Money and Monetary Policy Students

MANAGERIAL
ECONOMICS
Prepared by:
Ronnel Quintana
Money and
Monetary Policy
Learning Objectives:
At the end of this lesson, the students
should be able to:
-Understand the concepts of monetary policy.
-To know how money is being measured.
-Discuss about money laundering.
-Define the concepts related to banking.
How is money
measured?
inflation deflation
Three categories of money
M1 narrowest
includes all physical denominations of coins and

currency; demand deposits, which are checking
accounts and NOW accounts; and travelers'
checks
M2 broader
adds all the money found in M1 to all time-

related deposits, many types of retirement
accounts, and non-institutional money market
funds
M3 broadest
adds all the money found in M1 to all time-

related deposits, many types of retirement
accounts, and non-institutional money
market funds
-a term arising from this regulatory
regime, consists of actions taken to
conceal financial movements
underlying crimes ranging from tax
evasion and drug trafficking to public
corruption and the financing of groups
designated as terrorist organizations.
Money Laundering
-is an illegal activity that makes large
amounts of money generated by criminal
activity.
-The money from the criminal activity is

considered dirty, and the process
“launders” it to look clean.
Anti-money Laundering (AML)
-financial institutions policies to detect

and prevent this activity.
Anti-money Laundering (AML)
-AML legislation was a response to the growth of the

financial industry, the lifting of capital controls, and the
growing ease of conducting complex chains of financial
transactions. A high-level United Nations panel has
estimated annual money laundering flows total at least $1.6
trillion, accounting for 2.7% of global GDP in 2020.
How Money Laundering
Works?
-Money laundering is essential for

criminal organizations that use
illegally obtained money.
Laundering money
typically involves three
steps although some stages
may be combined or
repeated.
1. Placement: Injects the “dirty money” into the
legitimate financial system.
2. Layering: Conceals the source of the money

through a series of transactions and bookkeeping
tricks.
3. Integration: Laundered money is disbursed

from the legitimate account.
1. Placement: Injects the “dirty money” into the
legitimate financial system.
2. Layering: Conceals the source of the money

through a series of transactions and bookkeeping
tricks.
3. Integration: Laundered money is disbursed

from the legitimate account.
Types of Transactions
1. Structuring or Smurfing
2. “Mules” or cash smugglers
3. Investing in commodities
Types of Transactions
4. Buying and Selling:
5. Gambling
6. Shell companies
Capital Control
-represents any measure taken by a

government, central bank, or other
regulatory body to limit the flow of foreign
capital in and out of the domestic economy.
Capital Control
-These controls include

taxes, tariffs, legislation, volume
restrictions, and market-based forces.
Concepts of Banking
Banking are given the power by the
government to conduct different functions
under its jurisdiction.
Concepts of Banking
The most basic of which are to accept

deposits from people who save, and to lend
money to parties that need funding.
Concepts of Banking
Why Depositors or savers place their money
in banks?
1. Earning interetst
2. Security from lost
3. Storage
Concepts of Banking
When you place your money in the bank, it grows.

The 1,000,000 invested today, given a 5% annual
interest, will grow to 1,500,000 in 10 years.
Concepts of Banking
Meanwhile, different individuals and companies

need funding for their businesses and for emergencies.
Concepts of Banking
For example, ABC Company borrows
1,000,000 from XYZ bank. It was charged by the
bank with a 15% annual interest. After a year, ABC
Company would need to pay 1, 150,000 to the bank
for the use of the money it borrowed.
Concepts of Banking
These functions of of deposit-taking and
criedit / lending facilitated by the banks are
called the FINANCIAL INTERMEDIATION
PROCESS.
Functions of Banks
Functions:
1. Treasury operations (investment or trading)
- banks engage in the trading of the stocks of
companies.
2.Borrowing
- banks also borrow from one another.
- this requires liquidity from the bank.
Functions:
2.Borrowing
- banks also borrow from one another.
- this requires liquidity from the bank.
Liquidity
- is the speed at which assets can easily be
converted to the accepted medium of exchange.
Functions:
Bank run
- happens when the public, learning of a
possilbility that the bank is no longer capable of
returning their money “runs” to the bank to
withdraw.
Functions:
4. Private banking - provides additional resources

and VIP treatment to depositors who have maintained a
certain amount of untouched deposits with the bank for
a specific period.
Functions:
For example
a bank depositor who maintains at elast 500,000
average daily balance for six months with the bank
gets to have his/her own queue when he/she falls in
line in the bank to transact.
Functions:
5. FCDU OPERATIONS -foreign currency
denomination unit (FCDU) is a function of the bank
that deals with foreign currency.
-In the Philippines, money deposited
to the bank, which is not in the form of
phil. peso, shall be managed by the FDCU
department
Functions:
6. INTERNATIONAL BANKING -banks within the

country may have either foreign counterparts or
branches abroad.
-it includes remittance of money from

abroad to our country.
Functions:
7. BROKERAGE -brokers are professionals who
service clients for specific purposes.
-real state brokers assist in the purchase and sale of

real state properties
-stock brokers help manage the trading of
their client’s stocks.
Functions:
7. BROKERAGE -brokers are professionals who
service clients for specific purposes.
-real state brokers assist in the purchase and sale of

real state properties
-stock brokers help manage the trading of
their client’s stocks.
Functions:
8. Investment banking or underwriting

-when a business may need to increase its
working capital, banks may lend help by distributing
the company bond on behalf of this client-company.
Al-Amanah Islamic bank
-the most unique bank in the Philippines
-the only Islamic bank in the country that, instead
of charging interest payments on the money lend, they
just charge a certain fee for the transaction.
Thank you!!!

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MANAGERIAL

includes all physical denominations of coins and

adds all the money found in M1 to all time-

adds all the money found in M1 to all time-

-The money from the criminal activity is

-financial institutions policies to detect

-AML legislation was a response to the growth of the

-Money laundering is essential for

2. Layering: Conceals the source of the money

3. Integration: Laundered money is disbursed

2. Layering: Conceals the source of the money

3. Integration: Laundered money is disbursed

2. “Mules” or cash smugglers

4. Buying and Selling:

-represents any measure taken by a

-These controls include

The most basic of which are to accept

When you place your money in the bank, it grows.

Meanwhile, different individuals and companies

4. Private banking - provides additional resources

6. INTERNATIONAL BANKING -banks within the

-it includes remittance of money from

-real state brokers assist in the purchase and sale of

-real state brokers assist in the purchase and sale of

8. Investment banking or underwriting

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