Civics Today Citizenship, Economics, & You
Money and Banking
Money has three functions. It serves as a medium of exchange, a store of value, and a measure of value. Throughout history many different goods have been used for money. Today, however, the most familiar types of money are coins and currency. People and businesses usually save their money in a financial institution. The most common financial institutions are commercial banks, credit unions, and savings and loan associations. Banks accept deposits and make loans. The Federal Reserve System, also known as the Fed, is the central bank of the United States. It is a bankers' bank. The Fed regulates the banking industry and controls the flow of money into the economy. One of the Fed's most important functions is to control monetary policy. To control the money supply and interest rates, the Fed can raise or lower the discount rate and reserve requirements, or can engage in open market operations.