1. MANAGING THE ECONOMY AND THE FED

2. THE BUSINESS CYCLE

3. The business cycle
measures the Gross
domestic Product of
the U.S. That means
all the goods and
services produced in
the U.S.

4. CHANGES IN THE GNP/GDP OVER 50 YEARS
GREAT DEPRESSION

5. ECONOMY EXPANSION

7. A RECESSION IS WHEN THE GDP (GROSS DOMESTIC PRODUCT
GOES DOWN FOR 6 MONTHS OR TWO QUARTERS

9. the change in the average price of a
The Consumer
Price Index Measures
the change in the average price of a
set number of products
and services
each month.

10. CONSUMER PRICE INDEX MEASURES INFLATION USING PRICES FOR THESE THINGS:

11. WHEN PRICES CONTINUE TO GO UP OVER TIME IT IS CALLED INFLATION.

14. INFLATION IS THE RISE IN PRICES OF GOODS AND SERVICES OVER TIME.

16. DEFLATION: When the price of goods begins to
Go down. This is bad because manufacturers receive
Less for their product and lay people off.

17. STOCK INDEX
ONE WAY TO MEASURE THE ECONOMY IS TO USE A STOCK INDEX...LIKE THE DOW JONES AVG.

18. THE MOST FAMOUS STOCK INDEXES ARE THE DOW JONES AND THE STANDARD AND POOR 500

19. HOW THE U.S. ECONOMY AND MONEY SUPPLY IS CONTROLLED

20. FISCAL POLICY
Tax cuts for businesses or for individuals - This gives people and corporations more money, which may make them more likely to buy things, which increases demand.
Increased spending to establish new government jobs - This increases demand for labor, which can lower the unemployment rate.
Unemployment insurance - This system provides an income for people who are out of work.

21. THE FED
Formally known as the Federal Reserve, the Fed monitors the U.S. economy. It is the central bank of the United States government.
regulates banks
manages the nation's money
influences the economy

24. MONETARY POLICY: When the FED regulates
the amount of money in the economy and how easy
it is to get credit.

25. THE FED CONTROLS THE MONEY SUPPLY.
THEY USE THE FOLLOWING MEANS:
Lower the discount rate (interest on loans)
Lower or raise the reserve requirement
Buy or sell U.S. bonds to banks (open market policy)

26. The Reserve Requirement Banks now have to set aside a certain amount of cash in "reserve." The reserve is very important because it helps to ensure that the bank will always be able to give you your money when you ask for it.

27. The Discount Rate
The "discount rate" is the interest rate that a regional Reserve Bank charges banks and financial institutions when they borrow funds.

28. WHEN THE GOVERNMENT KEEPS INTEREST RATES LOW (ALSO CALLED THE DISCOUNT RATE), IT IS CALLED LOOSE MONETARY POLICY

29. WHEN YOU RAISE THE DISCOUNT RATE/INTEREST RATE IT IS CALLED TIGHT MONEY.

30. Low interest allowed us to buy this house!!!
LOW INTEREST RATES HELP THE ECONOMY

31. HIGH INTEREST RATES SLOW THE ECONOMY9% 4%
NO HOUSE!!!

32. Open Market Operations
The most effective tool the Fed has, and the one it uses most often, is the buying and selling of government securities in its open market operations. Government securities include treasury bonds, notes, and bills. The Fed buys securities when it wants to increase the flow of money and credit, and sells securities when it wants to reduce the flow.

33. SO… GOVERNMENT FISCAL POLICY: Raise or lower taxes
Spend more government money
Give unemployment
FED MONETARY POLICY:
Raise or lower discount rate (interest)
Raise or lower Reserve Requirement
Open Market bond sales

34. BANKS AND BANKING

35. THE BASIC FUNCTION OF MONEY IS TO STORE VALUE FOR FUTURE USE

36. MONEY HAS VALUE BECAUSE THE GOVERNMENT BACKS IT AND YOU BELIEVE IN THE GOVERNMENT

37. ANOTHER NAME FOR
MONEY IS CURRENCY

38. THE FIRST BANKS BEGAN DURING THE MIDDLE AGES
IN EUROPE

39. COMMERCIAL BANKS
SUCH AS WACHOVIA

40. BANK SERVICES apply for a credit card buy traveler's checks
cash a check
check your account balance
deposit money
exchange money
fill out a withdraw slip
open a checking account
open a savings account
order checks
pay off a loan
pay your bills online
rent a safety deposit box
review your bank statement
take out a loan
talk with a bank teller
talk with the bank manager
transfer money
use a debit card
withdraw money

42. SAVINGS AND LOANS ARE BANKS THAT
WERE ORIGINALLY STARTED TO HELP PEOPLE
BUY HOUSES. TODAY, THEY DO MUCH OF WHAT
A REGULAR BANK DOES. MANY WENT OUT OF
BUSINESS IN THE SAVINGS AND LOAN CRISIS
DURING THE 1980’S. THEY ARE OWNED BY
SHAREHOLDERS.

43. CREDIT UNIONS BELONG TO PEOPLE WHO WORK
FOR THE SAME COMPANY OR ORGANIZATION. THEY
ARE OWNED BY THEIR MEMBERS. LOW INTEREST
LOANS ARE AVAILABLE AND YOU CAN KEEP
A CHECKING ACCOUNT.

44. SAVINGS
ACCOUNTS
Your money be placed in a bank savings account and this
is guaranteed to be safe by the The FDIC (Federal Deposit
Insurance Corporation). However,you get a very low
interest rate and a low return on your money.

45. BANKS MAKE MOST OF THEIR MONEY FROM INTEREST ON LOANS

46. THE AMOUNT IN YOUR SAVINGS ACCOUNT IS CALLED THE PRINCIPAL.

47. BANKS HAVE LIMITED RESERVES (MONEY IN VAULT) BECAUSE THEY ARE ALWAYS LENDING IT OUT.

48. REVIEW OF INVESTING

49. CERTIFICATE OF DEPOSIT
Money deposited in a bank or savings and loan for a stated time period and normally paying a fixed rate of interest.

50. Bonds are certificates of debt issued by government and
corporations to people who lend them money. After
a set amount of time, you get your money back with interest.

51. You can buy stock which is a part of a company. If the company
Makes a profit you make a profit. You can’t lose more than the
Amount you paid for the stock.

52. DIVIDENDS: If a company makes a profit, it splits the
profit up and gives a certain percentage to each stockholder
based on how much stock they own. CAPITAL GAINS is profit on stock sales.

53. MUTUAL FUNDS