 Why borrow money? Individuals- to purchase large items such as homes and cars Businesses- to operate or expand their business (purchase a building, replace old equipment, offer new products) Government- expand transportation, schools or other public services

 What is saving? Putting away money for future use  What is investing? Using savings to earn more money for the future

 Saving influences on economic activity Makes more money available to individuals, businesses and the government When borrowed money is spent > demand for goods and services increase > more jobs > creates spending for workers

 Two main goals of savers and investors: Immediate income Long-term growth (money for the future)  Growth of savings- Interest is money you receive while others borrow your money Simple interest is interest paid on the amount of money deposited for a period of time

 How is simple interest calculated?** I = P * R * T P= principalR= rateT= time I= Interest  Example: P= $1000 R= 5% T= 1 yr  $1000 * 5% * 1 yr = $50.00

 Compound interest is computed on amount saved plus the interest previously earned  How is compound interest calculated? YearBeg. Balance 10%Ending Balance 1$1000$100$ $110$ $121$1331

Simple interest $2,000 at 10% Year 1: $2,000 *.10 = $200 $2,000 + $200 = $2,200 Year 2: $2,000 *.10 = $200 $2,200 + $200 = $2,400 What would the value be at the end of year 3? Compound interest $2,000 at 10% Year 1: $2,000 *.10 = $200 $2,000 + $200 = $2,200 Year 2: $2,200 *.10 = $220 $2,200 + $220 = $2,420 What would the value be at the end of year 3?