Transcript 2.03-PowerPoint

2.03 PowerPoint
Objective 2.03 Explain how the Federal
Reserve, Stock Market, and e-commerce
impact the United States’ economic system.
The Federal Reserve
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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

Impact of the Federal Reserve

If the Federal Reserve raises the discount
rate
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Consumer credit becomes more expensive
Consumers buy fewer large goods—
refrigerators, boats, etc.
If the Federal reserve lowers the discount
rate

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Consumer credit becomes less expensive
Consumers buy more expensive goods—cars,
washing machines, etc.
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

What other investments are traded?

Bonds—loans made by the investor to the
issuer; the investor is repaid with interest
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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.
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.
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New York Stock Exchange (NYSE)
American Stock Exchange
NASDAQ—virtual exchange
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).

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.
Impact of E-commerce
on the Economy
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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.