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 Central Bank of the United States Regulates the money supply in the US economy Raises and lowers the interest rate Puts money into circulation Removes money from circulation

Federal Reserve System

Impact of the Federal Reserve If the Federal Reserve raises the discount rate Consumer credit becomes more expensive Consumers buy fewer large goods —homes, cars, boats, etc.

Impact of the Federal Reserve If the Federal reserve lowers the discount rate Consumer credit becomes less expensive Consumers buy more expensive goods If you borrow $1000 at an annual interest rate of 4%, at the end of the year you'll owe $1040.

Interest Rate Examples: If you borrowed $1,000 at an annual interest rate of 9%, at the end of the year you would owe __________ If you borrowed $1,000 at an annual interest rate of 4%, $1090 $1040

What are stocks? Shares of ownership in corporations Corporations sell stock to raise capital for the corporation How to make money on a stock: Dividends from the corporation Value of stock goes up

The Stock Market’s Purpose The stock market is where shares of stocks, are bought and sold. The stock exchange is the actual physical location where stocks are listed and traded. New York Stock Exchange (NYSE) NASDAQ—virtual exchange

The Stock Market’s Functions Provides a way to issue shares of stock Provides a place for the buying, selling and trading of stocks

Impact of the Stock Market on the Economy Bull Market Stock prices going up or rising Consumers are optimistic and buy stock Consumers buy goods and businesses prosper

Impact of the Stock Market on the Economy Bear Market Stock prices are going down or falling Consumers are pessimistic and reluctant to buy stock Consumers buy fewer goods and businesses may lose money. Some workers may lose jobs.

Impact of E-commerce on the Economy More choices in goods. Global competition is increased Fewer salespeople are needed in stores More people are needed in order fulfillment and customer service. Goods are manufactured JIT