Bell Ringer - Mr. Lange's Classroom Website -...
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Bell Ringer ⚫Do you think “ money is the root of all evil”? ⚫Why/why not?
Transcript of Bell Ringer - Mr. Lange's Classroom Website -...
Bell Ringer
⚫Do you think “money is the root of all evil”?
⚫Why/why not?
Bell Ringer⚫ “Surely there never was so evil a thing as money,
which maketh cities into ruinous heaps, and
banisheth men from their houses, and turneth their
thoughts from good unto evil.” –Sophocles
⚫ “For the love of money is a root of all kinds of evil.
Some people, eager for money, have wandered from
the faith and pierced themselves with many griefs.”
1 Timothy 6:10
⚫ “Few men have virtue enough to withstand the
highest bidder.” –George Washington
Bell Ringer⚫“So you think that money is the root of all evil?
Have you ever asked what is the root of money?”
–Ayn Rand
⚫“The lack of money is the root of all evil.”
–Mark Twain
⚫“Cash rules everything around me. C.R.E.A.M.,
get the money. Dollar dollar bill y’all.”
–Method Man
Before we get started…
⚫Most of the beginning of the course dealt with
microeconomics. What is microeconomics? “The study of economic behavior and decision-making in
small units, such as households and firms.”
⚫The rest of the semester will deal mostly with
macroeconomics. What is macroeconomics? “The study of economic behavior and decisions in a nation’s
whole economy.”
Objectives
1. Describe currency and
bartering.
2. Analyze money and its
different uses throughout
history.
3. Identify the six
characteristics of money.
Currency
⚫The coins and paper bills people use as
money today are called currency.
⚫In the past, people have used many
things as currency including cattle, dried
fish, precious stones, fur, and salt.Did you know… we get the word “salary” from the word “salt”?
What else did people use as currency?
Barter
⚫Without money, people acquire goods and
services through barter (i.e., trade or exchange).
⚫Many parts of the world still use bartering. But as
an economy becomes more specialized, it
becomes too difficult to establish the relative
value of items to be bartered.
⚫Money, therefore, makes exchanges much easier.
The Six Characteristics of Money
⚫The six characteristics of money are:
Durability
Portability
Divisibility
Uniformity
Limited supply
Acceptability
Durability and Portability
⚫Durability
Money must be able to
withstand the physical wear
and tear that comes with
being used over and over
again.
⚫Portability
Money must be easily carried
by people. Paper money and
coins work because they are
small and light.
Divisibility and Uniformity
⚫DivisibilityMoney must be easily divided into smaller denominations.
⚫UniformityMoney must be made to look the same so people can count and
measure it accurately.
Limited Supply and Acceptability
⚫Limited Supply
Money would lose its value if there was an unlimited
supply of it.
This leads to inflation… something we’ll be covering
soon.
⚫Acceptability
Everyone in an economy must be willing to accept the
money and exchange it for goods and services.
Preview Questions
⚫What did people in ancient times
use as money?
⚫What is the function of money
(besides just to buy stuff)? What
other purposes does it serve?
⚫What gives money its value?
In other words, why are people
willing to take money as payment
for goods and services?
Follow-Up Questions
⚫What makes a rare baseball card
valuable?
⚫What if—all of a sudden—someone
found 100,000 of what had been a
rare baseball card?
⚫How do you think the increase in
supply would affect the price
(value) of the card?
How does the amount of money in
supply affect the value of money? 1909 HonusWagner baseball card
worth $2.1 million
Bell Ringer⚫From what source(s) does money get its value?
⚫A new Corvette sold in 1971 for $5,500.
A 2020 Corvette sells for $72,000. Why is this?
Objectives
1. Learn how money came to be what
it is today.
2. Describe the three types of money.
3. Analyze the sources of money’s
value.
Commodity Money
⚫Commodity money
consists of objects that
have value in and of
themselves that are
also used as money.
⚫Why is commodity
money impractical for
use in our modern
society?
Salt – Middle East,
ca.2000 BCE
Musket balls -
Massachusetts, 1600sCigarettes - Russia,
after fall of USSR
1. Why would it have been considered
valuable?
2. On a scale from 1-10, how well does
the commodity fit the following
characteristics of money: Durability,
Portability, Divisibility
Representative Money
⚫Representative money- currency that has value because it can be exchanged for something else of value.
⚫Early representative money took the form of paper receipts for gold and silver.People left their gold in goldsmith’s safes and would carry
paper ownership receipts to show how much gold they owned.
Fiat Money
⚫United States money today is fiat money,
which has value because a government has
decreed that it is an acceptable means to pay
debts.
Citizens have confidence that the money will be
accepted.
Because the Federal Reserve controls the supply, it
remains in limited supply, which makes it valuable.
https://www.youtube.com/watch?v=L04VLaZX1y8
⚫What are the disadvantages of using fiat money instead of commodity/representative money?
The unlimited power of governments to “print” up money whenever they want.
Fiat currencies will always lose value over time.
Fiat money always has the potential to drop to zero value.
Fiat Money
⚫What are the potential benefits of relying on fiat money?
It is easy to create and transport.
The money supply grows as the economy grows, which can make the economy more stable.
Money can be quickly created and issued in emergency situations, such as during war.
Fiat Money
What do you
know about
Bitcoin?
http://www.nasdaq.com/article/bitcoin-
frequently-asked-questions-cm478328
https://charts.bitcoin.com/
https://youtu.be/s4g1XFU8Gto
What is something that you can
remember being a lot less expensive
when you were a little kid?
1982
2019→
Bell Ringer
Objectives
1. Define “inflation” and
“hyperinflation.”
2. Describe how inflation impacts a
nation’s economy, especially the
prices of goods/services.
What is Inflation?
⚫Inflation is a general upward
movement in prices.
⚫It is caused when the money supply
(total amount of money in circulation)
exceeds the output of goods and
services in the economy
What causes inflation?
⚫Inflation occurs as a result of federal
governments printing too much money.
⚫Who prints the money in the U.S.?The Federal Reserve (aka, The Fed)
⚫The central bank of the United States
▪1946 to 1948 - 8% annually
▪1948 to 1970 - 2% annually
▪1969 to 1979 - Prices doubled
▪Currently (projected) – 1.8%
Recent History of Inflation
http://www.usinflationcalculator.com/inflation/current-inflation-rates/
Consumer Price Index = a measure
of weighted average of prices of a
basket of consumer goods and
services, such as transportation,
food, and medical care.
Recent History of Inflation
⚫Is there anything wrong with a slow and
steady rate of inflation?
No, especially when the inflation rate is
anticipated.
It can raise prices (which encourages
business growth) and boost wages (which
increases worker productivity).
Hyperinflation
⚫ Hyperinflation is “out of control” inflation,
with annual inflation rates usually between
100-500%.
Examples of Hyperinflation
⚫ In 1923, the German mark inflated from
2,000 to the dollar to 4.2 trillion to the dollar!
Examples of Hyperinflation
⚫ In 2008, the yearly
inflation rate in
Zimbabwe reached
over 80 billion percent.
⚫ At one point, prices
were doubling twice a
day.
Inflation at the Movies
⚫ What is the highest-grossing movie of all
time?
⚫A: It depends.
Nominal value Real value
• How much do you know
about how banking works?
Scale of 1-5
• What services that banks
provide do you think you will
use within the next ten years?
Bell Ringer
Objectives
1. Identify how financial
institutions make
money.
2. Describe the different
types of financial
institutions.
Banking Explained – Money and Credit
https://www.youtube.com/
watch?v=fTTGALaRZoc
Loans
⚫One of the main functions of banks is to loan money to other financial institutions and individuals.
⚫Fractional reserve banking is the system where a bank only keeps a fraction of its funds on hand and lends out the rest.
⚫Most banks choose to lend up to 90 percent of their assets.
How Banks Make a Profit
Types of Financial Institutions
⚫Commercial Banks
Offer checking accounts, accept deposits, and make loans
⚫Savings and Loan AssociationsAllow people to save up and borrow enough for their own homes
⚫Finance CompaniesMake installment loans to consumers
⚫Credit Unions
Cooperative lending associations established for particular groups
Pros/Cons of Credit Unions
✓Member owned
✓Not for-profit
✓Better interest rates
and lower fees
✓Federally-insured, just
like banks
Open only to members
of a certain group
Branch and ATM
locations are often
limited
Less access to large
loans
Credit Unions in Tucson
⚫ Pima Federal C.U.
⚫ Hughes Federal C.U.
⚫ Vantage West C.U.
⚫ Pyramid Federal C.U.
⚫ Tucson Federal C.U.
⚫ Arizona Central C.U.
⚫OneAZ C.U.
⚫…and others
Closure
• Explain the function of
banks in an economy and the
process through which they
make a profit.
Key Terms
⚫money supply: all the money available in the United
States economy
⚫fractional reserve banking: a banking system that keeps
only a fraction of its funds on hand and lends out the
remainder
⚫mortgage: a specific type of loan that is used to buy real
estate
⚫ interest: the price paid for the use of borrowed money
⚫principal: the amount of money borrowed
Bell Ringer
List one service that a bank provides
that you think you will use within the
next ten years (checking account,
car loan, credit card, etc.).
How will the bank make money by
providing that service?
What do you get in return?
Objectives
1. Define credit history and credit
score
2. Explain what factors
consumers should consider in
evaluating credit cards.
Loans
⚫Financial institutions lend money to consumers and charge interest on those loans.
⚫What is interest?
The cost of borrowing money
⚫Interest is typically measured as an APR(Annual Percentage Rate).
⚫In addition, interest charges can either be fixed or variable.
Credit Cards
⚫How do credit cards work??
⚫Credit cards entitle their owners to
buy goods and services based on
the owners promise to pay.
⚫The amount you can borrow is tied to
your credit history and credit score.
Credit Score
⚫Your credit score is number that depicts
your “creditworthiness” to potential lenders.
The higher the score, the more financially
trustworthy a person is considered to be.
⚫Lowest: 300 Highest: 850
⚫A credit score above 700 is considered good.
Payment History: On-time
payments or delinquencies
Amounts Owed: Percentage
of credit limits available
Length of Credit History:
How long you’ve maintained
credit responsibility
New Credit: Number of credit
inquiries and credit lines
opened in last 12-18 months
Types of Credit Used:
Installment vs. Revolving
Loans
The average American
household has a credit
card debt obligation of
over $16,000
Closure Quiz
1. What does APR measure?
2. What is a good credit score range?
3. What is one way to avoid a mountain of
credit card debt?
