Chapter 22.1

13. Civilian Labor Force 14. Unemployment Rate 15. Fiscal Policy 16. Inflation 17. Consumer Price Index (CPI) 18. Central Bank 19. Federal Open Market 20. Committee (FOMC) 21. Monetary Policy 22. Discount Rate Reserve 23. Open Market Operations 1.Sole proprietorship 2.Financial capital 3.Partnership 4.Articles of Partnership 5.Corporation 6.Charter 7.Stock 8.Stockholder 9.Board of Directors 10.Cooperative 11.Real GDP 12.Business Cycle

1. Expenses What you need to start & continue a business 2. Advertising Introduction and reminder of your business 3. Receipts & Record Keeping Needs to be accurate and dependable – for profits & losses 4. Risk (profit vs. loss) Risk is a consequence to the advantage of being in business

* Establishment of inventory * Use of computers/Technology * Turbo Tax * Time – the opportunity cost. You could be working for someone else.

* There are three main types of businesses. They differ in size and in daily operations. * Sole-Proprietorship * Partnership * Corporation

1. Sole Proprietorship Owned by 1 person Easy & relatively inexpensive to start Typically small businesses Most common form of business Owner receives all profits Unlimited Liability

Advantages * Receive all profits * Quick decisions because no consultation * Relatively low taxes Disadvantages * Unlimited liability * Handle all decisions * Time consuming * Rely on own funds * Business depends on one person

2. Partnership Owned by 2 or more individuals Articles of Partnership – Partners sign an agreement on what each is responsible for.

Limited Partnership oPartners are not equal oGeneral Partner – has majority of control oLimited Partner – owns a small part of the business – does not voice opinions & is responsible only for what they put in to the partnership oLLPs (Limited Liability Partnerships) [mix of corporations and partnerships): Very popular with lawyers, accountants, and architects. Joint Venture otemporary partnership to do a job

Advantages * Losses are shared * More efficient than proprietorships * Pay taxes on share of profit * Easier to borrow money Disadvantages * Profits are shared * Unlimited liability, most of the time * Must reach agreements * Committed partners

3. CorporationCorporation a. Owned by many b. Started by a founder c. Owned by Stockholders d. Run by a Board of Directors e. State government issues a charter to run the business f. Complicated structure g. Business has the same rights as an individual h. Are Double Taxed – 1. Corp. pays a tax on its profits. 2. After profits are distributed to the stockholders – stockholders pay a tax on those earnings.

* Founder’s responsibilities * Register with the state government for a charter * Sell Stock * Select the initial Board of Directors * Board of Director’s responsibility * Elected by Stockholders – act on behalf of the stockholders. * Supervise & control the corporation * Make all major decisions

Advantages * Owners do not have to devote time to make money. * Stockholders have limited liability; they only lose what they put in. * Individuals trained in specific areas make decisions. Disadvantages * Decisions are slow. Interest of the board may differ from the stockholders. * Double taxation. Govt. taxes corporate profit then individual shares. * Stockholders have little or no say in how business is run.

* Stock: Individual ownership in a corporation. Shareholder receives voting rights and dividends. * Bond: Promise by a corporation to pay a stated amount of interest over a period of time.

* Franchise – sell the name & structure of a business Franchise * Help train employees & set up the business * Franchisee – pays a start up fee & annual fee * Non – Profit – Making a profit is not the main purpose of the business Non – Profit * Cooperative – individual businesses that work together to benefit all members * Producer – Ex: Farmer’s Market * Consumer – Ex: PCC Natural Markets, REIPCC Natural Markets * Service – Ex: Credit Unions, Utility companies

* Corporations sell stock to raise financial capital * People buy stock to make money * Dividends – a share of a corporation’s profits * Capital Gain – when stock is sold for more than it originally cost – Rule: Buy low, sell high

* Stock Indexes * Statistical measures that track stock prices over time * The ticker * Ex: Dow Jones Industrial Average (DJIA) or Standard & Poor’s (S&P) * Stock Exchanges * Stock market – where stock is bought & sold * Ex: NYSE – largest & most prestigious * Others: American Stock Exchange, Chicago Mercantile Exchange, Electronic – NASDAQ * Changes in stock prices are based on market forces of supply & demand

* Bull Market * Investors expect growth, profits high & unemployment low * Prices tend to rise * Bear Market * Investors are pessimistic, profits drop & unemployment rises * Prices fall * Changes to Stock Prices * Change in profits * Rumors (externalities) * News * Stockbroker – person who buys & sells stock

Chapter 22.3

* 1. Responsibilities to Consumers * 2. Responsibilities to Owners * 3. Responsibilities to Employees * 4. Responsibilities to the Community

Sell products that are safe Products should work as promised Be truthful in advertising Treat all customers fairly Responsibilities to Consumers

* To protect stockholders – to do this they - * Reveal – making public important financial information * Transparency

Responsibilities to Employees Provide a safe workplace Treat all workers fairly and without discrimination * Basis of race, religion, color, gender, age, or disability

Social responsibility – obligation to pursue goals that benefit society as well as themselves. ex – charitable gifts, national volunteering, assisting disaster victims through relief agencies.

Think about a personal experience in which a product you purchased was flawed? What did you do? Did the business try to fix the problem?

The Business Cycle (AKA The Economic Rollercoaster) The ups and downs of the economy Alternating periods of growth & decline

Prosperity(Expansion)Boom Economy is improvingEconomic activity peaks Business activity is increasingBusinesses work at full capacity Businesses hire more Stores sell at record workersamounts Consumers buy more*Peak: High point of boom DeclineRecession Economy slows downLowest period for production Production is cut downHigh unemployment Workers are laid off Low consumer spending * Trough: Low point of recession Depression: Severe recession

Expansion/ Prosperity Decline/ Recession Boom Recovery/ Prosperity Peak Trough Recession

1. Boom 2. Trough 3. Expansion 4. Peak

* The way the government taxes and spends money. * In a recession: * The government spends more money on public works projects in order to provide jobs. This keeps companies running and workers employed. * Provides money to people and increases demand. Producers will then increase supply. * Tax cuts: Gives people more money to spend. * The government will control peaks by increasing taxes.

* The way the government regulates the amount of money in circulation. Accomplished through raising or decreasing interest rates. The Federal Reserve (FED) is in control of monetary policy. * There are 12 district banks in the Federal Reserve.

* A decline in the value on money. * Purchasing power: Amount a dollar can buy. * Inflation is measured by the Consumer Price Index and the Implicit GDP price deflator.

* Change in price over time of a specific group of goods and services the average household uses. * Each year is compared to the average of This makes the base year. * This tells us the change in the standard of living.

* Takes inflation away for year. * The base year used for comparisons is 1987.

* The total dollar value of all final goods and services produced and sold in the nation during a single year. * Value is always expressed in terms of the dollar. * Final means only finished goods. * Only new items are counted. Anything bought used is not counted.

* Consumer Goods: Goods or services bought by consumers for direct use. * Business Goods: Business purchase of tools, machines, and buildings used to produce other goods. * Government Goods: Anything bought by federal, state, and local governments. * Export: Anything sold to other countries. * Import: Anything bought from other countries. * Net Exports: The difference in what the nation buys and sells with other countries.

* Loose Money 1. Easy to borrow 2. Consumers buy more 3. Business Expansion 4. Employment increases 5. Spending increases This can lead to inflation * Tight Money 1. Difficult to borrow 2. Consumers buy less 3. No business expansion 4. Unemployment increases 5. Production decreases This can lead to a recession

* The way banks create money. * Discount Rate: Prime rate that banks can borrow money from the FED. * Reserve Requirements: Percentage of deposits that banks must hold. * Banks are free to loan out money that is not on reserve leading to expansion.

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* The depression begins in Black Tuesday, October 29, 1929 * By 1933, salaries decreased by 40% and hourly wages by 60% compared to 1929 levels. * The average family income fell from $2,300 to $1,600. * 1930: 4 million Americans were unemployed. By 1933 the number tripled. * Bank runs – People tried to get all their cash out of banks, banks ran out of money * Many Americans marked this as the end of capitalism. Communists and Socialists fought with each other leading to the decline of this movement.

Soup Kitchen

Hooverville – Names of shanties (homeless towns) during the Depression (President Hoover was president

* FDR’s plan to end the depression. First had to restore faith in banks. * Began “fireside chats” insuring Americans the situation would improve. * Hundred Days: March 9-June 16, Congress passed 15 bills. Most were written by FDR.

* Glass-Steagall Act (1933): Banks could not invest in the stock market. Created the FDIC to insure deposits. * Federal Securities Act (1933): No stock market fraud.

* First Fireside Chat First Fireside Chat

* Unemployment rate: Percentage of the labor force without jobs but actively looking for work. * Unemployment reduces living standards, disrupts families, and causes a loss of self-respect. * Reaches its height during recession.

* Cyclical: Associated with the ups and downs of the economy. * Structural: Changes in the economy based on technology. * Seasonal: Based on weather. * Frictional: Based on people being terminated or looking for new jobs. * Videos * Dealing with unemployment Dealing with unemployment * The Pain of Unemployment The Pain of Unemployment * Slow Recovery Slow Recovery

* Hailey, a worker at Ford, loses her job because of a machine that can do her job more efficiently. * Structural * Matt works at the Sugar Mountain Ski Lodge. * Seasonal * Jarret, Hailey’s friend at Ford, loses his job because of low car sales. * Cyclical * Abby is tired of working at In-n-Out Burger quits her job. * Frictional * Maddy has just graduated from college and is unemployed. * Frictional * Travi slost his job at the neighborhood swimming pool after Labor Day. * Seasonal * Mrs. Kelley is laid off due to the tight budget of ISS for school year. * Cyclical * Drake loses his job as a cleaning guy because he is replace by a RoboMaid. * Structural

Write a short story, play, poem, or song about a family during the great depression. Make sure to include terms and concepts we have been talking about in class!

* Ch 24.3

* What do Banks do? * Accept Deposits * Make Loans

* Checking Accounts – * Allow customers to write checks or use check/debit cards * Used to pay bills or transfer money from 1 person to another. * Pay little or no rate of interest. * People don’t keep money in checking accounts for very long. Why? * Used to meet regular expenses.

* Savings Accounts – * banks pay interest to customers based on how much is deposited. * Certificates of Deposits (CDs) – * Require the saver to deposit money for a certain period of time. * Offer higher interest rates. * The longer the time the higher the interest rate * Making loans - One of the main principals of banks is to lend money to businesses and consumers.