Your Money课件.pptVIP

Can Anyone tell you how to spend your money? (Ch 9) Pecuniary emulation ‘Keeping up with the Joneses’ ? wondering how they could afford it? People spend their money differently, but there are average patterns. Table 5 (p 45) Majority of expenses: Shelter, Transportation 精品文档 Spending patterns As income rises, most expenditures as a percent of income decrease (total amount spent does not change too much) except for insurance, pension SS (usually a certain % spent, regardless of income), savings taxes ? more money, ability to save more Also varies with age As age increases, spend more (%) on food, utilities and health care; less on taxes, SS 精品文档 Back to money… Paper bills get worn out pretty quick. Need to be replaced. Average lifespan of $1: between 13 – 18 months. How does new currency get into your hands? The treasury ships new money to the Federal Reserve banks. 精品文档 New Money Federal Reserve banks return old money to the treasury, who shred and burn it. The Fed then distributes the money to individual banks in its regions. The banks send back old worn out bills back to the Fed branch. The banks distribute the new money to its customers (in exchange for old ones, of course!) They get used, world goes around ($$)… 精品文档 Other forms of money Currency is not the only type of money. Checks Debit cards Not credit cards 1998: 70% of all households have at least 1 credit card Estimated that roughly 84% of those pay their bill in full monthly. 精品文档 Federal Reserve System Monetary Policy: the Fed injects and withdraws money from the economy in order to regulate it. Money supply: the amount of money that people have available to spend (cash, checking accounts) 精品文档 Federal Reserve system If money supply is increased, typically economy grows quickly, companies hire more workers, people spend more If money supply is decreased, economy slows down, unemployment increases etc. More money there is in the economy, the higher is the price level, less purchasing power (inflatio