Money, Banking, Credit

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Money, Banking,Credit Consumer Rights

• Ch. 20

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Money

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

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Different types of Money
4
What is it called when you get less satisfaction
from eating your 2nd piece of pizza?

1. Law of Diminishing Returns
2. Anti-Pizza disease
3. Full Stomach syndrome
4. Diminishing Marginal Utility

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What is not a factor of production?

1. Unions
2. Labor
3. Natural Resources
4. Capital

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What type of economy is the U.S.?

1. Traditional
2. Market
3. Mixed
4. Command

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Banking

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

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What signaled the start of the Great Depression?

1. Roosevelts Fireside Chats
2. Bank Holiday
3. Stock Market Crash
4. Hoovervilles

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Types of Deposit Accounts

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

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Checking Accounts
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(No Transcript)
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Types of Deposit Accounts cont.

• 2. Savings Account
• Banks pay interest to customers based on how much
  money is deposited
• Money grows larger the longer it is there
• Money remains untouched for longer periods of
  time

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Savings Account
Sample Bank Book
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Types of Deposit Accounts cont.

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

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What are the type of jobs that usually occur in
manufacturing sectors called?

1. Rust Belt
2. Sun Belt
3. White Collar
4. Blue Collar

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Types of Banks

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

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Commercial Banks
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Credit Unions
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FDIC

• Federal Deposit Insurance Corporation
• Insures deposited money in the bank up to
  100,000 Right now 250,000
• Most are FDIC insured

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What US event caused the formation of the FDIC?

1. 9/11
2. Bombing of Pearl Harbor
3. Stock Market Crash and Bank Runs
4. The birth of Mr. Cleland

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Loans

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

22
Which of the following best explains why a
business could move from record sales and
production to plant shutdowns and company layoffs?

1. Diminishing Marginal Utility
2. Law of Supply
3. Law of Demand
4. Law of Diminishing Returns

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Types of Loans

1. Fixed interest is set cant be changed
2. Variable Changes when interest rates change

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Which of the following best describes scarcity?

1. Not enough goods for everyone
2. The amount that people want
3. Lack of desire to produce enough resources
4. Not enough resources to provide for every desire

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Charge Accounts

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

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Types of Charge Accounts

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

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What is the governments role in a market economy?

1. Set price control
2. Own the means of production
3. Absolutely no role
4. Set production quotas

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Credit Cards

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

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Applying for Credit

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

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Which economic term best explains a consumers
choice of buying a new car instead of opening a
savings account?

1. Trade-off
2. Scarcity
3. Opportunity cost
4. Comparative advantage

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Credit Rating

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

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Credit Bureaus
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Which of the following would have a negative
impact on the GDP?

1. An increase in exports
2. An increase in imports
3. An increase in production
4. An increase in population

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Government Regulations

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

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What is the unintended side effect of an action?

1. Utility
2. Public Goods
3. Personality
4. Externality

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Bankruptcy

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

37
Why do elephants face the threat of extinction
while cows do not?

1. Cattle are a valuable resource while elephants
   have no market value.
2. There is a high demand for products that come
   only from the cow.
3. There are still lots of cattle that roam free,
   while most elephants are in zoos.
4. Cattle are owned by ranchers, while elephants are
   owned by no one.

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Consumer Rights

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

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Consumer Rights cont.

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

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Consumer Responsibilities

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