2.03 PowerPoint2.03 PowerPoint

Objective 2.03 Explain how the Federal Objective 2.03 Explain how the Federal Reserve, Stock Market, and e-Reserve, Stock Market, and e-

commerce impact the United States’ commerce impact the United States’ economic system. economic system.

The Federal ReserveThe Federal Reserve Central Bank of the United StatesCentral Bank of the United States Regulates the money supply in the US Regulates the money supply in the US

economyeconomy Raises and lowers the interest rateRaises and lowers the interest rate Puts money into circulationPuts money into circulation Removes money from circulationRemoves money from circulation

Federal Reserve SystemFederal Reserve System

Impact of the Federal ReserveImpact of the Federal Reserve

If the Federal Reserve If the Federal Reserve raisesraises the discount the discount raterate Consumer credit becomes Consumer credit becomes more expensivemore expensive Consumers Consumers buy fewer large goodsbuy fewer large goods —homes, —homes,

cars, boats, etc.cars, boats, etc.

Impact of the Federal ReserveImpact of the Federal Reserve

If the Federal reserve If the Federal reserve lowerslowers the discount the discount raterate Consumer credit becomes Consumer credit becomes less expensiveless expensive Consumers Consumers buy more expensivebuy more expensive goodsgoods If you borrow If you borrow $1000$1000 at an annual interest rate at an annual interest rate

of of 4%,4%, at the end of the year you'll owe at the end of the year you'll owe $1040$1040. .

If you borrowed If you borrowed $1,000$1,000 at an annual interest rate at an annual interest rate of of 9%,9%,

at the end of the year you would owe __________at the end of the year you would owe __________

If you borrowed If you borrowed $1,000$1,000 at an annual interest rate at an annual interest rate of of 4%,4%,

at the end of the year you would owe __________at the end of the year you would owe __________

Interest Rate Examples:Interest Rate Examples:

$1090$1090

$1040$1040

What are stocks?What are stocks? Shares of ownership in Shares of ownership in

corporationscorporations Corporations sell stock to raise Corporations sell stock to raise

capital for the corporationcapital for the corporation How to make money on a stock:How to make money on a stock:

Dividends from the corporationDividends from the corporation Value of stock goes upValue of stock goes up

The Stock Market’s PurposeThe Stock Market’s Purpose

The The stock marketstock market is where shares of is where shares of stocks, are bought and sold.stocks, are bought and sold.

The The stock exchangestock exchange is the actual is the actual physical locationphysical location where stocks are where stocks are listed and traded.listed and traded. New York Stock Exchange (NYSE)New York Stock Exchange (NYSE) NASDAQ—virtual exchangeNASDAQ—virtual exchange

The Stock Market’s FunctionsThe Stock Market’s Functions

Provides Provides a waya way to issue shares of to issue shares of stockstock

Provides Provides a placea place for the buying, for the buying, selling and trading of stocksselling and trading of stocks

Impact of the Stock Market Impact of the Stock Market on the Economyon the Economy

Bull MarketBull Market Stock prices going up or risingStock prices going up or rising Consumers are Consumers are optimistic optimistic and buy stockand buy stock Consumers buy goods and businesses Consumers buy goods and businesses

prosperprosper

Impact of the Stock Market Impact of the Stock Market on the Economyon the Economy

Bear MarketBear Market Stock prices are Stock prices are

going down or fallinggoing down or falling Consumers are Consumers are

pessimisticpessimistic and and reluctant to buy reluctant to buy stockstock

Consumers buy Consumers buy fewer goods and fewer goods and businesses may lose businesses may lose money. money.

Some Some workers may workers may lose jobslose jobs..

Impact of E-commerce Impact of E-commerce on the Economyon the Economy

More choicesMore choices in goods. in goods. Global competitionGlobal competition is increased is increased Fewer salespeopleFewer salespeople are needed in stores are needed in stores

More people are needed in More people are needed in order fulfillmentorder fulfillment and and customer servicecustomer service..

Goods are manufactured Goods are manufactured JITJIT