Section Outline

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Money and BankingSection 2: Our Banking System

I. The Beginnings of Banking

II. The Kinds of Money

III. Bank Services

IV. The Business of Banking

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Money and BankingSection 2: Our Banking System

Main Idea

Banks hold citizens’ funds for safekeeping,

enable them to pay for items, using alternatives

to currency, and give them short- and long-term

loans. Banks enable citizens to participate more

fully in their economy.

Key Terms

•Demand deposit

•Loan

•Money supply

•Fractional reserve banking

The Beginnings of Banking

•Banks have been used since the Middle Ages in Europe.

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Money and BankingSection 2: Our Banking System

•Banks perform a variety of functions for their clients.

•Banks have played a crucial role in shaping the United States of America.

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Money and BankingSection 2: Our Banking System

The Kinds of Money

•Checks— Checks are accepted as a means of exchange.— Traveler’s checks — Demand deposit: the money in a checking account

•Banks and Money Supply— Money supply: the total amount of money that is available for use as a medium

of exchange

Go Online: The Story of a Check

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Money and BankingSection 2: Our Banking System

Bank Services

•Checking Accounts

•Savings Accounts— Savings collect “interest” from the bank.

•Loans— A loan is an amount of money borrowed for a certain time period.— Interest: A percentage borrowers pay on a loan, as a fee for receiving the loan.

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Money and BankingSection 2: Our Banking System

The Business of Banking

•Fractional Reserve Banking— Banks that keep a percentage of checking and savings deposits in reserve

•Other Financial Institutions— Savings and loan associations— Mutual savings banks— Credit unions

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