2.03 PowerPoint

1. 2.03 PowerPoint Objective 2.03 Explain how the Federal Reserve, Stock Market, and e-commerce impact the United States’ economic system.

2. The Federal Reserve • Central Bank of the United States • Regulates the money supply in the US economy • Raises and lowers the discount interest rate • Puts money into circulation • Removes money from circulation

3. Impact of the Federal Reserve • If the Federal Reserve raises the discount rate (minimum interest rate for lending to other banks) • Consumer credit becomes more expensive • Consumers buy fewer largegoods—refrigerators, boats, etc. • If the Federal reserve lowers the discount rate • Consumer credit becomes less expensive • Consumers buy more expensivegoods—cars, washing machines, etc.

4. What are stocks? • Stocks are shares of ownership in corporations • Shareholders have partial ownership in the corporation • Corporations are permitted to sell stock to raise capital for the corporation • Shareholders may receive dividend payments from the corporation

5. What other investments are traded? • Bonds—loans made by the investor to the issuer; the investor is repaid with interest • Corporate Bonds • Municipal Bonds • Treasury Bonds • US Savings Bonds • Futures—agreement to buy or sell a commodity (oil, gold, etc.) at some point • Mutual Funds—combination of individual stocks • Stocks, Bonds, Futures, and Mutual Funds are called Securities.

6. The Stock Market’s Purpose • The stock market is where shares of stocks, bonds, and futures are bought and sold (or traded). (Can be electronic) • The stock exchange is the actual physical location where stocks are listed and traded. • New York Stock Exchange (NYSE) • American Stock Exchange • NASDAQ—virtual exchange

7. The Stock Market’s Functions • Provides companies with a way of issuing shares of stock to people who want to invest in the company. The sale of shares of stock is a way for the corporations to raise money. • Provides a place for the buying, selling and trading of stocks (and other securities).

8. Impact of the Stock Market on the Economy • Bull Market • Stock prices going up or rising • Consumers are optimistic and buy stock hoping to earn more money • Consumers buy goods and businesses prosper • Bear Market • Stock prices are going down or falling • Consumers are pessimistic and reluctant to buy stock • Investors sell stock so they won’t lose more money • Consumers buy fewer goods and businesses may lose money. Some workers may lose jobs.

9. Impact of E-commerce on the Economy • Because consumers can purchase goods on the Internet they have more choices in goods. • Global competition is increased and US businesses must compete globally. • Fewer salespeople are needed in stores—a shift in jobs is required. More people are needed in order fulfillment and customer service. • Goods are manufactured just-in-time—as they are needed for distribution.