!"#$%& ()*+,- .

-/* 012#234 Name:

Reading p.1
52#*4& 52#*4& 52#*4
You think you know what it is, right? Its that cold, hard cash in your
pocketthat paper with presidents faces on it, those coins that say e
pluribus unum. But money is more than just that. 52#*4 is a medium of
exchange, which means its what is commonly accepted in exchange for
goods and services. Noney also sets a common standard of value among
people in a country. (Everyone knows what a dollar is, right?)
Noney includes coins and notes printed by the government, which are
called 16))*#147 But it also includes things that can be easily changed into
currency, such as a deposit in a bank account. Think of it this way: When
people say I dont have any money, they dont just mean they arent
carrying any cash. Usually they mean they also dont have a positive bank
account balance that they could turn into cash.
!"#$ 81126#-%
Most of the time, when you hear bank you think account. Bank
accounts are an important service that banks provide. When you have a
bank account, you make +*92%,-% by putting your money in the bank,
and you expect to be able to :,-/+)": your money out of the bank
whenever you want to.
With a 1/*1$,#; "1126#-, you deposit your money into the bank with
the expectation that you will be depositing and withdrawing money from
the account often. You get paper 1/*1$% that let you transfer your money
to other people. Normally you also get a plastic +*<,- 1")+ that lets you
pay for things with your account money by swiping the card in a store or
entering the card number online. Its called a debit card because it debits,
or withdraws, money from your account. Debit cards also let you use ATN
machines to withdraw money from your account.
With a %"=,#;% "1126#-, you deposit your money into the bank with
the expectation that you will make limited withdrawals. (Theres a reason
why its called a savings account.) In fact, federal regulations limit the
type and number of withdrawals youre allowed to make each month
from a savings account. But theres a benefit: The bank actually pays you
to keep money in a savings account. The extra money you earn on a
savings account is very low, though, so dont expect to get rich that way.
Paper checks are used less often
now that people have debit cards
and pay bills online.
Automatic teller machines (ATNs)
make it easy to turn money stored
in a bank account into cash. Bills
and coins make up only 7 of the
money in circulation in the U.S.
Can you explain why?
>- 5"$*% -/* ?2)@+ A2 8)26#+B
Have you ever tried to imagine a world without money? Give it a
try. Okay, done? How did it go? Easy? Probably not. No matter
what your views are about money and how important it is, the fact
remains: The world runs on money. We all use it to pay for the
things we need and want. So what is money, and where does it
come from? What role do banks play? And do you really need
money? Cant you just use credit instead? Its time to find out.
||OlOOO9|OO||O.O|_ lII.//m||OlOOO.u







What is the difference between MONEY and CURRENCY?

Money is: ___________________________________________________________________

Currency is: _________________________________________________________________
How Much Money is there on Earth?
http://youtu.be/w2tKg3E53DM

= ____________________________

= ____________________________

= ____________________________

= ____________________________



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Types of Money


Which type of money is the US Dollar? ___________________________________________

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+($,-
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Value is based on:

Value is based on: Value is based on:
An example is:


An example is: An example is:
Pros:

Pros: Pros:
Cons:

Cons Cons:
^|.1OlOOOO_ 11/?/1 ?
!"#$%& ()*+,- . -/* 012#234 Name:
Reading p.2
!"#$% . 5*#+,#6
So, what happens to the money you put in the bank? Do they carefully
take it back to the vault and keep it there until you need it? If thats
what you always imagined, you might want to close your eyes for this
part: The reason banks accept deposits is so they can let other people
use the money. Yes, you heard that right. Banks let other people
spend your money when youre not using it! But dont worry, it will be
there when you need it.
Heres the thing: Banks are businesses. Businesses want profits.
!nstead of selling shoes or pizzas to make a profit, banks sell the right
to use money. Ever heard of a loan? When you get a 72"# from a
bank, you pay the bank to let you borrow money. But the bank
wouldnt have any money to lend if nobody put money into the bank.
Thats why saving and lending go hand in hand in the world of
banking. A bank pays people to keep money in savings accounts. Then
the bank turns around and charges other people a fee for borrowing
that same money. The bank makes a profit by charging borrowers a
higher fee than it pays to people who have savings accounts.
52"#% ")* !,6 !8%,#*%%
Lending is a huge, HUGE business. Why? Because lots of things are too
expensive to pay for outright. (Think cars and houses.) Businesses borrow
even more money than individual people do. Say you want to open an
auto repair shop downtown. How are you going to pay for everything
youll need to start your business? Most people would need a loan to do
that. Even established businesses need loans to construct new buildings
or buy expensive new equipment. The money savers deposit into banks
goes back out into the community in the form of loans that are used to
build houses, expand businesses, get college degrees, and more.
The fee charged for a loan is called
,#-*)*%-. !t is charged as a percent
of the total loan amount. This
percentage is the ,#-*)*%- )"-*.
52"#%9 : ;2#*4 <#=*1-,2#
Loans actually increase the amount of money available to spend.
Nagic? Sort of. When someone makes a deposit, the bank must
keep part of the deposit in reserve. The bank is free to lend the
rest to someone else. This starts a chain of depositing and
lending that actually multiplies the amount of money available!
Heres what happens: Imagine that Mary deposits $100 into her
account at Bank A. Bank A keeps 10 ($10) in reserve and loans
$90 to Bob. Bob buys a used drum set from Jane for $90. He
writes her a check. Jane deposits the check into Bank B. Bank B
keeps 10 ($9) and loans out the rest ($81) to Keith. Keith goes
to BigNart and buys a bunch of stuff that adds up to $81. He
writes BigNart a check for $81. BigNart deposits the $81 into
Bank C. Bank C keeps 10... Get the idea? Follow the diagram to
see how Marys $100 deposit results in $1,000 of money being
made available for people to use.
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Brainstorm a list of things that a bank produces and sells. How
many can you come up with?
1. 5. 9.
2. 6. 10.
3. 7. 11.
4. 8. 12.



THe magic of creating Money - Legally!

"42%&'($23 8,),49, :2$;'$E
Denition: Denition: Denition:

Fractional Reserve Banking allows banks to keep only a _____________ of their deposits
in _____________ - ready to be withdrawn by people at any given time. Its perfectly legal and
it allows banks to use _________ _________ to ________ _________ to other people.
^|.1OlOOOO_ 11/?/1
Store Money

When you ______________

in the bank you can trust
that they will keep it safe
for you.
Earn Money

When deposit your money
in a __________ ________

the bank will pay you
_______________ - so your

money earns a little
money just by sitting
there!
Borrow Money

When you get a ________

from the bank, you will
pay _______________ - a

fee for the convenience of
using that money.






SERVICES






PRODUCTS
||OlOOO9|OO||O.O|_ lII.//m||OlOOO.u
^|.1OlOOOO_ 11/?/1 4
11.
8.
9.
7. 5.
4.
2.
3.
1.
6.
10.
After Bank C makes a loan to the guy with the goatee, $________________ has been created
using an initial deposit of $______________ by Mary. And no laws were broken. #TurnedUp.
!"#$%& ()*+,- . -/* 012#234 Name:
Reading p.3
5/4 62"#% 52)$
Naybe you saw that chain of loans on the last page and wondered how all
that money could be created out of thin air. Maybe youre thinking, But
theres nothing behind that money. Just Marys $100! So why doesnt the
whole system just collapse? Because there is something behind all those
loans: each borrowers ability to pay back the loan. Banks are pretty careful
about lending money. They want to know about the borrowers past history of
paying back loans, and they want to know that the borrower has a source of
income. Income depends on a persons ability to produce goods or services.
This is what you do at your job, whether youre farming or designing video
games or giving haircuts. Ultimately, the ability to produce is what keeps our
economy going.
The Federal Reserve headquarters
in Washington, D.C. !n addition to
supervising our banking system,
the Fed is the bank for the United
States government.
7/* 8*+*)"9 :*%*);*
Bees have a queen, aliens have a mother ship, and banks well, banks
have the Federal Reserve. The 8*+*)"9 :*%*);* (known as the Fed)
is the central bank of the United States. !t is made up of 12 Federal
Reserve Banksone for each of 12 districts covering the United States.
A Board of Governors oversees these banks. Federal Reserve Banks
dont deal with the public. They are bankers banks.
Together with other agencies in the federal government, the Federal
Reserve supervises the banking industry and makes rules that banks
must follow. The Fed also oversees electronic payment systems and
processes the checks people write. !n addition, when banks need coins
and paper money, they order currency from the Fed. (Paper money is
actually made by the U.S. Bureau of Printing and Engraving; coins are
made at the U.S. Nint.) But one of the biggest jobs of the Federal
Reserve is to help keep the United States economy healthy.
7/* 8*+ . -/* 012#234
The Federal Reserve works toward three goals for a healthy economy:
Naking sure the highest possible number of citizens have jobs
Keeping the price of goods and services stable
Naking sure the cost of a loan is not too high or too low
Heres how these goals are related: When interest rates on loans are low, it
is cheap to borrow money. This encourages businesses and people to borrow
and spend money. With more spending, there is more demand for stuff.
Producers want to make more stuff to meet this demand, so they employ
more people. !n order to attract workers, wages go up. With lots of money
in peoples pockets but the supply of stuff not necessarily meeting the
demand, prices can go up. The rise of prices over time is called ,#<9"-,2#.
Prices can skyrocket if the economy grows too fast, so the Fed works to
keep things in balance. !t does this by making changes that affect the
interest rates that banks charge for loans. Expensive loans discourage people
and businesses from making decisions that require borrowing. There is less
spending and less hiring, so the economy slows. The Fed keeps an eye on
the economy and adjusts loan interest rates up or down as necessary.
||OlOOO9|OO||O.O|_ lII.//m||OlOOO.u
The Fed
FED = _______________ ________________ ________________.

It is the ___________________ _______________ of the United States of America. #Murkah

It is made up of __________________ district banks and is run by a _______________ ____

_________________________ who are appointed by the President and conrmed by the

______________.














The Fed has 5 major functions:

1. Regulate/Supervise/Communicate:

2. Loan money to regular banks:

3. Sell Government Securities (Investments):

4. Manage Currency:

5. Pay the Governments Bills:
^|.1OlOOOO_ 11/?/1
!"#$%& ()*+,- . -/* 012#234 Name:
Reading p.+
52"#% 62) -/* 78-8)*
A loan always costs more than paying for something outright. Thats
because banks wont lend money for free. You have to pay back the
amount of the loan plus interest. !nterest can add up to a lot of money
over time. Sometimes people take out a loan because they know that in
the long run they will make more money on what they are buying than
they will pay in interest on the loan. !n that case, the borrower sees the
loan as an ,#9*%-3*#-money spent in order to make more money.
Loans to buy a house are viewed as investments because the value of a
house normally increases over time. College loans are seen as
investments because getting more education usually means youll qualify
for higher-paying jobs. Business loans are also considered investments.
When someone takes out a loan to start or expand a business, they are
investing in their own ability to produce in the future.
52"#% 62) -/* :2;
On the other hand, sometimes people take out a loan because they need or
want something they cant afford to buy outright. These are loans for
things that will only decrease in valueor even be used up completely!
Cars are an example of something most people cant pay cash for and must
buy with a loan. vehicles decrease in value very quickly, so buying one with
a loan almost always means youre paying more than the car is worth. But
most people dont have any choice. Vacations are an example of the other
extreme. Once a vacation is over, all thats left is a memory. There are lots
of great reasons to take a vacation, but if youve paid for it with a loan, you
could end up paying the billand the interestfor a long time.
</* =>?4 @,+* 26 5*#+,#> . !2))2;,#>
The ugly side of borrowing comes when people start to depend on credit. This
can happen because of too much spending, expensive emergencies, or other
financial problems. very often, people in this situation already have a limited
income. That makes it difficult to pay back their loans and credit cards. When
you dont make a loan or credit card payment on time, there are severe
penalties. First, the bank may raise your ,#-*)*%- )"-*, which determines how
much interest you pay on the loan. Starting with your next payment, youll be
paying more. A lot more. The bank also reports you to the three 1)*+,-
)*A2)-,#> B8)*"8%companies that keep track of your credit history. A bad
credit history can make it hard to get any credit at all. Any credit you do get
will be very expensive because the lender will be afraid you wont pay it back.
Sometimes people have a reasonable income, but theyve let their spending
get out of control. Theyre buying way more stuff then they can pay for, and
theyre buying it all with credit. Even if theyre making all their payments on
time, theyre wasting tons of money on interest. This lifestyle can make it
hard to save money for the future, which can mean disaster when theres an
emergency. Taking out even more loans to meet the crisis may be difficult or
make the problem worse. People in these situations often turn to a
trustworthy 1)*+,- 128#%*?,#> service to help them make a plan to pay off
their loans and learn to live within their means instead of relying on credit.
People who take risks to start a new
business are called *#-)*A)*#*8)%.
!n a market economy, loans help
finance businesses and development
of new ideas.
This lifestyle can mean disaster when theres an emergency, because
most likely no money has been saved for the future. !t can be hard to
get an emergency loan because they already owe so much money.
Worksheet p.1
!" $%&'()*'+," Natch each word with its definition. Some words are not in bold in the reading.
-'./01 2+3456 7 683 9&%.%:, Name:
____1. Noney
____2. Currency
____3. Deposit
____+. Withdraw
____5. Loan
____6. !nterest
____7. Federal Reserve
____8. !nflation
____9. !ncome
____10. Reserve
____11. !nvestment
____12. Entrepreneur
____13. Credit reporting bureau
____1+. Credit counseling
A. Helps people control their finances and use credit wisely
B. The fee charged for the right to borrow money
C. The rise of prices over time
D. A medium of exchange that sets a common standard of value
E. Put money into a bank account
F. People who take risks to start a new business
G. Coins and paper money printed by the government
H. Paying a bank to let you borrow money
!. A persons source of money, dependent on the ability to produce
J. The central bank of the United States
K. Take money out of a bank account
L. Noney that a bank keeps and does not lend out
N. Company that keeps track of your credit history
N. Noney spent in order to make more money
2" ;%'.0" Follow the directions in each box. -" <83 =34" Put an X by each statement
that is TRUE about the Federal Reserve.
__1. The Fed sets rules that banks must
follow.
__2. The Fed can affect the interest rates that
banks charge for loans.
__3. The Fed creates money out of thin air,
so theres always enough.
__4. The Feds goal is to keep the economy
healthy.
__5. People can set up checking and savings
accounts at the Fed.
__6. The Fed tries to keep employment high
and prices stable.
__7. The Fed processes checks and electronic
money transfers.
__8. The Fed supervises the banking industry.
__9. Coins and paper money are made by the
Fed.
__10. There is a Federal Reserve bank in
every state.
Worksheet p.2
D. Its Called Money, Honey. Below is a list of
everything Sam has and how much its worth.
Nark the things that are considered money. Then
add to find out how much money Sam has.
!" $%&'(&) $*+&,-./" Each of these people has
made a banking mistake. Read what theyre
saying and tell them where theyre going wrong.

0" 1& 2&3-.-/3(&) 4(3+%3(5&" People can end up paying a lot extra for a car because they only pay
attention to the monthly payment theyre being offered. Which of these loans will cost you MORE?

$%&'/6 7.-,(3 8 39- !:5&5;< Name:
Sam has this much money: $__________________
Problem:___________________________
__________________________________
Problem:___________________________
__________________________________
Problem:___________________________
__________________________________
Problem:___________________________
__________________________________
!
"
#
$%
%
%

3+2.05fmonth
This is a +-year loan. Youll
make this monthly payment
for +8 months. Do the math:
3+2.05
x +8
219.13fmonth
This is a 7-year loan. Youll
make this monthly payment
for 8+ months. Do the math:
213.13
x 8+
Youll end up paying this much:
$ ______________________
(Shorter loans usually have lower
interest rates. This rate was +.5)
Youll end up paying this much:
$ ______________________
(Longer loans usually have higher
interest rates. This rate was 6.)
Fed Basics: How Much Do You Know?
ACROSS
2. The Fed keeps the economy healthy by
managing the nation's money _______.
7. How many members are on the
Board of Governors?
8. One of the Fed's responsibilities is to provide
__________ services to any bank, regardless
of its size or location.
10. Who appoints members of the Board
of Governors?
12. Banks deposit billions of dollars at the Fed
in cash, _____, wire transfers or other forms
of electronic payments.
13. _______ wrote the Federal Reserve Act in 1913.
14. The number of Federal Reserve Districts.
DOWN
1. Low ___________ is a long-term goal of the Fed.
(Hint: Think monetary policy.)
3. A goal of the Fed is to improve the efficiency of the
nation's __________ system.
4. One of the Fed's three main responsibilities is to supervise
and __________ certain commercial banks.
5. Economists share this with their Reserve Bank presidents
and also with the public, through publishing and
public speaking.
6. Which Fed entity issues the nation's monetary
policy directive?
9. The Fed was once known as the lender of last _________.
11. The Fed regulates certain banks to keep the banking
system safe and _______.
Key concepts about the Federal Reserve
W B M D P I N C M I C S H L P K Q R M M C K P D L
A R P G K M H J K N R I E A H W S E C E W O N V T
E H U F X A X W N D R U T R H B Q Y N Q Z K P W F
J D N O I S I V R E P U S D V Q N T M X H O R C K
S F X R Z B G U M P M E P Q H I R F G O K Q W F D
P U M F A O N S Z E U X N R H A C U U P N F V T L
B A H Z I Z D S H N R M S T L I W E Y A K O U Q Q
N Z I R Z X T W H D S T Y I Y F U K S Y A W C P Y
B C Z U W X Z P B E U G Z K A W L Z E M G F E E H
T E X K T J Z P I N R E L N U C N G F E G A Z P U
U X H H M L I T U T D R G E F N Q R Z N O P T G R
Q R O P R N N S L V V K B F I G T Q Q T T D H U F
G O C X M J N J C P Y F M V A V M O A S R W F C N
E V T G Y T N R W R P W Q M W L K W V O K W U S W
C J A H Y W W F Z F J O B M X C V R E Z D Z T C T
U K N P L H M Y X M N G L T F N M F Q C L C O M H
L R D W S D Y V P V H O M I Q M Y L B Q I W S O H
C H F R R Q C E D R V R I W C E U P U R I L M F X
R E G I O N A L V V Y B D T O Y X U T G U T S L R
B Q P R N W T L S M D F B U A H M S P R T F W X F
Q G C V R J N X O C B M S T B L I A J I N V T F B
B A Y D E C E N T R A L I Z E D U M K F I R R W A
V O F G V U I P X S K G N H K D H G T E W O A B Y
V F V S O S C I L B U P I F N Y X D E W R P R I G
M M E D G S H O Y T B W M X L L X R N R J S V T R
CENTRALIZED
CHAIRMAN
DECENTRALIZED
DISTRICTS
ECONOMY
FOMC
GOVERNORS
INDEPENDENT
PAYMENTS
POLICYMAKERS
PUBLICS
REGIONAL
REGULATION
SERVICES
SUPERVISION