MAKE USE OF THE CASE STUDY

There are several different types of banking institutions that all work in almost exactly the same way. Before we get into exactly what the banks' function is in the United States, we want to go over the different types of banks you will come across in the country. Keep in mind that the lines aren't drawn with permanent marker here - some banks might offer a variety of services spanning across the different types of banks in our list.

Retail banks:Retail banks are the ones you come across most often. These banks focus on the consumer and provide the public with a place to deposit money into their own checkings and savings accounts. These kinds of banks give credit cards, offer loans, and offer numerous locations for you to manage your finances.

Commercial Banks:Wikipedia's definition of a commercial bank really hits the nail on the head. Basically, a commercial bank is "an institution that provides services such as accepting deposits, providing business loans, and offering basic investment products." These banks started out with the aim to serve the business sector and not just the general public. These banks rely on lines of credit to manage cash flow and provide any other kind of service a business might need.

Credit Unions:A credit union is a member-owned financial cooperative, controlled by its members to provide credit at competitive rates. In other words, a credit union is a not-for-profit organization owned by their own customers that offers banking services to its members. Although similar to commercial or retail banks, credit unions differ in that the members share common characteristics like the location of where they live, what occupation they have, and where they work.

Savings Banks:Savings banks provide a place for people to save their money and accrue interest on their money over time

Savings and Loans:Savings and loan associations specialize in accepting savings, deposits, and making mortgage and other loans.

Online banks:Online banks operate entirely online and do not offer physical brick and mortar locations for you to manage your finances at. These are becoming more popular as our world becomes more digitized.

Mutual Banks:Mutual banks are similar to credit unions in that they are owned by the members or customers instead of outside investors.

Central Banks:The central bank is the big dog that manages the monetary system of the government. The Federal Reserve (central bank) is responsible for managing economic activity and supervising banks. You will understand how they do twhen you learn how banks function in the next section!

How do banks in the United States work?

Although there are a variety of different kinds of banks, most operate in the same way by doing the same thing. First, you must understand that a bank is a business at the end of the day and that they need to make money too. We explain how below!

Banks in the US make money off of the money you have put into your bank account. Whenever you put money in your account in the United States, that money gets moved to a large pool of money that is used for other people to buy homes, cars, or finance their business or child's education.We get more into this at the end of this section. Before you freak out about your money getting "taken from you, I want to clarify something. Banks putting your money into this large pool for other people to use does not mean that your money disappears from your control. You can take out the money that has been credited to your account in cash whenever you want. In fact, you can take out as much as you want whenever you want, up to the amount you have put in of course. It is your money, after all.

Keep in mind that there are limits to how much money you can take out a day from an ATM, but in general, you can make transactions online and write checks to the amount you desire to withdraw. If you want a certain amount of cash withdrawn from your account, you can always go to a brick and mortar bank in your town to request the amount you need from a bank teller. Make sure to take your id and other required documents to take out large sums of money from your account in person.

Now let's get back to how banks make money off of your money. Banks create money in the economy that technically wasn't there before by administering loans. This does not mean that banks are giving out an infinite amount of loans to make more money. This would ruin the economy! There are some regulations set in place to control this.

The Federal Reserve (central bank mentioned in our list) is what regulates the lending of money by setting reserve requirements that indicate the amount of money banks are allowed to lend.

We will paint a picture for you in the following example so you can get a better idea of what we mean.

Let's say you put $1,000 into your bank account into an American bank account. Of that $1,000 dollars, the bank is allowed to lend out $900 dollars of the total you have put in. Based on this example, what would be the reserve requirement for how much money the bank needs to keep from lending? Take a second to think about that question. In other words, what percentage of your deposit did the bank have to keep in its reserve? Ok, now for the answer. If you said 10%, then you guessed the reserve requirement set by the Federal Reserve.

Banks are allowed to lend out 90% of your deposit and can not touch 10% of it. The $900 from your $1,000 deposit goes back out into the economy and ends up deposited into another bank. These banks are then able to lend out 90% of the $900 that was put into the account, and on and on, creating an exponentially increasing amount of money in the economy.

Question 11

1.The economic badly-behaved has, at its fundamental,_____- the issue of high-quality because_____________

2.The basic economic badly-behaved is that

3.The field of Economics is the study of__________-

4.An economic good, as condifered in the filed of economic can be describe as_________

5.A family inherited 15,000 from a long lost aunt. They are weighing up whether to buy a new car or go on a trip to Australia for a month. They decide to go to Australia. The opportunity cost of this decision is _____________

6.The production possibility curve can be used to illustrate each of the following, with the exception of______________

7.The production possibility diagram below shows various output choices P, Q, R, S and T.________________ The production possibility diagram below shows various output choices P, Q, R, S and T.

8.Referring to the production possibility diagram below, at which point is there unemployment in the economy?

9.Referring to the production possibility diagram below, at which point is there unemployment in the economy?

10.. Which one of the following statements is false? At all points on the production possibility curve