine how valuable items were) and a medium of exchange (they were not willing to workthat same number of hours for the same products; thereby money allows both the buyer and the seller some-thing on which they can agree).
5. Go on to discuss the characteristics of money (divisibility, durability, acceptability, and portability).
Assessment
1. Have students draw cartoons that illustrate functions and characteristics of money.
2. Have students present skits that would illustrate life without money, or what life would be like if money did nothave the characteristics it has.
▼ BACKGROUND
Money makes it possible for businesses andconsumers to obtain goods.
▼ MATERIALS
10 pictures of various items from catalogs(large enough to be seen from the back of theroom and pasted on cardboard) with priceswritten on the back of each picture
▼ OBJECTIVES
After completing this activity, students will beable to• Determine the characteristics of money.• Describe the functions of money.
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T HE FUNCTIONS AND CHARACTERISTICS OF MONEY
Name Date Class
RUBRICScartoon, a skit
16
Performance Assessment Activity 16
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Name Date Class
14, A
14. M2 is
a. a broader definition of the money supply than M1.b. a narrower definition of the money supply than M2.c. a different way of measuring the money supply than M2.d. always equal to M1.
15. Representative money is money that is
a. backed by a valuable item, such as gold.b. used in comparison for the values of goods and services.c. accepted in payment for private debts.d. coins and bills.
CRITICAL THINKING QUESTIONS
Directions: Answer each of the following sets of questions on a separate sheet of paper.
16. Sequencing and Categorizing Information What important event preceded the establishment of theFederal Deposit Insurance Corporation (FDIC)? How did that event prompt establishment of the FDIC?
17. Drawing Inferences and Conclusions Why would cattle, chocolate, and clothing be poor mediums ofexchange?
APPLYING SKILLS
Understanding Percentages: Study the chart and answer the questions below.
U.S. Money Supply, 1994–97(in billions of dollars)
Source: Statistical Abstract of the United States
18. By what percentage did M1 decrease between 1994 and 1997?
19. Over the same period, by what percentage did M2 increase?
20. What percent was M1 of M2 in 1995?
Year M1 M2
1994 1,151 3,502
1995 1,129 3,655
1996 1,081 3,821
1997 1,068 4,019
Chapter 14 Test Form A
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Name Date Class
SCORE
14, A
M ONEY AND BANKING
RECALLING FACTS AND IDEAS
Multiple Choice: In the blank at the left, write the letter of the choice that best completesthe statement or answers the question.
11. ATMs receive deposits, give out funds, accept payments, and
a. make loans. b. provide credit ratings.c. cash checks. d. transfer funds between accounts.
12. The Federal Reserve System was established to
a. ensure a safe and uniform currency. b. regulate thrift institutions.c. establish a gold standard. d. control the amount of money in circulation.
13. The Federal Reserve has the power to
a. regulate national bank reserves. b. control deposits in member banks.c. set interest rates for all banks. d. tax member banks.
A1. barter
2. debit card
3. overdraft checking
4. thrift institutions
5. automated teller machine (ATM)
6. M1
7. legal tender
8. M2
9. checking account
10. electronic funds transfer
USING KEY TERMS
Matching: Match each item in Column A with the items in Column B. Write the correctletters in the blanks.
Ba. money that must by law be accepted for payment of public
and private debts
b. system of putting onto computers all the various bankingfunctions that in the past were handled on paper
c. moneys that can be spent immediately and against whichchecks can be drawn
d. card used to make cashless purchases
e. mutual savings banks, savings and loan institutions, and creditunions
f. exchange of goods and services for other goods and services
g. account from which deposited money can be withdrawn atany time by writing a check
h. moneys that can be spent immediately and against whichchecks can be drawn plus money market fund balances andeurodollars
i. units that allow customers to access their banking without thehelp of a teller
j. checking account that allows customers to write checks formore money than they have in their accounts
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Name Date Class
14, B
14. Near moneys include
a. stocks. b. bonds.c. time deposits. d. property.
15. One of the drawbacks of electronic funds transfer is
a. it can take longer than manual transfers.b. the possibility of tampering is increased because records are stored in a computer.c. ATMs cannot always handle electronic funds transfers.d. not all banks are equipped to handle electronic funds transfer.
CRITICAL THINKING QUESTIONS
Directions: Answer each of the following sets of questions on a separate sheet of paper.
16. Understanding Cause and Effect How did the growth of money market deposits and mutual fundsaffect the money supply?
17. Drawing Inferences and Conclusions How does a debit card help protect a consumer from falling into debt?
APPLYING SKILLS
Understanding Percentages: Study the chart and answer the questions below.
U.S. Money Supply, 1994–97(in billions of dollars)
Source: Statistical Abstract of the United States
18. By what percentage did M1 decrease between 1995 and 1996?
19. Over the same period, by what percentage did M2 increase?
20. What percent was M1 of M2 in 1997?
Year M1 M2
1994 1,151 3,502
1995 1,129 3,655
1996 1,081 3,821
1997 1,068 4,019
Chapter 14 Test Form B
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Name Date Class
SCORE
14, B
M ONEY AND BANKING
RECALLING FACTS AND IDEAS
Multiple Choice: In the blank at the left, write the letter of the choice that best completesthe statement or answers the question.
11. Which of the following is not a function of money?
a. medium of exchange b. unit of accountingc. interest-bearing instrument d. store of value
12. The FDIC was created to
a. stabilize the interest banks paid depositors. b. increase government control over banks.c. create jobs during the Depression. d. increase depositors’ confidence in the banking
system.
13. Most of the currency in the United States is in the form of
a. coins. b. Federal Reserve notes.c. gold-backed securities. d. Treasury bills.
A1. money
2. M1
3. fiat money
4. thrift institutions
5. barter
6. automated teller machine (ATM)
7. debit card
8. electronic funds transfer
9. overdraft checking
10. checkable deposits
USING KEY TERMS
Matching: Match each item in Column A with the items in Column B. Write the correctletters in the blanks.
Ba. exchange of goods and services for other goods and services
b. money that can be spent immediately and against whichchecks can be written
c. anything customarily used as a medium of exchange, a unit ofaccounting, or a store of value
d. system of putting onto computers all the various bankingfunctions that in the past were handled on paper
e. mutual savings banks, savings and loan institutions, and creditunions
f. money deposited in a bank that can be withdrawn at anytime by presenting a check
g. money that has value because a government fiat, or order,has established it as acceptable for payment of debts
h. card used to make cashless purchases
i. units that allow customers to do their banking without thehelp of a teller
j. checking account that allows customers to write checks formore than they have in their accounts
374B
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Resource ManagerCHAPTER 14Application and Enrichment
ONEY AND BANKING
BANKING ON YOUR NEIGHBORS
A bank usually keeps about 15 percent of deposits on hand for cash. The other 85 percent itputs to work, usually within one day of a deposit. For example, a depositor’s money mighthave been lent to a local doughnut franchise in order to pay its employees, a local farm need-ing to purchase seed, or a foreign country trying to finance military purchases. How canpeople control what their money finances once it has left their hands? They can take fulladvantage of the Community Reinvestment Act (CRA) of 1977.
Directions: Follow the steps below to investigate your bank or another local bank.
1. Call the main office of the bank and request their CRA Statements and their CRA Performance Evaluations.
Banks must issue these statements. They identify community need and discuss ways in which the bank is help-
ing the community meet those needs through programs, services, and lending practices. How long does the
bank say it will take to send you this report? How long does it actually take?
2. Ask how you can arrange to look at the bank’s public comment file. This file contains written correspondence
concerning community involvement and is available for you to review. By what date does the bank say it will
send you this information? How long does it actually take? .
3. Go to the CRA Web site (www.occtreas.gov) and compare the CRA rating of your bank with other banks.
4. Write a report on how the bank you chose is meeting the needs of your community.
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Name Date Class
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Enrichment Activity 14
Teaching Transparency
Application and Enrichment
Review and Reinforcement
C HAPTER 14 MONEY AND BANKINGDirections: Fill in the crossword puzzle using vocabulary terms from the chapter.
ACROSS
3. A system of putting onto computers all the bankingfunctions previously handled on paper
4. money: mediums of exchange such as cattlethat have value aside from their value as money
6. Account that allows a customer to write a check formore money than exists in the account
7. M1 plus savings deposits, time deposits, and otherspecialized accounts
9. institutions offer many of the same servicesas commercial banks
10. Money that must by law be accepted for paymentof public and private debts
13. money has value because a governmentorder has established it as acceptable for paymentof goods
14. Money deposited in a bank that can be withdrawnat any time by presenting a check
DOWN
1. Any assets that can be turned into cash relativelyeasily and without the risk of loss of value
2. Money is used as the for goods and services
5. The use of money to store purchasing power forlater use
8. Credit device that electronically transfers moneyfrom a user’s account to a store’s account
11. Anything customarily used as a medium ofexchange, a unit of accounting, and a store ofvalue
12. The exchange of goods and services for othergoods and services
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Economic VocabularyActivity 14
374A
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S YNTHESZING INFORMATIONSynthesizing information involves integrating information from two or more sources. To synthesize information, analyze each source separately to understand its meaning. Determinewhat each source of information adds to the subject. Then identify points of agreement anddisagreement.
Directions: Read both of the excerpts below and answer the questions that follow.
What Is the “Debt Crisis”?Fergus Nicoll, BBC News Online
Campaigners for urgent debt relief say that huge sums of money are going back to wealthy countries instead of feed-ing and educating children in the world’s poorest nations. . . .
In its 1997 report, the United Nations Development Programme (UNDP) said that governments in Africa alone, ifrelieved of their debt obligations, could use the funds “to save the lives of millions of children . . . .”
Why Debt Relief Will Not Benefit PoorKarl Ziegler, Director of the Centre for Accountability and Debt Relief
The main reason why unconditional debt relief to the world’s over-borrowed nations will not help their poorest citizens, is that those citizens will never experience the benefits of such relief.
Most over-borrowed nations are dominated by ruling elites; familial, tribal or military, whose first priority is to feedtheir offshore bank accounts and provide sustenance and support to the military or police forces that maintain themin power.
Indeed, some of the world’s “poorest” over-borrowed countries include Nigeria, Democratic Republic of Congo (formerly Zaire), Zimbabwe, Tanzania and Zambia, inherently wealthy countries. . . .
In most cases, the total debt owed by the nation’s [sic] could be repaid immediately if monies, stolen by rulers andtheir cronies and nestled into offshore tax havens, were returned to the nations from which they had been exportedillegally. The highly visible. . . campaign [to forgive all debt by poor countries] has attracted well-meaning supportersbased on intellectually dishonest arguments. Debt, per se, does not starve children in Africa or elsewhere, but corrup-tion does have that effect. . . .
1. What is the main subject of each excerpt?
2. Write one sentence summarizing the main point of each article.
3. On what points do the two articles agree?
4. On what points do the two articles disagree?
Name Date Class
20
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Name Date Class
P RIMARY AND SECONDARY SOURCES ON FORMS OF MONEY
Primary sources are records of events by people who witnessed them. Secondary sources pulltogether information and provide an overview of events after they occur.
Directions: In the space before each of the following passages, write P if it is a primary source or S if it is a secondary source. Then after each secondary source, write the number of the primary source that supports it.
1. By the beginning of 1780 Congress had issued $191,500,000 in paper money (“Continentals”). . . Anattempt had been made to retire some of the paper money, but when the failure of states to provide forthe current expenses of the war resulted in exceeding the amount retired by over $35 million Continentalcurrency dropped precipitately. Encyclopedia of American History, Sixth Edition ❒
2. The other revenue, you see, was just salary obtained for regular work; but here was a little business opera-tion upon my own account, and I was very proud indeed of my gold dollar every week.“How I Served MyApprenticeship,” by Andrew Carnegie, The Youth’s Companion, April 23, 1896. ❒
3. Barter requires what Economists call a coincidence of wants. Each party to a transaction must want exactlywhat theother party has to offer. This situation is rare. As a result, people in societies that barter for goodsspend great amounts of time and effort making trades with one another. Bartering can work only in smallsocieties with fairly simple economic systems. Glencoe’s Economics:Today and Tomorrow ❒
4. They afterwards came to the ship’s boats where we were, swimming and bringing us parrots, cottonthreads in skeins, darts, and many other things; and we exchanged them for other things that we gavethem, such as glass beads and copper bells. From The Journal of Christopher Columbus ❒
5. Such also, at the beginning of the War of independence, was the state of want of the insurgent army, andsuch was the scarcity of money, and the poverty of that government, now so rich, powerful, and prosper-ous, that its notes, called Continental paper money, were nearly valueless. By the Chevalier de Pontgibaud,A French Volunteer of the War of Independence ❒
6. Coming to Pittsburgh from Scotland at the age of 13, Carnegie went to work in an cotton factory, wherehe earned $1.20 for working a 72-hour week. History of a Free Nation
1616
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Name Date Class
ONEY AND BANKING In the fictional coastal country of Potapova, people grow plenty of corn and rice. They alsogrow sugar cane, from which they make molasses. Almost all citizens have livestock, fromwhich they get milk, meat, and leather. The favorite hunting season is fall, when the only birdsever seen fly through on their way south. Salt has to be imported and is used to make meatjerky. The government is stable. At different times, all of the items in the table below have beenused as money in Potapova.
Directions: Use the table to rate each item according to its usefulness as money in the country of Potapova.For each characteristic, as identified by the column heads, write “very,” “not very,” or “somewhat.” Thenanswer the question below the table.
Item Durable Portable Divisible Stable in value Scarce
seashells
molasses
rice
salt
feathers
cows
paper moneyissued bygovernment
metal coins
gold bars
From the table above, choose a form of money that you would recommend for the country of Potapova. Explain whyyou think this form would work well.
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Critical Thinking Activity 16 Reteaching Activity 14
Reinforcing Economic Skills 20
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C HOOSING A BANKBanks offer many consumer services. However, not every consumer wants to or can takeadvantage of every service.
Directions: Below is a list of services, followed by descriptions of different depositors. For each potentialdepositor, write the letter or letters of the services that, in your opinion, he or she is most likely to want.
a. Automated teller machines throughout the areab. Interest on checking when depositor has more than $2,500 in accountc. Automatic deposit of paychecks and other types of income checksd. Safe-deposit boxese. Overdraft checkingf. No charge for writing checks when depositor has more than $2,500 in accountg. Money ordersh. Traveler’s checks
1. A business owner who writes many checks each month, and who often needs extra money for special expenses
2. A person who makes only $150 a week, but who write few checks
3. A retired couple who has saved many thousands of dollars and who travels often
4. A young family with two incomes, but with large expenses that keep their checking balance near zero
5. An elderly person who must take a long bus ride to pick up each month’s Social Security check
6. Knowledgeable investors who want all their money earning interest
7. A landlord who has many documents and deeds that must be kept safe from fire or theft
8. A person who like to use cash when shopping, but who does not want to carry the cash until reaching eachshopping area
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T YPES, FUNCTIONS, AND CHARACTERISTICS OF MONEY
Directions: Complete each sentence with vocabulary words relating to money, its types, functions, andcharacteristics. Then complete the crossword puzzle. For example, the word in blank 8A should be writtenin as the word at 8 Across.
• (8A) makes it possible for businesses and customers to obtain the goods and services they want and need.• For two parties to (5A) goods and services, they must have a double (7D) of (9A), which tends to limit this
type of activity.• In the United States, the dollar is (2A); that is, it must be accepted as repayment for all debts.• The three functions of money are (6D), (8A), and (14A).• Type of money in use in the United States today is (10D) money. The other two types of money are (4D) and
(11A).• To make the dollar (15A), the smaller unit of (12A) is used.• Because money is (16A), it can be kept for a long time. Because it is (6A) it will continue to buy about the
same amount of goods and services.• Money retains its value because it is (1D).• The size of money is compact so that it is (17A).• The (13D) is the unit of money (3A) all across the United States.
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Economic Concepts 6
E XCHANGE, MONEY, AND INTERDEPENDENCEThe drawing represents an average community with a number of single-family and multiple-family dwellings andvarious private sector and public sector economic units.
66
Economic Concepts Transparency 6
Consumer ApplicationsActivity 16
Free Enterprise Activity 16
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C HOOSING A FINANCIAL INSTITUTION
* Annual Percentage Yield, or the annual interest rate after compounding
Imagine that you have $100 that you want to save. Could you deposit this amount in a 24-month CD at one of the
institutions? (1) What alternative do you have for saving the $100? (2)
Now compare a regular savings account at the three institutions for a deposit of $100 for 1 year by filling in the table
below. When working with APY, use the simple interest formula I � p (principal) � r (rate) � t (time) .
Name Date Class
16
How do you decide where to do your banking? You might choose a bank close to where you live or work. You mightdecide to use a bank that has higher interest rates or lower fees for your banking needs, or both.
Compare the three types of depository institutions listed below. The information about the institutions’ fees and interestrates for three kinds of accounts (regular savings, interest checking, and certificate of deposit, or CD) should help youdecide where to put your money.
Regular Savings Interest Checking 24-Month CD
Minimum Minimumbalance balance Minimum
w/out fee Fee APY* w/out fee Fee APY deposit APY
Commercial $300 $2.50/ 1.10 $1,000 $12/mo. 1.50 $1,000 4.76bank mo.
Savings $250 $3/mo. 2.02 $500 $7/mo. 2.75 $500 4.70bank
Credit $50 None 3.09 Not $500 5.30union available
Which is your best choice for a deposit of $100? (6)
Suppose you want to open a checking account. Your average daily balance (the amount that the interest is computed
from) is about $350 each month. How much would a checking account cost at each institution?
Interest � Annual fees � Total
Commercial bank (3)
Savings bank (4)
Credit union (5)
Interest � Annual fees � Total
Commercial bank (7)
Savings bank (8)
EXAMINING THE CARTOON
Multiple Choice
1. What becomes of the man shining shoes in the first panel?
a. He turns to day trading. b. He becomes wealthy.c. He loses his money in the stock market crash. d. It is impossible to tell.
2. What does the cartoon imply will happen to the man in the second panel?
a. He will become a professional broker. b. He will lose his money.c. He will invest in Internet stocks. d. It is impossible to tell.
Critical Thinking
3. Analyzing the Cartoon What is significant about “1929”?
4. Expressing Your Opinion Do you think day trading should be legal? Explain.
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AY TRADING—BIG WINNINGS, BIG LOSSESUsing high-speed Internet connections, day traders, for a fee, can buy and sell stocks on amoment’s notice. A sophisticated trader can make a great deal of money by taking advantageof small variations in stock prices. The danger is that most day traders are not so sophisticatedand lose a great deal of money.
Directions: Study the cartoon below. Then answer the questions that follow.
Name Date Class
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D
Jeff MacNelly
puts the check in a queue for sending. Time consumed:maybe 10 seconds. When I’m ready to have the check orchecks sent, I click an “update/send” button . . . whichaccepts the checks, so informs me and also informs mewhen payment will be made by the bank to the payee. . . .
. . . The service provider used by the bank to handleall this actually produces a check-like piece of paper thatdoes not require my signature and mails it. No one hasever declined to accept it.
The only drawback is that there is a delay of a few daysin many instances before the party at the other end actual-ly collects the money. If you’re really late with a bill or needto get someone money fast, it’s best to deliver it yourself.
At the same time my checks are transmitted to thebank, I receive incoming data concerning other transac-tions—notice of checks cleared, notice of withdrawalfrom my ATM or of a debit from my account, or of adeposit, all of which gets downloaded neatly into myQuicken register.
For example, a check sent electronically (or the old-fashioned way—you can still do that) is marked with a “c”
once it has cleared. If I’ve forgotten to record an ATMwithdrawal or a check written by hand while traveling, forexample, the download alerts me that it’s there.
In any case, it is faster in every respect than waitingfor the mail. For me, it has eliminated traditional reconcil-iation—it is constantly reconciling, in the sense that Ialways know my real balance, checks cleared, checks out-standing. The time savings here is enormous—at least anhour or two hours a month.
At the end of each month, I still receive the reassur-ing envelope containing a traditional statement andcanceled checks. . . .
Many Web uses, I think, are passing fads. . . . [Somebank executives feel that] on-line banking is here to stayand is indeed the future.
I agree.
Barbash, Fred. “For The Checking-Hearted.” The Washington Post,April 12, 1999.
32 Primary and Secondary Source Readings
ANALYZING THE READING
1. Do you think the purpose of this article is to persuade or inform you about online banking? Explain.
2. What are some of the problems the author encountered with the old method of checking?
3. What does the author feel is the main benefit of online bill paying over check-writing software?
4. Name three services provided by online banking that save time and help the banker.
5. How has the author benefited from his switch to online banking?
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Name Date Class
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Cooperative Learning Simulations and Problems 16
Primary and Secondary Source Reading 16
Math Practice for Economics Activity 16
Economic Cartoons Activity 17
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M ONEY AND BANKING
GROUP PROJECT
The American system of money and banking has undergone many changes. During the pastthree centuries, a colonial money system has grown and developed into an electronically-linked global banking system. In the activity that follows, your group will create a bulletinboard exhibit on the theme of money and banking. Several ideas for exhibits are suggestedbelow.
▼MATERIALS:
Library resources, art materials
Bulletin Board Themes
1. Group Work Stage 1: Students work in groups of six. Choose a theme from the list above or brainstorm other ideas for an exhibit. Choose twogroup members to be researchers, two to be artists,and two to be designers.
2. Paired Work Stage 2: Students work in pairs.Researchers should gather information from thetextbook and outside sources about the theme thegroup has chosen. Researchers organize their find-ings into an outline for the designers. If researchersalso locate suitable illustrations that may be photo-copied or redrawn for inclusion in the exhibit, theygive them to the artists. Artists should use thesematerials and what they have gathered themselvesto illustrate the exhibit theme. Artists are alsoresponsible for labels and other print based on the researchers’ findings. The designers decide how the researchers’ findings and the art will bepresented. They make a rough sketch of the bulletinboard display that incorporates the researchers’ andartists’ work.
3. Group Work Stage 3: Students return to originalgroups. Designers show the sketch to the group for approval. Group members should critique theproposed display and incorporate changes. If further research or more art is thought to be necessary, pairs return to sources to complete theassignment. The designers assemble the groupexhibit on the bulletin board.
4. Group Work/Analysis Stage 4: Students work in original groups. Groups give a brief presentation of their exhibits. Each pair should explain why itincluded what is displayed. Groups should answerquestions from the class.
Group Process QuestionsWere the goals of the assignment clear?
Did the group agree on the assignment of tasks?
Did members give helpful criticisms?
Did members work well together?
COOPERATIVE GROUP PROCESS:
Name Date Class
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• bartering goods • types of money• chronology of money and banking • characteristics of money• money supply • money in colonial America• money in early societies • origins of the dollar• monetary standards • modern money
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Resource ManagerCHAPTER 14
nce, mankind believed that the capacity to manage achecking account was inherited: You either had it or youdidn’t.
I didn’t. But modern technology has taught me thatin fact it was only the tools that were wanting. I can do it.
My experience with on-line banking . . . has also beena lesson in the amazing productivity surge in certain cir-cumstances when the computer is combined with theWorld Wide Web. Apart from helping me get my account-ing act together, I save hours a month of drudgery. I haveyet to encounter a problem of security.
Normally I’m not so sure that the Web serves any realpurpose in this world. But on-line banking is different. It’sbeen around a few years, the bugs are worked out, and itnow works so well that I’ve got to get out my soapbox.
Let’s begin at the beginning. At the dawn of mycheck-writing career, I tried valiantly to do it right despitea lifelong aversion to numbers, . . . horrible handwritingand a failure to appreciate the consequences of thebounced check.
When I got the bank’s statement, I struggled to reconcileit with my own. Each calculation produced—curiously—a dif-ferent result. I spent hours each month, even days, searchingfrantically for the cause of the $12 discrepancy, as beads ofcold sweat formed on my forehead.
As I matured, and as the discrepancies grew from $12to $120 and every now and then to $1,200, I gave upkeeping records and surrendered to overdraft protection.This, however, proved costly. Each time I was a dollar over-drawn, the bank would kindly extend me a $50 loan at 18percent interest.
When I remarried in 1987, my wife, a lawyer, forcedme into receivership, Chapter 40: That’s where thespouse, fearing for the viability of the enterprise, seizescontrol of the books.
With the advent of the computer age and check-writing software such as Quicken and MicrosoftMoney, I decided that it might be fun to be in charge ofthe household books again. . . .
Quicken made a bookkeeper out of me. Because itwas a kick to use it, I went out of my way to check anddouble-check the account whenever I could. I actuallylooked forward to reconciliation time. I became a check-printing, statement-reconciliation freak. I produced chartsand graphs showing our inflow and outflow, what wespent on everything, and the perfectly balanced bankrecords.
Comes now on-line electronic
banking . . . this is one huge
timesaver and nothing, as many
people think, to be afraid of.
It was still time consuming, however. I still had toopen envelopes, clear out the junk to find the actual bill,fill out the “amount paid” blank, cut the check on thecomputer, print it, put it in an envelope, put on a stamp,get to a mailbox and at the end of the month, reconcile.If you add it all up, I would guess we’re talking five min-utes of effort per check.
Comes now on-line electronic banking . . . this is onehuge timesaver and nothing, as many people think, to beafraid of.
Here’s how it works. I open up Quicken (you can usethat, or Money or the bank’s own Web page as the vehi-cle) and click on an electronic check, which looks, on thescreen, like any other check. . . .
If I have provided the data previously, it is automati-cally printed on the screen from then on. So the only newdata I provide is the amount of the bill. I open the [bill]envelope, glance at the amount due, leave the trash inthere, fill in the numbers on the electronic check andrecord. That automatically creates an electronic stub and
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Primary and Secondary Source Readings 31
Name Date Class
F OR THE CHECKING-HEARTEDBalancing your checkbook can sometimes be a frustrating experience, with the potential for errors looming around every corner. At least that is how Fred Barbash, a staff writer at The Washington Post, describes it. He has discovered the wonderful world of online banking and his life has taken a turn for the better. As you read this article consider the benefits of online checking accounts. Then answer the questions that follow.
16
O
Block Schedule
Doug WoodsWashington High SchoolCherokee, Illinois
Mobile MoneyOrganize the class into four groups. Have each group
construct a four-sided placard (or use a medium-sized box)that represents the following concepts about money:
Side 1—History of moneySide 2—Functions of moneySide 3—Kinds of moneySide 4—Foreign currency
Have students use photographs, time lines, quotes, andso on to enhance their display. Students should constructthe placards so that they can be hung in the classroom likemobiles.
ACTIVITYFrom the Classroom ofACTIVITYFrom the Classroom of
Activities that are particularly suited to use within the blockscheduling framework are identified throughout this chapterby the following designation: BLOCK SCHEDULING
Block Schedule
Use Glencoe’s Presentation Plus!,a Microsoft PowerPoint® application, to teach Money and Banking. Withthis multimedia teacher tool, you can
customize ready-made presentations. At your fingertips areinteractive transparencies, on-screen lecture notes, audio-visual presentations, and links to the Internet and to otherGlencoe multimedia.
Interactive Lesson PlannerPlanning has never been easier! Organize your week, month, semester, or year with all the lesson helps you need to make teaching
creative, timely, and relevant—the way it is meant to be. TheInteractive Lesson Planner opens Glencoe’s Chapter 14resources, helps you build your schedule, and tracks yourprogress.
■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■
Resource ManagerCHAPTER 14
Teaching strategies have been coded for varying learning styles and abilities.L1 BASIC activities for all studentsL2 AVERAGE activities for average to above-average
studentsL3 CHALLENGING activities for above-average students
ENGLISH LANGUAGE LEARNER activitiesELL
Key to Ability Levels
Voluntary Standards Emphasized in Chapter 14Content Standard 10 Students will understand that insti-tutions evolve in market economies to help individuals andgroups accomplish their goals. Banks, labor unions, corpora-tions, legal systems, and not-for-profit organizations are exam-ples of important institutions.
Content Standard 11 Students will understand thatmoney makes it easier to trade, borrow, save, invest, andcompare the values of goods and services.
Resources Available from NCEE• Capstone: The Nation’s High School Economics Course• Focus: International Trade• United States History: Eyes on the Economy, Vol. 1 and Vol. 2• Personal Decision Making: Focus on Economics
To order these materials, or to contact your StateCouncil on Economic Education about workshops andprograms, call 1-800-338-1192 or visit the NCEE Web siteat http://www.nationalcouncil.org
Easy Planning and Preparation!
374D
■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■
Resource ManagerCHAPTER 14
374C
Blackline Master
Transparency
Software
CD-ROMVideodisc
Audiocassette
Videocassette
Reading Objectives Reproducible Resources Technology/Multimedia Resources
Section 1The Functions and Characteristics ofMoney• What are the three functions of
money?• What are the six major characteristics
of money?
Section 2History of American Money andBanking• What are some of the most important
events in the history of money andbanking?
• What are six services provided bybanks and savings institutions?
• How has electronic banking changedbanking services?
Section 3Types of Money in the United States• What is the difference between money
and near moneys?• What does the M2 definition of money
include?
Reproducible Lesson Plan 14-1Daily Lecture Notes 14-1Guided Reading Activity 14-1Reading Essentials and Study Guide 14-1Daily Focus Activity 58Section Quiz 14-1*Reinforcing Economic Skills 20
Reproducible Lesson Plan 14-2Daily Lecture Notes 14-2Guided Reading Activity 14-2Reading Essentials and Study Guide 14-2Daily Focus Activity 59Section Quiz 14-2*
Reproducible Lesson Plan 14-3Daily Lecture Notes 14-3Guided Reading Activity 14-3Reading Essentials and Study Guide 14-3Daily Focus Activity 60Section Quiz 14-3*
Daily Focus Transparency 58
Economic Concepts Transparency 6Vocabulary PuzzleMakerInteractive Tutor Self-Assessment SoftwareMindJogger Videoquiz
NBR's Economics & You*Presentation Plus!
ExamView® Pro Testmaker
Daily Focus Transparency 59Vocabulary PuzzleMakerInteractive Tutor Self-Assessment SoftwareMindJogger Videoquiz
NBR's Economics & You*Presentation Plus!
ExamView® Pro Testmaker
Daily Focus Transparency 60Vocabulary PuzzleMakerInteractive Tutor Self-Assessment SoftwareMindJogger VideoquizPresentation Plus!
ExamView® Pro Testmaker
*Also available in Spanish
Section Resources
375
CHAPTER 14SECTION 1, Pages 375–379
CHAPTER 14SECTION 1, Pages 375–379
Reproducible MastersReproducible Lesson Plan 14–1Reading Essentials and Study Guide 14–1Guided Reading Activity 14–1Section Quiz 14–1Daily Focus Activity 58Daily Lecture Notes 14–1
MultimediaDaily Focus Transparency 58Economic Concepts Transparency 6Vocabulary PuzzleMakerInteractive Tutor Self-Assessment Software
ExamView® Pro TestmakerMindJogger Videoquiz
NBR’s Economics & YouPresentation Plus!
SECTION 1 RESOURCE MANAGER
OverviewSection 1 describes or explains
the three functions of money, thethree types of money, and money’ssix major characteristics.
Answers to the Reading Objectivesquestions are on page 379.
Preteaching VocabularyHave students locate the defini-
tions of the Terms to Know in theGlossary. Then ask them to iden-tify the terms that relate to thefunctions of money and the termsthat describe the types of money.
Vocabulary PuzzleMaker
READER’S GUIDE
374
IntroducingCHAPTER14
374
Chapter OverviewChapter 14 describes or explains
the functions and characteristics ofmoney, modern banking services,the role of money and banking inthe development of the UnitedStates, and the types of money inuse in the United States today.
CHAPTER LAUNCH ACTIVITY
IntroducingCHAPTER14
Use MindJoggerVideoquiz VHS to previewChapter 14 content.
Introduce students to chaptercontent and key terms by havingthem access Chapter 14—ChapterOverviews at ett.glencoe.com
Have students write a short story about a typical day in a country where there is nomoney. Have them describe how they might do everyday activities—buying lunch at theschool cafeteria or getting gasoline for the car, for example. Call on volunteers to readtheir stories to the class. Conclude by informing students that in Chapter 14 they willlearn about the role of money in the American economy.
ECONOMICS & YOU
Money and Banking
!8t~0" Chapter 18 Disc 1, Side 2
ASK: What new nontraditionalfunctions have banks takenon? selling stocks, insurance,mutual funds
Also available in VHS.Project Daily FocusTransparency 58 and have students answer the questions.
This activity is also availableas a blackline master.
Daily Focus Transparencies
T HE FUNCTIONS OF MONEY
1. What is an example of each function of money?
2. How do the functions of money imply that anything can be usedas money?
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WELCOME TO THE FUNCTIONS OF MONEY
Money Has Three Functions:
Medium of Exchange (a seller will accept it in exchange for a good or service)
Unit of Accounting (money is a measure of relative value)
Store of Value (money stores economic power)
BELLRINGERMotivational Activity
Daily Focus Transparency 58
Why It’s ImportantWhy are these coins con-sidered money? Besidescoins and cash, what otherkinds of money exist? Thischapter will explain what makesour currency money and how bankswork to keep money in circulation.
To learn more about the supplyof money in the United States,view the Economics & YouChapter 18 video lesson:Money and Banking
Chapter Overview Visit the Economics Today and Tomorrow Web site at ett.glencoe.com and click on Chapter 14—Chapter Overviewsto preview chapter information.
375Money and Banking
Terms to Know• money• medium of exchange• barter• unit of accounting• store of value• commodity money• representative money• fiat money• legal tender
Reading Objectives1. What are the three func-
tions of money?
2. What are the six majorcharacteristics of money?
READER’S GUIDE
For thousands of years, money has made it possible for busi-nesses to obtain easily what they need from suppliers andfor consumers to obtain goods and services. What, however,
is money? As you read this section, you’ll learn the answer tothis question.
The Functions of MoneyThe basis of the market economy is voluntary exchange. In the
American economy, the exchange usually involves money in returnfor a good or service. Most Americans think of money as bills,coins, and checks. Historically, though, and in other economies,money might be shells, gold, or even goods such as sheep.
1
DISCOVER, OCTOBER 1998
[W]ealthy citizens [in Mesopotamia] were flauntingmoney at least as early as 2500 B.C. and perhaps a few
hundred years before that. “There’s justno way to get around it,” says MarvinPowell, a historian at Northern IllinoisUniversity in De Kalb. “Silver inMesopotamia functions like our moneytoday. It’s a means of exchange. Peopleuse it for a storage of wealth, and theyuse it for defining value.”
377
CHAPTER 14SECTION 1, Pages 375–379
CHAPTER 14SECTION 1, Pages 375–379
Project Economic ConceptsTransparency 6 and have studentsdiscuss the accompanying questions.
CHAPTER 14SECTION 1, Pages 375–379
CHAPTER 14SECTION 1, Pages 375–379
376
Guided PracticeL1 Understanding Ideas On theboard, draw a two-column chart with“Function or Characteristic” and“The Dollar” as column headings. Inthe first column, list the three func-tions and six characteristics ofmoney. Then have students view adollar bill. Ask them to identify howthe dollar fulfills each function anddemonstrates each characteristic.Note their responses in the appropri-ate row in the chart. Have studentsuse the information in the chart towrite a paragraph answering the fol-lowing question: How and why doesthe dollar bill qualify as money?
L ECTURE LAUNCHERBenjamin Franklin and Alexander Hamilton were responsible for the decision that the UnitedStates have a monetary system based on decimals, a dollar being 100 cents. Congress adopt-ed this proposal in 1786. And in 1792, the first official American silver coin, the half dimewas minted. What is money? How does it function? What characteristics should money have?
I. The Functions of Money
A. Something a seller will accept in exchange for a product or service; a medium ofexchange.
B. Without money, people would have to barter, a much more complicated processinvolving a double coincidence of wants.
C. It is used to measure and compare the values of different items and services; a unit ofaccounting.
D. Helps to keep accurate financial records
E. It is used as a store of value—sell one thing (such as labor) and save its value (paycheck) for use at a later time.
• Discussion Question
Explain how difficult it would be to measure and compare the values of differentitems and services without any kind of money. (It would be almost impossible, becauseindividuals or groups of people would have their own measure of value/wealth. Comparisons
14-1
PAGES 375–377
Daily Lecture Notes 14–1
Learning Disorder Show students with learning disorders the importance of headingsand subheadings for understanding the framework of each section. Illustrate the method tostudents by asking them what they would do if they wanted to discover what Section 1was about. Read aloud the section’s headings and subheadings. As you read each one,ask students to rephrase it in a complete sentence.
Refer to Inclusion for the Social Studies Classroom Strategies and Activities forstudents with different learning styles.
Meeting Special Needs
Name Date Class
For use with the textbook pages 375–379
T HE FUNCTIONS AND CHARACTERISTICS OF MONEY
FILLING IN THE BLANKS
Directions: Use your textbook to fill in the blanks using the words in the box. Some words may be usedmore than once.
fiat money money exchangebarter unit of accounting store of valuecommodity money representative money legal tendertransaction dollar
Introduction/The Functions of MoneyIn the American economy, 1 __________________________ usually involves money in return for goods and services.
Anything that is used as a medium of exchange, a 2 __________________________ , and a store of value is considered
3 __________________________. Money is a medium of 4 __________________________ because a seller will accept it
in exchange for a good or service. If money did not exist, people would have to 5 __________________________ , or
exchange goods and services for other goods and services. For bartering to work, each party to a
6 __________________________ must want exactly what the other person has to offer. Money that is used to compare
the values of goods and services in relation to one another is a 7 __________________________. In the United States,
the base unit of value is the 8 __________________________. Money also serves as a 9 __________________________ ,
where it is held for later purchases.
Characteristics of Money
14-1
Guided Reading Activity 14–1
ECONOMICS & YOU
Money and Banking
!8t~0" Chapter 18 Disc 1, Side 2
ASK: What function doesmoney serve when you save itfor a future purchase? store ofvalue
Also available in VHS.
Organize the class into small groups, and have groups review Figure 14.1 on page 376.Direct groups to use library resources and the Internet to discover the various items thathave been used for money through the ages. Have groups use their findings to create anillustrated chart titled “Money—Not Just Bills and Coins.” Suggest that they include suchinformation as where and when each item has been used as money. Encourage groups todisplay their completed charts around the classroom. BLOCK SCHEDULINGELL
Cooperative Learning
376 CHAPTER 14
money: anything customarilyused as a medium of exchange, a unit of accounting, and a storeof value
medium of exchange: use ofmoney in exchange for goods orservices
barter: exchange of goods andservices for other goods andservices
unit of accounting: use ofmoney as a yardstick for compar-ing the values of goods and ser-vices in relation to one another
Figure 14.1 shows several items that have been used as money.For example, Native Americans used wampum—beads made fromshells. People in the Fiji Islands have used whales’ teeth.
Economists identify money by certain functions. Anything thatis used as a medium of exchange, a unit of accounting, and astore of value is considered money. See Figure 14.2.
Medium of Exchange To say that money is a medium ofexchange simply means that a seller will accept it in exchange fora good or service. Most people are paid for their work in money,which they then can use to buy whatever they need or want.Without money, people would have to barter—exchange goodsand services for other goods and services.
Barter requires what economists call a double coincidence ofwants. Each party to a transaction must want exactly what theother person has to offer. This situation is rare. As a result, peo-ple in societies that barter for goods spend great amounts of timeand effort making trades with one another. Bartering works onlyin small societies with fairly simple economic systems.
Unit of Accounting Money is the yardstick that allows peopleto compare the values of goods and services in relation to oneanother. In this way, money functions as a unit of accounting.Each nation uses a basic unit to measure the value of goods, as ituses the foot or meter to measure distance. In the United States,this base unit of value is the dollar. In Japan, it is the yen; inmuch of Europe, the euro. An item for sale is marked with a pricethat indicates its value in terms of that unit.
By using money prices as a factor in comparing goods, peoplecan determine whether one item is a better bargain than another. A single unit of accounting also allows people to keep accuratefinancial records—records of debts owed, income saved, and so on.
Selected Items Used asMoney These items are just asample of the various things that have been used as money.
14.114.1
Feathers
Corn
Polished beads(wampum)
Gold, silver,and leather
Molasses
Copperand brass
store of value: use of money to store purchasing power forlater use
Store of Value Money also serves as a store of value. You can sell something, such as your labor, and store the purchasingpower that results from the sale in the form of money for lateruse. People usually receive their money income once a week,once every two weeks, or once a month. In contrast, they usuallyspend their income at different times during a pay period. To beable to buy things between paydays, a person can store some ofhis or her income in cash and some in a checking account. It isimportant to note that in periods of rapid and unpredictableinflation, money is less able to act as a store of value.
Characteristics of Money
Anything that people are willing toaccept in exchange for goods can serve asmoney. At various times in history, cattle,salt, animal hides, gems, and tobacco havebeen used as mediums of exchange. Eachof these items has certain characteristicsthat make it better or worse than othersfor use as money. Cattle, for example, aredifficult to transport, but they are durable.Gems are easy to carry, but they are noteasy to split into small pieces to use.
Figure 14.3 on page 378 lists thecharacteristics that to some degree allitems used as money must have. Almost
Because Russian currency is not trusted, real moneyplays a fairly small part in Russia’s economy today.Most business is conducted by barter or with IOUs. Forexample, workers rarely receive wages in the form ofcash. A bicycle factory outside the city of Perm pays itsworkers in bicycles! To get cash, the workers have tosell their “paychecks.” More often than not, they simplytrade the bicycles for the products they want. ■
Russia’s Barter Economy
Three Functions of Money All money serves threefunctions. The money this woman holds is serving as a
medium of exchange; the vendor will accept it in exchangefor a pizza. The money is also a unit of accounting—theproducts in the market are all priced in dollars, so thewoman can compare values of different items. Finally,the money serves as a store of value—the woman hasstored her purchasing power in the form of dollars.
14.214.2
Money and Banking 377
379379
CHAPTER 14SECTION 1, Pages 375–379
CHAPTER 14SECTION 1, Pages 375–379
ReteachHave students use the main
headings and subheadings to writean outline of Section 1.
1. All definitions can be found in the Glossary.2. medium of exchange, store of value, unit of
accounting3. Six major characteristics are durability, portabil-
ity, divisibility, stability in value, scarcity, andacceptability.
4. Lists will vary. Have students share and com-pare their lists to see if any trades are possible.
5. Commodity—Examples: cattle, gems, and salt.
Adv: It can be used for purposes other thanmoney. Dis: Some commodities might not beportable, and they may not be easy to divide.Representative—Examples: silver and goldcertificates, banknotes. Adv: It maintains itsvalue. Dis: Banks may not keep enough of thevaluable backing item on deposit to redeem allrepresentative money. Fiat—Example: dollarbill. Adv: acceptable everywhere for businesstransactions.
Have students write a short para-graph that answers the followingquestion: What is money? Call onvolunteers to read and discuss theirparagraphs.
Name Date Class
14, 1
money Anything customarily used as a medium of exchange, a unit of accounting, and a store of value(page 376)
medium of exchange Use of money in exchange for goods or services (page 376)
barter Exchange of goods and services for other goods and services (page 376)
unit of accounting Use of money as a yardstick for comparing the values of goods and services in rela-tion to one another (page 376)
store of value Use of money to store purchasing power for later use (page 377)
commodity money Mediums of exchange such as cattle and gems that have value as a commodity orgood aside from their value as money (page 378)
representative money Money that is backed by an item of value, such as gold or silver (page 378)
fiat money Money that has value because a government fiat, or order, has established it as acceptable forpayment of debts (page 379)
legal tender Money that by law must be accepted for payment of public and private debts (page 379)
KEY TERMS
For use with textbook pages 375–379
T HE FUNCTIONS AND CHARACTERISTICS OF MONEY
DRAWING FROM EXPERIENCE
Have you ever swapped trading cards with your friends? Did you think it was a fair trade? Howdid you determine the value of each card?
Reading Essentials and Study Guide 14–1
CHAPTER 14SECTION 1, Pages 375–379
CHAPTER 14SECTION 1, Pages 375–379
378
IndependentPracticeL2 Illustrating Ideas Tell studentsthey have been asked to teach a les-son on the functions and characteris-tics of money. Have them work insmall groups to develop two teach-ing visual aids—one to teach thefunctions of money, the other toteach the characteristics of money.Call on groups to display andexplain their teaching aids.
BLOCK SCHEDULING
T HE FUNCTIONS AND CHARACTERISTICS OF MONEY
Multiple Choice: In the blank at the left, write the letter of the choice that bestcompletes the statement or answers the question. (10 points each)
6. A seller accepting money for a service reflects the use of money as
a. a medium of exchange. b. barter.c. a unit of accounting. d. a store of value.
7. Money that is a measure of value, functions as
a. a medium of exchange. b. a store of value.b t d it f ti
SCORE
A1. money
2. medium of exchange
3. barter
4. commodity money
5. fiat money
Ba. use of money in exchange for goods or services
b. money that has value because the government hasestablished it as acceptable for payment of debts
c. exchange of goods and services for other goods andservices
d. anything customarily used as a medium ofexchange, a unit of accounting, or a store of value
e. mediums of exchange that have value as a good,aside from their value as money
Matching: Place a letter from Column B in the blank in column A. (10 points each)
Name Date Class
14, 1
Section Quiz 14–1
A Resurgence of Barter In recent years, barter has become a favored method of doingbusiness for many American companies. There are about 400 trade exchanges—agenciesthat organize and assist barter transactions—in the United States and Canada. Theseexchanges represent nearly 400,000 businesses and oversee more than $4 billion inbarter business each year. Companies pay between $200 and $500 to join a tradeexchange and then pay a monthly fee of about $30. Usually, a trade broker arranges acompany’s trades and tracks what the company owes and is owed in barter “dollars.”
Extending the Content
As well as cacao beans, theAztecs also used cotton cloaks,beads, shells, and copper bells as money.
Meeting LessonObjectives
Assign Section 1 Assessment ashomework or an in-class activity.
Use Interactive Tutor Self-Assessment Software to review Section 1.
commodity money: a mediumof exchange such as cattle orgems that has value as a com-modity or good aside from itsvalue as money
representative money: moneythat is backed by an item ofvalue, such as gold or silver
378 CHAPTER 14
Characteristics of Money
any item that meets most of these criteria can be and probablyhas been used as money. Precious metals—particularly gold andsilver—are especially well suited as mediums of exchange, andhave often been used as such throughout history. It is only inmore recent times that paper money has been widely used as amedium of exchange.
Types of MoneyMediums of exchange such as cattle and gems are considered
commodity money. They have a value as a commodity, or good,aside from their value as money. Cattle are used for food. Gemsare used for jewelry.
Representative money is money backed by—or exchangeablefor—a valuable item such as gold or silver. Typically, the amountof representative money in circulation, or in use by people, waslimited because it was linked to some scarce good, such as gold.
At one time, the United States government issued representa-tive money in the form of silver and gold certificates. In addition,private banks accepted deposits of gold bars or silver ingots
Characteristic
Durable
Portable
Divisible
Stable in Value
Scarce
Accepted
Description
Money must be able to withstand the wear and tear of being passedfrom person to person. Paper money lasts one year on average, butold bills can be easily replaced. Coins, in contrast, last for years.
Money must be easy to carry. Though paper money is not verydurable, people can easily carry large sums of paper money.
Money must be easily divided into small parts so that purchases ofany price can be made. Carrying coins and small bills makes it pos-sible to make purchases of any amount.
Money must be stable in value. Its value cannot change rapidly or itsusefulness as a store of value will decrease.
Whatever is used as money must be scarce. That is what gives it value.
Whatever is used as money must be accepted as a medium ofexchange in payment for debts. In the United States, acceptance isbased on the knowledge that others will continue to accept papermoney, coins, and checks in exchange for desired goods and services.
FIGURE 14.3FIGURE 14.3
fiat money: money that hasvalue because a government fiat,or order, has established it asacceptable for payment of debts
legal tender: money that by lawmust be accepted for payment ofpublic and private debts
379Money and Banking
Understanding Key Terms1. Define money, medium of exchange, barter, unit
of accounting, store of value, commodity money,representative money, fiat money, legal tender.
Reviewing Objectives2. What are the three functions of money?
3. Graphic Organizer Create a diagram like theone below to describe the six major characteris-tics of money.
Applying Economic Concepts4. Money Imagine that you live in a bartering
society. List 10 items that you use frequently,and then identify alternative goods that youwould be willing to trade for them.
5. Making Comparisons Make a chart with five columns. In the first column, listCommodity Money, Representative Money,and Fiat Money. In the other four columns,write Description, Example, Advantage, andDisadvantage. Fill in the chart, comparing thethree types of money. (For help in usingcharts, see page xvii in the EconomicHandbook.)
Critical Thinking Activity
Practice and assesskey skills with
Skillbuilder InteractiveWorkbook, Level 2.
1
T he Aztec in Central America usedcacao beans, from which chocolate is
made, as money. Prices varied from a fewbeans for a piece of fruit to several thou-sand for an enslaved person.
Aztec merchants had to take care whenselling expensive items. Payment usuallycame stored in sacks, and the sacks mightcontain counterfeit money—bean husksfilled with mud. ■
Economic Connection to... HistoryEconomic Connection to...
(called bullion) in exchange for paper money called banknotes.The notes were a promise to convert the paper money back intocoin or bullion on demand. These banks were supposed to keepenough gold or silver in reserve—on hand—to redeem their bank-notes. That did not always happen, however.
Today all United States money is fiat money, meaning that its face value occurs through government fiat, or order. It is inthis way declared legal tender.
A Chocolate Lover’s DreamA Chocolate Lover’s Dream
Characteristicsof Money
381
CHAPTER 14SECTION 2, Pages 381–385
CHAPTER 14SECTION 2, Pages 381–385
Reproducible MastersReproducible Lesson Plan 14–2Reading Essentials and Study Guide 14–2Guided Reading Activity 14–2Section Quiz 14–2Daily Focus Activity 59Daily Lecture Notes 14–2
MultimediaDaily Focus Transparency 59Vocabulary PuzzleMakerInteractive Tutor Self-Assessment Software
ExamView® Pro TestmakerMindJogger Videoquiz
NBR’s Economics & YouPresentation Plus!
SECTION 2 RESOURCE MANAGER
OverviewSection 2 describes important
events in the history of Americanmoney and banking, the servicesprovided by banks and savingsinstitutions, and the impact of elec-tronic banking on banking services.
Answers to the Reading Objectivesquestions are on page 385.
Preteaching VocabularyProvide each student with three
index cards. Direct students towrite definitions for the Terms toKnow. Collect the cards and ran-domly read aloud two definitionsfor each term. Have students voteon which they think is the correctdefinition. Then have them locatethe definitions in the Glossary.
Vocabulary PuzzleMaker
READER’S GUIDE
Critical
Thinking Skills
380
Synthesizing InformationPoint out that synthesizing might
involve integrating informationfrom many different kinds ofsources. For example, researchingthe various items used for moneymight involve the study and integra-tion of information from time lines,charts, tables, graphs, periodicalarticles, and books.
Glencoe SkillbuilderInteractive Workbook,Level 2
This interactive CD-ROM rein-forces student mastery of essen-tial social studies skills.
Answers to Practicing the Skill
1. The main idea is about other countries adopting the dollar as their currency.2. Source B contradicts Source A. Source A states that dollarizing would be the linchpin
of a new global financial system, which would eliminate currency crises, lower inter-est rates, and stimulate economic growth. Source B states that dollarizing could create trouble for the United States and bring about fluctuating interest rates.
3. Some sources suggest that dollarizing could be the beginning of global financialsecurity, while others suggest that it could create economic problems for the U.S.
Application Activity Answers will vary. Have students share and compare their reports.
S YNTHESZING INFORMATIONSynthesizing information involves integrating information from two or more sources. To synthesize information, analyze each source separately to understand its meaning. Determinewhat each source of information adds to the subject. Then identify points of agreement anddisagreement.
Directions: Read both of the excerpts below and answer the questions that follow.
What Is the “Debt Crisis”?Fergus Nicoll, BBC News Online
Campaigners for urgent debt relief say that huge sums of money are going back to wealthy countries instead of feed-ing and educating children in the world’s poorest nations. . . .
In its 1997 report, the United Nations Development Programme (UNDP) said that governments in Africa alone, ifrelieved of their debt obligations, could use the funds “to save the lives of millions of children . . . .”
Why Debt Relief Will Not Benefit PoorKarl Ziegler, Director of the Centre for Accountability and Debt Relief
The main reason why unconditional debt relief to the world’s over-borrowed nations will not help their poorest citizens, is that those citizens will never experience the benefits of such relief.
Most over-borrowed nations are dominated by ruling elites; familial, tribal or military, whose first priority is to feedtheir offshore bank accounts and provide sustenance and support to the military or police forces that maintain themin power.
Indeed, some of the world’s “poorest” over-borrowed countries include Nigeria, Democratic Republic of Congo (formerly Zaire), Zimbabwe, Tanzania and Zambia, inherently wealthy countries. . . .
In most cases, the total debt owed by the nation’s [sic] could be repaid immediately if monies, stolen by rulers andtheir cronies and nestled into offshore tax havens, were returned to the nations from which they had been exportedillegally. The highly visible. . . campaign [to forgive all debt by poor countries] has attracted well-meaning supportersbased on intellectually dishonest arguments. Debt, per se, does not starve children in Africa or elsewhere, but corrup-tion does have that effect. . . .
Name Date Class
20
Reinforcing Economic Skills 20
Project Daily FocusTransparency 59 and have students answer the questions.
This activity is also availableas a blackline master.
Daily Focus Transparencies
T HE BANK PANIC OF 1907
1. Describe what is taking place in this photo. Is there anythingunusual about this banking scene?
2. When a bank like the one in the photograph failed, runs on thebank followed. How would you explain a run on the bank?
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BELLRINGERMotivational Activity
Daily Focus Transparency 59
380
Synthesizing information involves combining information from two or more sources. Information gainedfrom one source often sheds new light upon other information.
Critical Thinking Skills
• Analyze each source sepa-rately to understand itsmeaning.
• Determine what informa-tion each source adds tothe subject.
• Identify points of agree-ment and disagreementbetween the sources. Ask:Can Source A give menew information or newways of thinking aboutSource B?
• Find relationshipsbetween the informationin the sources.
Practice and assesskey skills with
Skillbuilder InteractiveWorkbook, Level 2.
Learning the Skill
To learn how to synthesize information, follow thesteps listed on the left.
Practicing the Skill
Study the sources below, then answer the questions.
Source A “At present 60% to 70% of all dollars in circu-lation are used abroad. Today Panama is the best-knowncountry that is ‘dollarized,’ but 11 others use the U.S. dollar.The best route for the emerging market countries is to uni-laterally dollarize. . . . [T]he dollar could serve as the linch-pin of a new global financial architecture, one that wouldeliminate currency crises, lower interest rates, and stimulategrowth.”—Forbes, May 3, 1999
Source B “When a country abandons its currency, itsurrenders a central symbol of national identity. . . . Weare courting trouble if many countries dollarize. Theywould blame us for their problems; and they would try toinfluence U.S. policies, pushing for either lower or higherinterest rates.” —Newsweek, May 17, 1999
1. What is the main subject of each source?2. Does Source B support or contradict Source A?
Explain.3. Summarize what you learned from both sources.
Application Activity
Find two sources of information on banking prac-tices. What are the main ideas in the sources? How doeseach source add to your understanding of the topic?
Synthesizing Information
381Money and Banking
Terms to Know• overdraft checking• electronic funds transfer
(EFT)• automated teller machine
(ATM)
Reading Objectives1. What are some of the most
important events in the his-tory of American moneyand banking?
2. What are six services pro-vided by banks and savingsinstitutions?
3. How has electronic bankingchanged banking services?
READER’S GUIDE
A merican banking has included everything from wampumto “virtual” money—banking in cyberspace on theInternet. In this section, you’ll learn about the develop-
ment of and changes in the United States banking industry.
History of American BankingBecause the history of money in the United States is so closely
tied to the development of the banking system, the time line inFigure 14.4 on pages 382–383 describes both. During the colonial period, England did not permit the American colonies to print money or mint coins. Bartering for goods was common.
2
BUSINESS WEEK, APRIL 27, 1998
The $1,000,000,000,000 bank. Once, it was un-imaginable. But in eight days in April [1998], three eye-popping megamergers have brought the prospect of thefirst trillion-dollar bank within sight. Suddenly, it
seems to be the all-but-certainclimax of the cycleof ever-largercombinations that have alreadyreshaped the[banking] industry.
383
CHAPTER 14SECTION 2, Pages 381–385
CHAPTER 14SECTION 2, Pages 381–385
IndependentPracticeL1 Making Comparisons Have stu-dents review the text on electronicbanking transfers on pages 384 and385. Then have them write a fewparagraphs discussing the advan-tages and disadvantages of EFT ascompared to using checks or makingpayments in cash. Call on volunteersto read their paragraphs to the class.
CHAPTER 14SECTION 2, Pages 381–385
CHAPTER 14SECTION 2, Pages 381–385
382
Guided PracticeL1 Constructing a Time LineReview with students the informa-tion in Figure 14.4. Organize stu-dents into groups, and direct groupsto create a time line on the history ofmoney and banking in the UnitedStates. Assign each group a timeperiod from the 1780s to the present.Then have groups assemble picturesor create drawings that illustrateimportant events in American moneyand banking during their assignedtime period. Display the time linesaround the classroom. ELL
Refer students to Figure 14.4and draw their attention to theentry for 1811. Point out thatbanks that issued more currencythan they could back with goldand silver were called wildcatbanks. Many of these banks werelocated in areas so remote thatpeople said only a wildcat couldfind them.
L ECTURE LAUNCHERIn its early years, the United States had an unusually large number of banks compared toother countries. This was in large part due to the demands of an expanding frontier. Peopleneeded capital to purchase land and materials for building, and there was little communica-tion between the eat coast and the frontier. In the course of American history, how hasbanking changed? What services do banks offer today?
I. History of American Banking
A. England farebode Colonial America from using printed money or minted coins.
B. Bartering of various goods was used in place of money.
C. When the war came, the Continental Congress issued bills of credit (Continentals) topay war debts.
D. Too many Continentals were issued and they became worthless.
E. After the war, the United States began to mint its own coins backed by gold and silver.
• Discussion Question
Why were Continentals worthless? (Because the Congress issued too many of them. Theirfortunes rose and fell with the tides of the Revolutionary War.)
14-2
PAGES 381–384
PAGE 384
Daily Lecture Notes 14–2
Comprehension and Organization Problems Taking notes requires the ability to consolidate and summarize information so that it is sufficiently clear and complete. To helpstudents take good notes, ask them to read the subsection titled “Electronic Banking” onpages 384 and 385. Direct them to take notes as they read. Then pair students, and havepartners teach each other the subsection information using only their notes. Have studentsdiscuss the effectiveness of their notes in providing essential information. Direct them toidentify unclear or missing information. Finally, have them repeat the reading and note-taking process to improve their notes.
Meeting Special Needs
ECONOMICS & YOU
Money and Banking
!8t~0" Chapter 18 Disc 1, Side 2
ASK: Why were people reluc-tant to place their money inbanks during the early 1900s?because banks failed frequently,taking their depositors’ moneywith them
Also available in VHS.
For use with the textbook pages 381–385
H ISTORY OF AMERICAN MONEY AND BANKING
OUTLINING
Directions: Locate the heading in your textbook. Then use the information under the heading to help youwrite each answer.
I. History of American Banking
A. Introduction
1. How were ways is which colonial Americans conducted business?
2. Why did Continentals become worthless?
3. In order to establish a stable currency, what did the Constitution give Congress the power to do?
II. Banking Services
A. Introduction
1. What types of banking services do banks and savings institutions offer?
2. What does overdraft checking allow?
Name Date Class
14-2
Guided Reading Activity 14–2
Organize students into several groups, and have groups investigate the servicesoffered by local banks and savings institutions. Each group should focus on a differentbank or savings institution and present their findings in the form of an illustrated chart.Have groups display and discuss their finished charts. Then lead all students in a discus-sion of which bank or savings institution is best suited to their banking needs.
BLOCK SCHEDULINGELL
Cooperative Learning
Time Line of AmericanMoney and Banking
FIGURE 14.4FIGURE 14.4
Years
1780s
1791
1792
1811
1816
1830s–1860s
Civil War
Events
The new nation has no reliable medium of exchange. National leaders disagreeon a type of banking system. One group, led by Alexander Hamilton, believes anational banking system is necessary for development. The opposition, led byThomas Jefferson, argues that only states should have the right to charter banks.
Congress establishes the First Bank of the United States and gives it a 20-yearcharter. The bank is a private business, although the government supplies one-fifthof its starting capital. It serves as a depository for government funds, makes loansto the government and private individuals and businesses, and regulates theactivities of banks with state charters. It also issues banknotes backed by gold.
Congress passes the Coinage Act, which organizes a mint and establishes the dollaras the basic unit of currency for the nation. The Act also places the nation on abimetallic monetary standard—the value of the dollar is fixed according to specificquantities of both silver and gold.
Congress refuses to renew the charter of the First Bank because of questionsabout its legality and fears that it is gaining too much power. Without federalcontrols, dozens of state-chartered banks lend money and issue banknotes freely,many of which are not backed by enough gold or silver reserves.
Congress establishes the Second Bank of the United States after the financial con-fusion caused by the War of 1812. Like the First Bank, it brings some order to thebanking system. It pressures state-chartered banks to limit lending and to keepenough gold and silver in reserve to redeem their banknotes. Opposition to astrong national bank remains, however. In 1832 President Andrew Jackson vetoeslegislation to extend the Second Bank’s charter.
The end of the Second Bank brings another rapid rise in state-chartered banks.The amount of money in circulation varies widely. Such shifts in the amount ofmoney available result in major fluctuations in business activity and prices.
To help pay for the war, the United States issues fiat money—the first time sincethe Revolutionary War. These United States notes, called greenbacks, change invalue as confidence in the Union army rises or falls. Difficulties in raising moneyfor the war make clear the need for a better monetary and banking system. In1863 and 1864, Congress passes the National Bank acts. These acts establish asystem of federally chartered private banks, called national banks. The govern-ment also sets up a safe, uniform currency by requiring that all national bank-notes be fully backed by government bonds. The Comptroller of the Currency iscreated to grant charters for national banks and to oversee their activities.
382 383Money and Banking
Events
The nation shifts to a gold monetary standard in 1869. The federal governmentbegins redeeming early 1860s greenbacks for gold coins. Despite the new bank-ing system, problems remain. There is no simple way to regulate the amount ofnational banknotes in circulation, so periodic shortages of money occur. Financialpanics occur in 1873, 1884, 1893, and 1907. Many banks with low reserves areforced to close.
To control the amount of money in circulation, Congress establishes the FederalReserve System. It serves as the nation’s central bank with power to regulatereserves in national banks, make loans to member banks, and control the growthof the money supply. In 1914 the system begins issuing paper money calledFederal Reserve notes. These notes soon become the major form of currency incirculation.
The Great Depression begins. Stocks and other investments lose much of theirvalue. Bankrupt businesses and individuals are unable to repay their loans.
A financial panic causes thousands of banks to collapse. When President FranklinRoosevelt takes office in March 1933, he declares a “bank holiday,” closing allbanks. Each bank is allowed to reopen only after it proves it is financially sound.Congress passes the Glass-Steagall Banking Act in June, establishing the FederalDeposit Insurance Corporation (FDIC). This new agency helps restore public con-fidence in banks by insuring funds of individual depositors in case of a bank failure.
The nation switches from a gold standard to a fiat monetary standard. The gov-ernment stops converting greenbacks into gold, calls in all gold coins and certifi-cates, and prohibits private ownership of gold.
Banking reforms of the 1930s allow banks to enter a period of long-term stability,in which few banks fail.
Congress passes a series of laws to protect consumers in dealing with financialinstitutions. The Truth in Lending Act of 1968, the Equal Credit Opportunity Act of1974, and the Community Reinvestment Act of 1977 make clear the rights andresponsibilities of banks and consumers.
Banks begin using computers to transfer money electronically and to handlemany banking activities. Congress passes the Electronic Funds Transfer Act of1978 to protect consumers using these new services.
As part of the general move toward deregulation of business, Congress passesthe Depository Institutions Deregulation and Monetary Control Act in 1980.
Deregulation allows the savings and loan industry to make risky loans. ManyS&Ls face bankruptcy. Congress passes the Financial Institutions Reform,Recovery, and Enforcement Act of 1989. The full cost of bailing out the S&Ls is$300 billion, or about $4,000 per United States family in future taxes. The FDICtakes over regulation of the thrift institutions industry. Banking continues toevolve, incorporating technology such as e-cash on the Internet.
Years
Late 1860s–Early 1900s
1913
1929
1929–1934
1930s–1960s
Late 1960s–1970s
1980s–present
385385
CHAPTER 14SECTION 2, Pages 381–385
CHAPTER 14SECTION 2, Pages 381–385
ReteachHave students write review ques-
tions based on the section head-ings. Then pair students, and havepartners quiz each other on sectioncontent using their questions.
1. All definitions can be found in the Glossary.2. Time lines will vary.3. Students’ answers may include interest on cer-
tain kinds of checking accounts, automaticdeposit and payment, storage of values, trans-fer of money, and overdraft checking.
4. Electronic banking has made banking transac-tions simpler, quicker, and less expensive.Tampering and lack of privacy are increasedbecause all records are stored in computers.
5. Some students may agree, because dollarswould be backed by something of value.Others might disagree because the amount ofmoney in circulation would be controlled by theamount of U.S. gold.
6. Some students will suggest that peoplebelieved that coins made of gold and silvermaintained their value better than papermoney. Others might suggest that coins aremore durable than paper currency.
Ask students to write a para-graph in support of or opposed tothe following statement: Techno-logical developments have greatlyimproved banking services for consumers.
Name Date Class
14, 2
overdraft checking Checking account that allows a customer to write a check for more money thanexists in his or her account (page 384)
electronic funds transfer (EFT) System of putting onto computers all the various banking functions thatin the past were handled on paper (page 384)
automated teller machines (ATMs) Units that allow consumers to do their banking without the help ofa teller (page 385)
KEY TERMS
For use with textbook pages 381–385
H ISTORY OF AMERICAN MONEY ANDBANKING
DRAWING FROM EXPERIENCE
In the United States, the FDIC (Federal Deposit Insurance Corporation) insures bank deposits.Would you feel confident about putting your money in a bank if your deposit was not insured?
This section focuses on the history of banking and currency in the U.S. It also explains currentbanking practices and services.
ORGANIZING YOUR THOUGHTS
Use the time line below to help you take notes as you read through the summaries that follow.Fill in the significant events that occurred during the years listed. Think about what happened
Reading Essentials and Study Guide 14–2
CHAPTER 14SECTION 2, Pages 381–385
CHAPTER 14SECTION 2, Pages 381–385
384
Meeting LessonObjectives
Assign Section 2 Assessment ashomework or an in-class activity.
Use Interactive Tutor Self-Assessment Software to review Section 2.
See the Web Activity LessonPlan at ett.glencoe.com for anintroduction, lesson description,and answers to the Student WebActivity for this chapter.
ATM Transaction Charges Using an ATM is a relatively easy task. The customer insertshis or her card, enters an identification code, and then makes a transaction. If the customer ismaking a withdrawal at an ATM not owned by his or her bank, a fee—usually between $1and $2.50—is charged. Since each transaction costs only about 25 cents, some consumershave accused banks of profiting unfairly. Banks have responded by arguing that charging afee for convenience services is standard business practice. Recently, some local govern-ments have passed laws that prevent banks from charging ATM fees. In response, a fewbanks have programmed their ATMs to reject cards of customers who do not bank with them.
Extending the Content
Economic Connectionto... HistoryEconomic Connectionto...
In colonial times, frontierhunters often left their deerskins,or buckskins, at trading postswhile they went hunting for more.They received a receipt, whichthey used to pay each other or thetrading posts for supplies. Thevalue of the buckskins thathunters left—and the receipt—usually was about a dollar. Thecommon name for a dollar—buck—derives from this practice.
Name Date Class
14, 2
H ISTORY OF AMERICAN MONEY AND BANKING
Multiple Choice: In the blank at the left, write the letter of the choice that best completes the statement or answers the question. (10 points each)
6. The phrase “not worth a Continental” referred to money issued during the
a. Revolutionary War. b. War of 1812.c. Civil War. d. Great Depression.
7. In case of a bank failure, the funds of individual depositors are protected by the
a. Federal Deposit Insurance Corporation. b. Truth in Lending Act.c. Equal Credit Opportunity Act. d. Electronic Funds Transfer Act.
8. Which of the following may vary according to each state’s banking laws?
SCORE
A1. overdraft checking
2. electronic funds transfer
3. automated teller machine
4. service charges
5. monetary standard
Ba. unit that allows customers to do their banking with-
out the help of a teller
b. way in which a nation assigns value to money
c. account that allows a customer to write a check formore money than exists in the account
d. system of putting banking functions onto computers
e. fees that banks charge on checking accounts
Matching: Place a letter from Column B in the blank in Column A. (10 points each)
Section Quiz 14–2
overdraft checking: checkingaccount that allows a customer towrite a check for more moneythan exists in his or her account
electronic funds transfer (EFT):system of putting onto computersall the banking functions that inthe past were handled on paper
Though scarce, some European gold andsilver coins also circulated in the colonies.The Spanish dolár, later called the “dollar”by colonists, was one of the more commoncoins.
The Revolutionary War brought evenmore confusion to the already haphazardcolonial money system. To help pay for thewar, the Continental Congress issued billsof credit, called Continentals, that could beused to pay debts. So many of these noteswere issued that they became worthless,
and people often refused to accept them. The phrase “not wortha Continental” became a way of describing something of littlevalue.
After the war, establishing a reliable medium of exchangebecame a major concern of the new nation. The Constitution, rat-ified in 1788, gave Congress the power to mint coins, althoughprivate banks were still allowed to print banknotes representinggold and silver on deposit.
Banking ServicesBanks and savings institutions today offer a wide variety of
services, including checking accounts, interest on certain types of checking accounts, automatic deposit and payment, storage of valuables, transfer of money from one person to another, andoverdraft checking. Overdraft checking allows a customer towrite a check for more money than exists in his or her account.The bank lends the needed amount and the customer pays themoney back, usually at a relatively high rate of interest.
In general, the types of banking services are the same acrossthe country. The exact terms and conditions of the services, how-ever, vary from state to state according to each state’s bankinglaws. When choosing a bank or savings institution, you shouldinvestigate the bank’s service charges.
Electronic BankingOne of the most important changes in banking began in the
late 1970s with the introduction of the computer. With it cameelectronic funds transfer (EFT), a system of putting ontocomputers all the various banking functions that in the pasthad to be handled on paper. One of the most common features
Student Web Activity Visit the Economics Today and Tomorrow Web site at ett.glencoe.comand click on Chapter 14—Student WebActivities to see how online banking works.
384 CHAPTER 14 385Money and Banking
automated teller machines(ATMs): units that allow con-sumers to do their bankingwithout the help of a teller
of EFT is automated teller machines (ATMs). These units letconsumers do their banking without the help of a teller.
Today you can even do your banking from home. You can seeyour account balances, transfer funds from a savings account to a checking account, and often even apply for a loan—all on theInternet.
EFT Concerns Although EFT can save time, trouble, andcosts in making transactions, it does have some drawbacks. The possibility of tampering and lack of privacy are increasedbecause all records are stored in a computer. A person on acomputer terminal could call up and read or even alter theaccount files of a bank customer in any city, if he or she knewhow to get around the safeguards built into the system. Inresponse to these and other concerns, the Electronic FundTransfer Act of 1978 describes the rights and responsibilities of participants in EFT systems. For example, EFT customers areresponsible for only $50 in losses when someone steals or ille-gally uses their ATM card, if they report the card missing withintwo days. If they wait more than two days, they could beresponsible for as much as $500. Users are also protectedagainst computer mistakes.
Understanding Key Terms1. Define overdraft checking, electronic funds
transfer (EFT), automated teller machine (ATM).
Reviewing Objectives2. Graphic Organizer Create a time line like
the one below to list and describe at least fiveof the most important events in the history ofAmerican money and banking. See Figure14.4 on pages 382–383 for information.
3. What are six services offered by banks and sav-ings institutions?
4. How has electronic banking changed bankingservices?
Applying Economic Concepts5. Money In 1934 the government stopped back-
ing paper money with gold. Some experts haveproposed a return to the gold standard. Do youthink this would be a good idea? Why or why not?
6. Drawing Inferences Why do you thinkcoins have been a more desirable form ofmoney than paper currency throughoutAmerican history?
Critical Thinking Activity
Practice and assesskey skills with
Skillbuilder InteractiveWorkbook, Level 2.
2
387
CHAPTER 14SECTION 3, Pages 387–391
CHAPTER 14SECTION 3, Pages 387–391
Reproducible MastersReproducible Lesson Plan 14–3Reading Essentials and Study Guide 14–3Guided Reading Activity 14–3Section Quiz 14–3Daily Focus Activity 60Daily Lecture Notes 14–3
MultimediaDaily Focus Transparency 60Vocabulary PuzzleMakerInteractive Tutor Self-Assessment Software
ExamView® Pro TestmakerMindJogger Videoquiz
Presentation Plus!
SECTION 3 RESOURCE MANAGER
OverviewSection 3 explains the difference
between money and near moneysand describes the components ofthe M1 and M2 measures of themoney supply.
Answers to the Reading Objectivesquestions are on page 391.
Preteaching VocabularyCall on volunteers to state what
they think each of the Terms toKnow means. As each definition isoffered, have students check itsaccuracy by locating the term inthe Glossary.
Vocabulary PuzzleMaker
READER’S GUIDE
SPOTLIGHT
386
You might point out that bankservice fees—especially thosecharged for the use of ATMs—havebecome a major issue. Some stateand local governments, citing theElectronic Funds Transfer Act of1978, have sought to control thetypes and levels of fees that bankscan charge.
Answers to Think About It
Throughout much of the1990s, banks earned recordyearly profits. Income from feesgrew at more than three timesthe rate of the increase in profits.
1. Actions include not returning canceled checks or charging some kind of fee for theirreturn, charging customers for using live tellers, raising fees for handling bouncedchecks and for using other banks’ ATMs.
2. Many customers have switched to other banking institutions to avoid these variousfees and charges.
To find up-to-date news andanalysis on the economy, busi-ness, technology, markets,entrepreneurs, investments,and finance, have studentssearch feature articles and spe-cial reports on the BusinessWeek Web site.www.businessweek.com
Project Daily FocusTransparency 60 and have students answer the questions.
This activity is also availableas a blackline master.
Daily Focus Transparencies
T YPES OF MONEY
1. How does fiat money differ from representative money?
2. What type of money is used in the United States today?
TYPES OF MONEY
So called becauseit is a commodity,
or good, itself.
So called becauseit represents a
specific amount ofa specific commodity.
So called becausefiat comes from
the Latin for"let it be so."
Mediums of exchangethat have value
aside from their valueas money.
Mediums of exchangethat are backedby some kind of
commodity.
Mediums of exchangethat have value
because of societalagreement.
COMMODITY MONEY REPRESENTATIVE MONEY FIAT MONEY
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BELLRINGERMotivational Activity
Daily Focus Transparency 60
Anyone who has maintained a checkingaccount over the past decade knows that
the rules of the game have been dramaticallychanging. Specifically, your once friendly bankor thrift institution has probably been imposinga lot more fees and restrictions on youraccount—in an understandable effort to savemoney and wring even more profits from yourneed for its services.
Among other things, many banks now try tosave money on handling canceled checks—either by not returning them at all or, morelikely, charging either a set monthly amount for
all returned checks or aper-check fee. Some
also charge customersfor using live tellersinstead of ATMs.And many havebeen raising theirfees considerablyfor handlingbounced checksand for usingother banks’ATMs.
Ironically, reportseconomist JoannaStavins in a recentissue of the FederalReserve Bank ofBoston’s NewEngland EconomicReview, most of thegambits don’t seemto be paying off. In a study of checkingaccounts at some 250 banks around the nation in 1997, shefound that only two of the features describedabove appeared to be producing higher rev-enues: increased charges for bounced checksand higher fixed monthly fees for returningcanceled checks.
In all other cases, raising fees or tighteningrestrictions tended to induce depositors to switchto other institutions—thus lowering the banks’take. Consumers, it seems, are a lot more sensi-tive to such practices than banks realize.—Reprinted from July 26, 1999 issue of Business Week by special
permission, copyright © 1999 by The McGraw-Hill Companies, Inc.
Think About It1. What actions are banks taking to earn more
profits?
2. According to Stavins, how are customers reacting tobanks’ actions?
How Higher Fees Hurt Banks
SPOTLIGHT ON THE ECONOMY
Check It Out! In this chapter you learned about bankingservices. In this article, read to learn how consumersare reacting to higher bank fees for those services.
How Higher Fees Hurt Banks
386 387Money and Banking
Terms to Know• checking account• checkable deposits• thrift institutions• debit card• near moneys• M1• M2
Reading Objectives1. What is the difference
between money and nearmoneys?
2. What does the M2 definitionof money include?
READER’S GUIDE
When you think of money, you may think only of coinsand paper bills. As you read this section, you’ll learnthat money is more than just cash.
Money and Near MoneysMoney in use today consists of more than just currency. It also
includes deposits in checking and savings accounts, plus certainother investments.
3
KIPLINGER’S PERSONAL FINANCE MAGAZINE, DECEMBER 1998
Lincoln, Jefferson, Roosevelt and Washington. Soon to join those icons of American history on
our nation’s coinage is Sacajawea, theteenage Shoshone girl who helpedguide Lewis and Clark on their his-toric expedition. According to theexplorers’ journals, the girl, with
her infant son strapped to her back,helped the party navigate through
mountain passes, communicate withnative tribes, and find edible plants and roots when other food was scarce.
Sacajawea will represent Lady Liberty on the newdollar coin, expected to make its debut in 2000.
Randy L’Teton, model for theSacajawea coin
389
CHAPTER 14SECTION 3, Pages 387–391
CHAPTER 14SECTION 3, Pages 387–391
CHAPTER 14SECTION 3, Pages 387–391
CHAPTER 14SECTION 3, Pages 387–391
388
After students have reviewedFigure 14.5, point out that checksprovide an important record ofpersonal expenditures. Canceledchecks are needed in preparingincome tax returns or resolvingdisputes over the payment of billsor credit card accounts.
L ECTURE LAUNCHERFifty to sixty percent of all monetary transactions do not use cash or checks. What do youthink of when you think of money? Do your thoughts include credit cards?
I. Money and Near Moneys
A. Currency—coins and bills (notes)
B. Checks or checking accounts which offer checkable deposits
C. Credit cards are not really money; they are representative of future claims to funds.
D. Credit cards actually defer the completion of the transaction to a later date.
E. Debit cards are similar to checks, but the withdrawal is done electronically.
F. Near moneys are assets that have values stated in terms of money, but are not them-selves money.
G. Near money can easily be turned into money, such as savings accounts or timedeposits.
• Discussion Question
Compare and contrast two of the forms of money listed above. (Answers will vary.Students should be able to see the similarities and differences in function or form betweenthe different types of money or near money.)
14-3
PAGES 387–391
Daily Lecture Notes 14–3
Auditory Disability One type of learning disorder results from inefficient auditory pro-cessing. Students with this disability may look as if they are not paying attention when, inreality, they are “lost” in the confusion of language. To help students with this type of dis-ability listen effectively, cue them with a subtle but consistent gesture—a raised hand, forexample—when you are coming to an important point.
Refer to Inclusion for the Social Studies Classroom Strategies and Activities forstudents with different learning styles.
Meeting Special Needs
“Dollarizing” South AmericaMany South American countries
have proposed adopting the dollaras their basic currency. A gooddeal of business is conducted withdollars. And in some of the largerSouth American cities, dollars areavailable at ATMs.
Organize students into small groups, and have groups investigate how United Statesmoney—both coin and paper—is made. Direct groups to discover such information aswhere money is made, what materials are used, what measures are taken to preventcounterfeiting, and what happens to worn-out currency. Have groups present their findingsin illustrated reports. BLOCK SCHEDULINGELL
Cooperative Learning
IndependentPracticeL2 Constructing Graphs Have stu-dents construct a circle graph usingthe following information:
M1 in 1996Total = $1,081 billionCurrency = $395 billionTravelers’ checks = $9 billionDemand deposits = $403 billionOther checkable deposits =
$275 billion.
Then have students use libraryresources to find the most recentfigures on M1. Call on volunteers to discuss how the size and compo-sition of M1 have changed since1996. BLOCK SCHEDULING
Name Date Class
For use with textbook pages 387–391
T YPES OF MONEY IN THE UNITED STATES
RECALLING THE FACTS
Directions: Use the information in your textbook to answer the questions.
1. What are token coins?
2. Which bureau is responsible for minting coins?
3. Which section of the Treasury Department prints Federal Reserve notes?
4. Why did the Treasury Department stop printing bills larger than $100?
5. What is a checking account?
6. Why did checkable deposits used to be called demand deposits?
7 What are some examples of thrift institutions?
14-3
Guided Reading Activity 14–3
Guided PracticeL1 Categorizing InformationReview with students the informa-tion on the money supply on page391. On the board, draw a two-column chart with “M1” and “M2” as column headings. Call on volun-teers to enter the items listed belowin the correct columns. (Remind students that some items are part of both measures.)
Travelers’ checks (M1 and M2)Money market deposit accounts
(M2)Currency (M1 and M2)Checkable deposits (M1 and M2)Savings deposits (M2)
Writing a Check and BalancingYour Checkbook Always fill out yourchecks completely and clearly in ink. Seethe sample check in Part A. After you writea check to someone or make a deposit intoyour checking account, write the number,date, and amount in your check register.See the sample register in Part B.
Then, when you receive your monthlybank statement, balance your checkbookby following these steps:1. Sort your checks by number. Check off
each one in your checkbook.2. Check off your deposit slips.3. Deduct service charges and bank fees
from your checkbook balance.4. Add to the bank statement balance any
deposits that have not cleared.5. Total the amount of checks that have
not cleared. Subtract this total from theamount on your bank statement.
The sample checkbook register in Part Bshows that you have a running total of$191.36 in your account. Balance this totalagainst the bank statement in Part C.
123-456-7 827.91 504.61 674.66 3.00 660.86
Bernadette C. Dabney12 Vico Lane
Haddonfield, NJ 08033
Bernadette C. Dabney12 Vico LaneHaddonfield, NJ 08033
Date 20A
Number
132 Fashion Shop 167310/25 $
Date Description Payment of Debt
FIRST NATIONAL BANK OF CHICAGO
Fee Deposit of CreditBalance
B
C
$ 75754$
91827
December 1
25292
25209
25159
25149
25153
86653
004
61500
123-456-7
Account Number
1 Dec. 2002
Statement Date
36191
$
133 Rent 5046211/1
134 Phone 008311/7
135 Cash 005011/14
136 J.W. Little 001011/15
John’s check11/22
Paycheck11/23
137 Rent 5046212/1
Summary of Accounts
Previous Balance
Debits Credits Balance
754.75292.25209.25159.25163.25663.86660.86
Nov. 2223
4.00500.61
73.16462.5083.0050.00
132133134135
4815
Nov.
3.00SC
AccountNumber
PreviousBalance
TotalCredits
TotalDebits
TotalCharges
CurrentBalance
827.91 Current Balance 660.86
FIRST NATIONAL BANK OF CHICAGO
Pay to theorder of
Memo
Dollars
$Rental Agency 462.50
02
Four Hundred Sixty-Two and 50/100
Bernadette C. Dabney
7
FIGURE 14.5FIGURE 14.5
388 CHAPTER 14
Currency All United States coins in circulation today are tokencoins. The value of the metal in each coin is less than its exchangevalue. A quarter, for example, consists of a mixture of copper andnickel. The value of the metal in a quarter, however, is much lessthan 25 cents. The Bureau of the Mint, which is part of the TreasuryDepartment, makes all coins. About 7 percent of the currency in cir-culation in the United States today is in the form of coins.
Most of the nation’s currency is in the form of Federal Reservenotes issued by Federal Reserve banks. The Bureau of Engravingand Printing, also part of the Treasury Department, prints allFederal Reserve notes. They are issued in denominations of $1,
389Money and Banking
checking account: account inwhich deposited money can bewithdrawn at any time by writing a check
checkable deposits: moneydeposited in a bank that can bewithdrawn at any time by present-ing a check
thrift institutions: mutual sav-ings banks, S&Ls, and creditunions that offer many of thesame services as commercialbanks
debit card: device used to makecashless purchases; money iselectronically withdrawn from theconsumer’s checkable accountand transferred directly to thestore’s bank account
$2, $5, $10, $20, $50, and $100. (Larger notesused to be printed, but the practice was stoppedto make it harder for criminals to hide largeamounts of cash.)
The Treasury Department has also issuedUnited States notes in $100 denominations only.These bills have the words United States Noteprinted across the top and can be distinguishedfrom Federal Reserve notes by a red Treasuryseal. United States notes make up less than 1 percent of the paper money in circulation.Both Federal Reserve notes and United Statesnotes are fiat money, or legal tender.
Checks A checking account is moneydeposited in a bank that a person can withdrawat any time by writing a check. The bank mustpay the amount of the check on demand, orwhen it is presented for payment. Suchaccounts used to be called demand deposits.Today we call these checkable deposits, and avariety of financial institutions offer them.
Commercial banks used to be the only financial institutionsthat could offer checkable deposits. Today all thrift institutions—mutual savings banks, savings and loan associations (S&Ls), andcredit unions—offer checkable deposits. In addition, certain bro-kerage houses offer the equivalent of checking accounts. MerrillLynch and Fidelity Investments are two examples.
The largest part of the money supply in the United States con-sists of checkable accounts. Figure 14.5 shows how to write acheck and balance a checkbook.
Credit Cards and Debit Cards Even though many people usetheir credit cards to purchase goods and services, the credit carditself is not money. It acts neither as a unit of accounting nor as astore of value. The use of your credit card is really a loan to you bythe issuer of the card, whether it is a bank, retail store, gas com-pany, or American Express. Basically, then, credit card “money” rep-resents a future claim on funds that you will have later. Credit cardsdefer rather than complete transactions that ultimately involve theuse of money.
A debit card automatically withdraws money from a check-able account. When you use your debit card to purchase some-thing, you are in effect giving an instruction to your bank to
Job Description■ Cash checks,
accept deposits,and processwithdrawals
■ Sell savingsbonds, processCDs and moneymarketaccounts, andsell traveler’schecks
Qualifications■ High school
education■ Must feel
comfortableworking withcomputers
Median Salary: $16,300
Job Outlook: Below average
CAREERSBank Teller
—Occupational Outlook Handbook, 1998–99
391391
CHAPTER 14SECTION 3, Pages 387–391
CHAPTER 14SECTION 3, Pages 387–391
ReteachHave students use the Terms to
Know to write two paragraphs—oneexplaining the difference betweenmoney and near moneys, the otherdescribing two measures of money.
1. All definitions can be found in the Glossary.2. Money: currency, checkable deposits at banks
and savings institutions, debit cards; NearMoneys: time deposits, savings account bal-ances; Differences: Money is legal tender orchecks or debit card transactions that must bepaid by banks on demand. Near moneys canbe turned into currency or a means of pay-ment—such as a check—relatively easily.
3. M2 includes all of M1 (currency, travelers’checks, and checkable deposits) plus savingsdeposits, time deposits, small-denominationcertificates of deposit, money market depositaccounts, money market mutual fund balances,and other more specialized accounts.
4. Answers will vary.5. Encourage students to present their findings in
an illustrated report.
Have students work in smallgroups to create posters illustratingthe components of Americanmoney.
Name Date Class
14, 3
checking account Account in which deposited money can be withdrawn at any time by writing a check(page 389)
checkable deposits Money deposited in a bank that can be withdrawn at any time by presenting a check(page 389)
thrift institutions Mutual savings banks, S&Ls, and credit unions that offer many of the same services ascommercial banks (page 389)
debit card Credit device used to make cashless purchases; money is electronically withdrawn from theconsumer’s checkable account and transferred directly to the store’s bank account (page 389)
near moneys Assets, such as savings accounts, that can be turned into money relatively easily and with-out the risk of loss of value (page 390)
M1 Narrowest definition of the money supply; consists of moneys that can be spent immediately andagainst which checks can be written (page 391)
M2 Broader definition of the money supply; includes all of M1, plus such near moneys as money marketmutual fund balances, certificates of deposit, and Eurodollars (page 391)
For use with textbook pages 387–391
T YPES OF MONEY IN THE UNITED STATES
DRAWING FROM EXPERIENCE
Do you have a job for which you are paid by check? Do you deposit that check into a checkingaccount? Or do you get cash for your paycheck and use the cash to pay for purchases? Why domost employers pay by check?
hi i l i h diff f d i h i d l l i h
KEY TERMS
Reading Essentials and Study Guide 14–3
CHAPTER 14SECTION 3, Pages 387–391
CHAPTER 14SECTION 3, Pages 387–391
390
L3 Writing Newspaper ArticlesHave students use library resourcesand the Internet to find economists’views on whether credit cardsshould be considered money. Thenhave them present their findings on this debate in the form of an article for the business section of anewspaper.
Refer students to Figure 14.6.ASK: How have M1 and M2changed over the 10 years shownin the graph? Both have increasedsteadily, with M2 increasing at aslightly faster rate.
Graphic Organizer Have students drawtwo web diagrams similar to the one here.The first web should have three outer ovals,while the second should have two outerovals. Ask students to write “Money” in thecentral oval of the first web. They shouldenter examples of money in the outer ovals.For the second web, have students enter
“Near Moneys” in the central oval and exam-ples of near moneys in the outer ovals.
T YPES OF MONEY IN THE UNITED STATES
Multiple Choice: In the blank at the left, write the letter of the choice that bestcompletes the statement or answers the question. (10 points each)
6. Today money consists of
a. only checking and savings deposits. b. currency, checking and savings deposits, and investments.
c. only investments in stocks. d. only currency.
7. Most U.S. currency today is in the form of
a gold and silver b Federal Reserve notes
SCORE
A1. checking account
2. thrift institutions
3. debit card
4. near moneys
5. M1
Ba. assets that can be turned into money relatively
easily
b. narrowest definition of money supply
c. account in which deposited money can be withdrawn at any time by writing a check
d. credit device used to make cashless purchases
e. mutual savings banks, S&Ls, and credit unions thatoffer many of the same services as commercialbanks
Matching: Place a letter from Column B in the blank in Column A. (10 points each)
Name Date Class
14, 3
Section Quiz 14–3
Meeting LessonObjectives
Assign Section 3 Assessment ashomework or an in-class activity.
Use Interactive Tutor Self-Assessment Software to review Section 3.
390 CHAPTER 14
near moneys: assets, such assavings accounts, that can beturned into money relatively easilyand without the risk of loss ofvalue
transfer money directly from your bank account to the store’sbank account. The use of a debit card does not create a loan.Debit card “money” is similar to checkable account money.
Near Moneys Numerous other assets are almost, but notexactly, like money. These assets are called near moneys. Theirvalues are stated in terms of money, and they have high liquidity incomparison to other investments, such as stocks. Near moneys canbe turned into currency or into a means of payment, such as acheck, relatively easily and without the risk of loss of value. Forexample, if you have a bank savings account, you cannot write acheck on it. You can, however, go to the bank and withdraw someor all of your funds. You can then redeposit these funds in yourchecking account or spend it all as cash.
M1 and M2 With the deregulation of banking services in the early 1980s, thedefinition of the money supply was enlarged to include the new types of accounts.
Bil
lio
ns
of
Do
llars
Years
$4,500
$4,000
$3,500
$3,000
$2,500
$2,000
$1,500
$1,000
$500
01987 ’88 ’89 ’90 ’91 ’92 ’93 ’94 ’95 ’96 ’97 ’98 ’99
Source: Board of Governors of the Federal Reserve System
M2
M1
Growth in the Money Supply
For an online update of this graph, visit ett.glencoe.com and click on Textbook Updates—Chapter 14.
FIGURE 14.6FIGURE 14.6
391Money and Banking
M1: narrowest definition of themoney supply; consists of mon-eys that can be spent immedi-ately and against which checkscan be written
M2: broader definition of themoney supply; includes all of M1,plus such near moneys as moneymarket mutual fund balances,certificates of deposit, andEurodollars
Time deposits and savings account balancesare near moneys. Both pay interest, and neithercan be withdrawn by check. Time depositsrequire that a depositor notify the financial institu-tion within a certain period of time, often 10 days,before withdrawing money. Savings accounts do not usually require such notification.
The Money SupplyHow much money is there in the United States today? That
question is not so easy to answer. First, the definition of money supply must be agreed upon. Currently, two basic definitions are used, although others exist. The first is called M1, and the second M2.
M1 includes all currency (bills and coins), all checkabledeposits, and traveler’s checks. M2 includes everything in M1 plus savings deposits, time deposits, small-denominationcertificates of deposit, money market deposit accounts, moneymarket mutual fund balances, and other more specializedaccount balances. Figure 14.6 shows the growth of M1 andM2 from 1987 to 1999.
Understanding Key Terms1. Define checking account, checkable deposits,
thrift institutions, debit card, near moneys, M1, M2.
Reviewing Objectives2. Graphic Organizer Create a chart like the
one below to explain the difference betweenmoney and near moneys.
3. What does the M2 definition of money include?
Applying Economic Concepts4. Exchange, Money, and Interdependence
What various forms or types of money and nearmoneys do you use?
5. Summarizing Information Use a searchengine to find the Bureau of Engraving andPrinting Web site. Find out how currency isprinted and what security measures are takento avoid counterfeiting. What steps would yousuggest to minimize counterfeiting?
Critical Thinking Activity
Practice and assesskey skills with
Skillbuilder InteractiveWorkbook, Level 2.
3
Money Near Moneys Differences
393
Use the Chapter 14 Summary to preview, review, condense, orreteach the chapter.
Preview/ReviewVocabulary PuzzleMaker Soft-
ware reinforces the key terms usedin Chapter 14.
Interactive Tutor Self-Assess-ment Software allows students toreview Chapter 14 content.
CondenseHave students listen to the
Chapter 14 Audio Program (alsoavailable in Spanish) in the TCR.Assign the Chapter 14 Audio Pro-gram Activity and give students theChapter 14 Audio Program Test.
ReteachHave students com-
plete Reteaching Activity 14 in theTCR (Spanish Reteaching Activitiesare also available).
C H A P T E R 14
ECONOMICS & YOU
Money and Banking
!8t~0" Chapter 18 Disc 1, Side 2
If you do not have accessto a videodisc player, theEconomics & You programs arealso available in VHS.
Money and Banking Have students monitor the currency that comes into their posses-sion during a one-week period. Ask them to keep track of the features that appear on thefront and back of each bill or coin, noting the differences among the various denominationsof bills and coins. Suggest that students collate their information in a chart with the follow-ing column headings: “Unit of Currency,” “Front Characteristics,” “Back Characteristics.”Encourage students to share and compare their charts.
Economics Journal
392
Answers to Checking for Understanding1. not only businesses with 500 employees or less, but also those businesses that can-
not tap into the lines of credit that they need to grow2. Because of the contribution small businesses make to American life—according to
Alvarez—they are the building blocks of sustainable communities, and they creategood jobs.
Call on volunteers to read AidaAlvarez’s three statements. After thefirst statement, ask students torestate Alvarez’s definition in theirown words. After the second state-ment, point out that one area thatAlvarez feels the SBA should befully involved in is microlending—making loans of $1,000 or less.Have students discuss how thismight help small businesses.Finally, after the third statement,underscore the importance of smallbusinesses by pointing out thatthey employ the majority ofAmerican workers.
BackgroundWhen introducing this feature,
you might mention that AidaAlvarez is the first Hispanic woman,and the first person of Puerto Ricanheritage, to hold a cabinet position.
■ Administrator of theUnited States SmallBusinessAdministration(SBA)
■ Served as directorof the Office ofFederal HousingEnterpriseOversight (OFHEO),which regulates theoperations of thenation’s two largesthousing financecompanies(1993–97)
■ Worked as aninvestment bankerand a journalist
In 1997 President Bill Clintonappointed Aida Alvarez to the
office of Administrator of theSmall Business Administration(SBA). The SBA oversees thedevelopment and delivery of aseries of financial and businessprograms designed to aid smallbusinesses. Alvarez has a verybroad view of what constitutes a“small business”:
“[The] SBA deals with a wholerange of business. There are anumber of different size standardsto determine whether a business issmall or not.
One way to look at it is that if abusiness has 500 or fewer employ-ees it is a small business. We addonto this [number] businesses thatcan’t tap into the lines of credit thatthey need to grow, even if they aredominant in their field. Those busi-nesses are candidates for the SBA.”
Alvarez feels that the SBA canplay a much greater role in theeconomy:
“. . . I think there is opportu-nity to turn the SBA into a leading-edge financial agency. As women’sbusinesses continue to grow, I wouldlike to do whatever I can to supportthem. There also are other commu-nities not being serviced. Minoritycommunities, rural communities,Alaskan native communities.”
Alvarez considers the work ofthe SBA essential because of thecontribution of small businessesto American life:
“. . . [S]mall businesses are thebuilding blocks of sustainable com-munities. Small businesses creategood jobs. Jobs bring security andhope. Hope enables people to investfor the future—to buy homes, estab-lish neighborhoods, educate chil-dren, settle down, and rise up.”Checking for Understanding
1. According to Alvarez, what is a smallbusiness?
2. Why does Alvarez consider the workof the SBA essential?
Aida AlvarezGOVERNMENT OFFICIAL (1950—)
392 393Money and Banking
The Functions andCharacteristics of Money
• Money has three functions. It can be used as amedium of exchange, a unit of accounting, and a store of value.
• Anything serving as money must be durable,portable, divisible, stable in value, scarce, andaccepted as a medium of exchange in payment for debts.
• Money that has an alternative use as a commod-ity—cattle, gems, and tobacco, for example—isconsidered commodity money.
• Money that is backed by—or can be exchangedfor—gold or silver is known as representativemoney.
• Today all United States money is fiat money, orlegal tender.
History of AmericanMoney and Banking
• Throughout American history, people have usedcommodity money, European coins, privatelyprinted banknotes, and many other forms of notes.
• To control the amount of money in circulation,Congress established the Federal Reserve Systemin 1913. It serves as the nation’s central bank. In1914 the system began issuing paper money calledFederal Reserve notes, which soon became themajor form of currency.
• The Constitution of the United States gaveCongress the power to mint coins. It was not untilthe Civil War that the government set up a safe,uniform currency.
• In 1934 the nation switched from a gold standardto a fiat money standard.
• Electronic funds transfer has revolutionized thebanking industry, with customers using automatedteller machines and even the Internet to do theirbanking.
Types of Money in theUnited States
• Money today consists of more than just currency. Italso includes deposits in checking accounts aswell as debit cards and near moneys.
• Economists measure the amount of money in theeconomy by adding up M1—currency, all check-able deposits, and traveler’s checks. Then theycalculate M2—all the items in M1 plus savingsdeposits, time deposits, small-denomination certifi-cates of deposit, and other account balances.
C H A P T E R
SECTION 1
SECTION 2
SECTION 3
Chapter Overview Visit the Economics Today and Tomorrow Web site at ett.glencoe.comand click on Chapter 14—Chapter Overviewsto review chapter information.
14
CHAPTER 14Assessment and ActivitiesCHAPTER 14
Assessment and Activities
395
Applying EconomicConcepts
Answers will vary. Suggest thatstudents present their answers inchart form.
CooperativeLearning Project
Encourage students to find first-person accounts of the GreatDepression. Quotations, or soundrecordings of eyewitness accounts,will add authenticity to their lectures.
Reviewing SkillsAs students share their designs,
ask them to explain why theyselected certain design features—people or landmarks shown, sizeand placement of numbers, colors,and so on.
Technology ActivityPoint out to students that the
Economics Journal activity for thischapter is a useful source of infor-mation for this activity.
Analyzing theGlobal Economy
As students share their charts,have them discuss the major simi-larities and differences between theforeign currencies and UnitedStates currency.
ASK: When might barter workas well as or better than anexchange involving money?Students might suggest the trad-ing of items of similar value—suchas compact discs—or when thereis a double coincidence of wants—when both parties in the transac-tion want what the other is offering.
Chapter BonusTest Question
2. Debit cards are considered money becausethey are similar to checkable accountmoney. Credit cards, on the other hand,create a loan that must be paid at a laterdate.
CHAPTER 14Assessment and ActivitiesCHAPTER 14
Assessment and Activities
394
Identifying KeyTerms1. d 5. f2. c 6. a3. b 7. e4. g
Recalling Facts and Ideas
1. barter2. Money also should be portable,
stable in value, scarce, andacceptable.
3. fiat4. bartering5. in the 1930s at the beginning of
the Great Depression6. automated teller machines
(ATMs)7. $1, $2, $5, $10, $20, $50, and
$1008. because the bank must pay the
amount of the check ondemand, or when it is pre-sented for payment
9. Near moneys are almost, butnot exactly, like money. Theirvalues are stated in moneyterms, and they can be turnedinto currency or a means of payment, such as a check, fairlyeasily and without loss of value.
10. because, unlike M2, it does notinclude near moneys
Thinking Critically1. Barter: Costs—requires a double coinci-
dence of wants; that is, each party to thetransaction must want exactly what theother person is offering. This takes a greatdeal of time and effort. Barter goods maynot maintain their value. Barter goodsmay not be portable. Benefits—if tradetakes place, it saves the effort of exchang-ing one item for money and using themoney to buy the other.
Money: Costs—on occasions, may be aslower process of making transactionsthan barter. Benefits—money is a mediumof exchange that is readily acceptable aspayment for goods and services. Moneyprovides a simple and convenient way tocompare values of various items. Moneyretains its value. Money is portable.
Have students visit theEconomics Today and TomorrowWeb site at ett.glencoe.com toreview Chapter 14 and take the Self-Check Quiz.
MindJogger Videoquiz
Use MindJogger to reviewChapter 14 content.
Identifying Key TermsWrite the letter of the definition in Column Bthat correctly defines each term in Column A.
Column A1. fiat money2. checkable deposits3. M14. commodity money5. near moneys6. legal tender7. electronic funds transfer
Column Ba. money that by law must be accepted for
payment of debtsb. currency in circulation, traveler’s checks,
plus checking-type depositsc. money in a bank that can be withdrawn at
any timed. money that has value because the govern-
ment has established it as acceptable pay-ment for debts
e. computerized banking functions that pre-viously were handled on paper
f. assets that can be turned into moneyfairly easily
g. money that has value aside from its valueas money
Recalling Facts and IdeasSection 1
1. What is the alternative to using money?2. Money should be durable and divisible.
What other characteristics should moneyhave?
3. Is the type of money used in the UnitedStates commodity money, representativemoney, or fiat money?
Section 24. What type of system did the early
colonists use when they bought and soldgoods and services?
5. When was the most serious bankingpanic of the twentieth century?
6. Electronic banking is increasingly com-mon today. What form of this system domost consumers use?
Section 37. What are the only denominations of
paper currency being issued today by thefederal government?
8. Why were checking accounts formerlycalled demand deposits?
9. What is the distinction between moneyand near moneys?
10. Why is M1 considered a narrower defini-tion of the money supply than M2?
14
Self-Check Quiz Visit the Economics Today and Tomorrow Web site at ett.glencoe.comand click on Chapter 14—Self-Check Quizzesto prepare for the Chapter Test.
394 CHAPTER 14 395Money and Banking
Thinking Critically1. Making Comparisons Create a diagram like
the one below to compare the costs andbenefits of engaging in barter to the costsand benefits of using money.
2. Making Generalizations Why are debitcards similar to money, whereas creditcards are not?
ApplyingEconomic ConceptsThe Functions of Money The three functionsof money are as a medium of exchange, aunit of accounting, and a store of value. Keeptrack of any time you use money, see moneyused, or see dollar values written out some-where. Try to determine in each instancewhat function the money is serving. Forexample, if you see a headline that says“Microsoft Corporation Sales Increased to$10 Billion,” you know that money is beingused as a unit of accounting.
CooperativeLearning Project
During the 1930s, the United Statesunderwent a tragic economic depression.Work in groups to research the followingaspects of daily life.■ What happened to incomes and prices?■ What happened to savings accounts?■ What happened to the availability of jobs?
Each member of each group shouldresearch one question. Summarize thegroup’s notes to develop a lecture thatdescribes what actually happened duringthe Great Depression.
Reviewing SkillsSynthesizing Information Imagine that thecountry is returning to privately issued banknotes. Design the currency you wouldlike to see in circulation.
Use information from the Bureau ofEngraving and Printing’s Web site to gatherdata about the exact measurements of exist-ing currency. Then make a list of items, ideas,people, and so on that are important to you.Utilize your list to help create your currency.Share your design with the rest of the class.
TechnologyActivityUsing a Database Analyze the currency in yourpossession. List the features that appear on thefront and back of each bill or coin, noting thesimilarities and differences between the variouscurrencies.
Create a database that could be accessedby foreign visitors to describe the specific fea-tures and purposes of each bill and coin.Create fields such as portrait, paper/coin,value, Federal Reserve Bank, watermarks, colors, etc.
Analyze several foreign coins and papercurrencies. Use a magnifying glass if neces-sary. Make a chart listing the following itemsnoted on each currency: Country of Origin,Monetary Unit, Year of Origin, Watermarks,Identity of People Pictured, Symbols, NaturalFeatures, Buildings or Animals Shown, Other.Compare the foreign currency to UnitedStates currency, and share your chart withthe rest of the class.
Costs Benefits
BarterMoney
Answers to Thinking Globally
1. The use of coins probably developed during the 600s B.C. in what is now westernTurkey. Coins may have developed around the same time in China.
2. The Chinese may have begun to make coins around the same time as the Lydians.The Chinese began using paper banknotes in the A.D. 800s.
3. Cowrie shells have been used as money throughout Africa, and the name for Ghana’smonetary unit, the cedi, means “cowrie.”
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Have students answer theThinking Globally questions.
To conclude, ask students to dis-cuss why they think the variousitems once used as money fell outof favor and were replaced by coinsand paper currency.
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Ask students if they would bewilling to sell an item—a baseballcap or a CD, for example—for a fewdollars. Although they might argueabout the number of dollars, moststudents would be willing to makethe sale. Then ask them if theywould be willing to part with thatitem for shells, or a block of salt, ora string of beads. When studentsrespond in the negative, point outthat in the past, these three com-modities—and many others—werereadily accepted as money.Conclude by informing studentsthat this feature provides a briefreview of the major developmentsin the history of money.
Have students read through theinformation in the boxes. Thenhave them arrange the informationin a chart, categorizing by continentor time period. Suggest that theyrefer to their charts as they answerthe Thinking Globally questions.
Commodity Money Throughout history people have used commodities—everythingfrom salt to dried fish to coconuts to cattle—as money. Several words with connections tomoney derive from the commodities once used as a medium of exchange. The Englishword salary, or a fixed income that is paid at regular intervals, comes from the Latin wordsalarius, which means “of salt.” Another Latin word, pecuniarius—meaning “wealth in cat-tle”—is the basis for the English word pecuniary, which means “related to money.”
Extending the Content
Native Americans probablyused wampum—strings of beadsmade from clamshells—as moneylong before the arrival of theEuropeans. It was among the mostpopular mediums of exchangewhen early European settlers andNative Americans traded.
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Two BitsDo you know why people sometimes call a quar-ter “two bits”? The origin of this term datesback to colonial times. The American colonistsused Spanish silver dollar coins called pieces ofeight. Each coin was divided into eight pieces—or bits—so that it could be broken to makechange. Four bits was equal to half a dollar,while two bits equaled a quarter.
A Brief History of Money Over the centuries such items as cattle,salt, large stones, seashells, metals, beads, tea, coffee, tobacco, fishhooks, and furs have served asmoney. Some of the more important developments in the history of money are described here.
Rings and IngotsPerhaps as early as 2500 B.C. the people ofancient Egypt and Mesopotamia—the landbetween the Tigris and Euphrates Rivers—were using gold and silver as money. Themoney took the form of rings, small orna-ments, and ingots, or bars.
Thinking Globally1. Where did the use of coins develop?
2. What developments in the history of money took place in China?
3. How is the history of money in Africa reflected in the currency of Ghana?
The First Paper BanknotesThe Chinese may have begun to makecoins around the same time as theLydians. These coins were made ofbronze and often had holes in them sothat they could be carried on a string.The Chinese also began using paperbanknotes—printed on paper madefrom mulberry bark—in the A.D. 800s.
The First CoinsThe Lydians, who lived in what isnow western Turkey, probably madethe first coins during the 600s B.C.These coins were made of electrum,a mix of gold and silver, and werestamped with pictures of gods oremperors. The Greeks, Persians, andRomans adopted Lydian coiningtechniques and, in time, the use ofcoins spread throughout much ofWestern Europe.
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Cowrie ShellsCowrie shells have been used as money throughout Asia,Africa, and Oceania. The cowrie was still in use in someAfrican countries as recently as the mid-1900s. The namefor Ghana’s monetary unit, the cedi, comes from the Ghanaian word meaning “cowrie shell.”