http://www.coderedsupport.com/millionaire/online/game14.php
http://www.superteachertools.com/jeopardy/usergames/Nov201046/game1289913300.php
Thursday, December 16, 2010
Tuesday, December 7, 2010
The Federal Reserve and Bank Failures
This scene depicts a bank failure -- a "run on the bank" in which the bank couldn't meet the demands of depositors for the money they had deposited. Bank failures occurred frequently in the nineteenth century and early in the twentieth century. They hardly ever occur today. What caused the bank failures, and why are they now a thing of the past? You'll learn the answers to these questions in this lesson. Along the way, you'll learn some basic information about how banks work, how banks create money, and how the Federal Reserve uses monetary policy to influence the economy.
In this lesson you will learn why banks sometimes failed in the past. You will also take up some related questions. What happens to the money you deposit in the bank? What do banks do with your money? Answers to these questions will show that banks play a very important role in our economy. They aren't there to just store your money and keep it safe. You will learn what else banks do, and how their activity is influenced by the Federal Reserve.
The famous movie scene highlights an important fact about banks and banking: banks do not keep all of their customers' deposits on hand. Even your local bank does not keep enough cash on hand to satisfy all of its customers if they came in at the same time demanding to withdraw their deposits. Most of the money deposited by a bank's customers is not kept in the vault; instead most of it is lent out to other bank customers, to be used for productive purposes.
This role of a bank, often called financial intermediation, is vital to the efficient workings of a market economy. Banks bring people together: people who have extra money (the lenders or savers) and people who need money (the borrowers or spenders). It is a very important service. It enables people to buy homes, to start new businesses, to go to college, or (in the case of loans to the local school district) to build a new state-of-the-art school.
How might people do these things if there were no banks? Consider the prospects of a young teacher trying to buy a $150,000 home. Perhaps, by diligently saving her money, she is able to acquire the $30,000 needed for a 20 percent down payment. In that case, she still needs $120,000 to purchase the home. Since she can't go to a bank to borrow the $120,000, she might seek loans from members of her family, friends and neighbors, maybe even co-workers. While she might possibly come up with all of the money she needs to buy the home in this way, each of these loans would almost certainly be negotiated with its own terms and conditions, and borrowing from friends and relatives might involve complicated personal issues. The costs of acquiring money in this manner is very high.
Today, as an alternative, we have banks that utilize something called a fractional reserve system. With a fractional reserve system, only a fraction of bank deposits is actually kept in the bank to satisfy customers who want to make withdrawals. The rest of the money is lent out to individuals, firms, municipalities, the federal government or other borrowers, to be used for productive purposes. The amount of money that banks keep on hand to satisfy withdrawals is called reserves. Reserves are held in the bank's vault or in an account at a Federal Reserve Bank. The Federal Reserve, also known as the Fed, mandates a required reserve ratio, typically around 10 percent of checking deposits, which banks must hold in reserve to provide liquidity and satisfy requests for withdrawals. The required reserve ratio has an effect on the country's supply of money.
Because banks use a fractional reserve system, it is often said that banks "create money." While this term may conjure
up images of a banker running a printing press in the bank basement, that is not how banks create money. To understand how banks do create money, we first need to understand how economists define money.Economists consider money to be anything that is generally accepted as payment for goods and services. That definition clearly includes cash and currency. However, it also includes checking accounts, since checks can be written on these accounts and used to pay for items that people purchase. So, how does a bank create money?
Consider the following scenario. Sally Saver goes to First National Bank and deposits $1,000 that she received as a gift from her grandparents. She now has a checking account with a balance of $1,000 from which she can write checks. What will First National Bank do with this newly deposited money? Well, if there is a 10 percent reserve requirement, they will put $100 in their vault and lend out the rest to people who want loans. Say Mike Inventor walks into First National Bank looking to borrow $900 to develop his next great invention. If the bankers decide that his project is worthwhile, they might give him the $900 he requests. If Mike puts the $900 in his checking account, he can then write checks for this amount. There is now $1,900 of money available ($1,000 in Sally's checking account and $900 in Mike's) for spending. In other words, $900 in new money has been "created." This process will continue over and over again as the bank lends out $810 of Mike's deposit while putting $90 in reserves -- up to as much as $10,000. Our fractional reserve banking system leads to this multiplier effect on money.
In this lesson you will learn why banks sometimes failed in the past. You will also take up some related questions. What happens to the money you deposit in the bank? What do banks do with your money? Answers to these questions will show that banks play a very important role in our economy. They aren't there to just store your money and keep it safe. You will learn what else banks do, and how their activity is influenced by the Federal Reserve.
The famous movie scene highlights an important fact about banks and banking: banks do not keep all of their customers' deposits on hand. Even your local bank does not keep enough cash on hand to satisfy all of its customers if they came in at the same time demanding to withdraw their deposits. Most of the money deposited by a bank's customers is not kept in the vault; instead most of it is lent out to other bank customers, to be used for productive purposes.
This role of a bank, often called financial intermediation, is vital to the efficient workings of a market economy. Banks bring people together: people who have extra money (the lenders or savers) and people who need money (the borrowers or spenders). It is a very important service. It enables people to buy homes, to start new businesses, to go to college, or (in the case of loans to the local school district) to build a new state-of-the-art school.How might people do these things if there were no banks? Consider the prospects of a young teacher trying to buy a $150,000 home. Perhaps, by diligently saving her money, she is able to acquire the $30,000 needed for a 20 percent down payment. In that case, she still needs $120,000 to purchase the home. Since she can't go to a bank to borrow the $120,000, she might seek loans from members of her family, friends and neighbors, maybe even co-workers. While she might possibly come up with all of the money she needs to buy the home in this way, each of these loans would almost certainly be negotiated with its own terms and conditions, and borrowing from friends and relatives might involve complicated personal issues. The costs of acquiring money in this manner is very high.
Today, as an alternative, we have banks that utilize something called a fractional reserve system. With a fractional reserve system, only a fraction of bank deposits is actually kept in the bank to satisfy customers who want to make withdrawals. The rest of the money is lent out to individuals, firms, municipalities, the federal government or other borrowers, to be used for productive purposes. The amount of money that banks keep on hand to satisfy withdrawals is called reserves. Reserves are held in the bank's vault or in an account at a Federal Reserve Bank. The Federal Reserve, also known as the Fed, mandates a required reserve ratio, typically around 10 percent of checking deposits, which banks must hold in reserve to provide liquidity and satisfy requests for withdrawals. The required reserve ratio has an effect on the country's supply of money.
Because banks use a fractional reserve system, it is often said that banks "create money." While this term may conjure
up images of a banker running a printing press in the bank basement, that is not how banks create money. To understand how banks do create money, we first need to understand how economists define money.Economists consider money to be anything that is generally accepted as payment for goods and services. That definition clearly includes cash and currency. However, it also includes checking accounts, since checks can be written on these accounts and used to pay for items that people purchase. So, how does a bank create money?Consider the following scenario. Sally Saver goes to First National Bank and deposits $1,000 that she received as a gift from her grandparents. She now has a checking account with a balance of $1,000 from which she can write checks. What will First National Bank do with this newly deposited money? Well, if there is a 10 percent reserve requirement, they will put $100 in their vault and lend out the rest to people who want loans. Say Mike Inventor walks into First National Bank looking to borrow $900 to develop his next great invention. If the bankers decide that his project is worthwhile, they might give him the $900 he requests. If Mike puts the $900 in his checking account, he can then write checks for this amount. There is now $1,900 of money available ($1,000 in Sally's checking account and $900 in Mike's) for spending. In other words, $900 in new money has been "created." This process will continue over and over again as the bank lends out $810 of Mike's deposit while putting $90 in reserves -- up to as much as $10,000. Our fractional reserve banking system leads to this multiplier effect on money.
- Fill out the Fractional reserves worksheet to demonstrate your understanding of this concept.
- Look up the current reserve ratio, federal funds rate and discount rate on the Fed's web site page Monetary Policy .
- Then click here to take this quiz on Economic Literacy. Make sure to tell Miss Berliner your score (this won't be graded).
Wednesday, December 1, 2010
Banks and Credit Unions
You are going to research and compare credit unions and banks. Use the following links to fill out the venn diagram comparing commercial banks with credit unions:
Facts about credit unions:
http://www.creditunion.coop/
http://www.pueblo.gsa.gov/cic_text/money/credit-unions/fedcredt.htm
http://www.econedlink.org/lessons/glossary_popup.php?title=Credit%20Union
Facts about banks:
http://money.howstuffworks.com/personal-finance/banking/bank1.htm
http://www.econedlink.org/lessons/glossary_popup.php?title=Bank
Once you have filled out the venn diagram, you will look for local banks and credit unions near where the city where you are most likely to go to college. If you are not planning on going to school in the states, you make pick a city of your choice in the US or try to find some banks and credit unions in your home country.
Use the following links to search and pick one bank AND one credit union near your future home.
Locate Local Banks (Enter "banks" in the place for name and enter your zip code)
http://www.mapquest.com/
Locate Local Credit Unions; General Credit Union Information
http://www.creditunion.coop/
Next, fill out the bank criteria worksheet comparing the bank and credit union you chose.
If you have time you can do the following activity to see how well you know the difference between banks and credit unions:
http://www.econedlink.org/lessons/popup.php?lesson_number=691&&flash_name=mm691_dragndrop1.swf
Facts about credit unions:
http://www.creditunion.coop/
http://www.pueblo.gsa.gov/cic_text/money/credit-unions/fedcredt.htm
http://www.econedlink.org/lessons/glossary_popup.php?title=Credit%20Union
Facts about banks:
http://money.howstuffworks.com/personal-finance/banking/bank1.htm
http://www.econedlink.org/lessons/glossary_popup.php?title=Bank
Once you have filled out the venn diagram, you will look for local banks and credit unions near where the city where you are most likely to go to college. If you are not planning on going to school in the states, you make pick a city of your choice in the US or try to find some banks and credit unions in your home country.
Use the following links to search and pick one bank AND one credit union near your future home.
Locate Local Banks (Enter "banks" in the place for name and enter your zip code)
http://www.mapquest.com/
Locate Local Credit Unions; General Credit Union Information
http://www.creditunion.coop/
Next, fill out the bank criteria worksheet comparing the bank and credit union you chose.
If you have time you can do the following activity to see how well you know the difference between banks and credit unions:
http://www.econedlink.org/lessons/popup.php?lesson_number=691&&flash_name=mm691_dragndrop1.swf
Wednesday, October 6, 2010
Supply and Demand
Supply and Demand activity
Our economic system is called capitalism, and its basic engine is called the market. A market economy is made up of buyers and sellers. Buyers try to get what they want for the lowest price possible, and sellers want to get the most money they can for the things they are selling. Together, this push-pull effect helps keep the market system in balance.
One of the mechanisms that helps maintain this balance is called supply and demand. The central principle of supply and demand is that prices are determined by the levels of supply (amount of items available) and demand (degree to which an item is desired). If more people want to buy a particular kind of product, the large demand will make the price increase. If fewer people want that kind of product, the price will decrease. Supply is quite similar. If there is a low supply of a particular product, the price will be higher than if there is a glut of similar resources on the market.
How does this interaction of supply and demand affect pricing? What happens if supplies run low of something everyone needs in order to live?
Market forces of supply and demand help to keep the capitalist system in balance. Earthquakes, floods, and other natural disasters often cause extreme shifts in the supply of and demand for certain items. When extreme events affect supply or demand for a particular item, pricing may seem outrageously inflated - something people often refer to as "price-gouging." In fact, however, when demand outstrips supply in an extreme way, the natural response of a market should be for the price to increase significantly.
Go to the following link for the activity "Disaster Zone" and follow the instructions:
http://www.econedlink.org/lessons/popup.php?lesson_number=508&&flash_name=em508_pricegouging-disasterzonev1.swf
In a market economy, supply and demand are the primary determinants of pricing. When the supply of a product outpaces the demand for that product, prices will naturally go down as sellers compete for consumers. When the supply of a product is not able to keep up with the demand for it, prices increase - sometimes dramatically - in response to the sellers' ability to attract consumers.
Other methods for the distribution of products can be considered, but none would be any more or less "fair" than exchange of money for goods or services - the dominant method of distribution in a market economy.
If someone asked you to explain the principle of supply and demand, could you do it? Get together with the person sitting next to you, or with a group, and answer the following questionson a separate sheet of paper:
Answer each question in one paragraph or less.
How do fluctuations in levels of supply and demand affect prices?
What can happen when the demand for something is extremely high for something and the supply is extremely low?
What are some of the ways in which scarce supplies can be distributed?
Our economic system is called capitalism, and its basic engine is called the market. A market economy is made up of buyers and sellers. Buyers try to get what they want for the lowest price possible, and sellers want to get the most money they can for the things they are selling. Together, this push-pull effect helps keep the market system in balance.
One of the mechanisms that helps maintain this balance is called supply and demand. The central principle of supply and demand is that prices are determined by the levels of supply (amount of items available) and demand (degree to which an item is desired). If more people want to buy a particular kind of product, the large demand will make the price increase. If fewer people want that kind of product, the price will decrease. Supply is quite similar. If there is a low supply of a particular product, the price will be higher than if there is a glut of similar resources on the market.
How does this interaction of supply and demand affect pricing? What happens if supplies run low of something everyone needs in order to live?
Market forces of supply and demand help to keep the capitalist system in balance. Earthquakes, floods, and other natural disasters often cause extreme shifts in the supply of and demand for certain items. When extreme events affect supply or demand for a particular item, pricing may seem outrageously inflated - something people often refer to as "price-gouging." In fact, however, when demand outstrips supply in an extreme way, the natural response of a market should be for the price to increase significantly.
Go to the following link for the activity "Disaster Zone" and follow the instructions:
http://www.econedlink.org/lessons/popup.php?lesson_number=508&&flash_name=em508_pricegouging-disasterzonev1.swf
In a market economy, supply and demand are the primary determinants of pricing. When the supply of a product outpaces the demand for that product, prices will naturally go down as sellers compete for consumers. When the supply of a product is not able to keep up with the demand for it, prices increase - sometimes dramatically - in response to the sellers' ability to attract consumers.
Other methods for the distribution of products can be considered, but none would be any more or less "fair" than exchange of money for goods or services - the dominant method of distribution in a market economy.
If someone asked you to explain the principle of supply and demand, could you do it? Get together with the person sitting next to you, or with a group, and answer the following questionson a separate sheet of paper:
Answer each question in one paragraph or less.
How do fluctuations in levels of supply and demand affect prices?
What can happen when the demand for something is extremely high for something and the supply is extremely low?
What are some of the ways in which scarce supplies can be distributed?
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