1. Week Notes

2. Savings and Investment
Savings: income not used for consumption
Investment: use of income today in a way that allows for a future benefit
Ex. Stocks, bonds, CDs, mutual funds, etc.
Risk v. rate of return
Savings account = least risky, lowest rate of return
Stocks = most risky, highest possible rate of return

3. Financial Markets Stock Market:
Stock exchange: market where securities (stocks and bonds) are bought and sold
Investors earn dividends (share of corporate profits) and capital gains (earnings from selling stock at higher price than you bought it for)

4. Financial Markets Stock Market, cont.
Biggest exchange: NY Stock Exchange (NYSE)
Online only exchange: NASDAQ – mostly tech stocks

5. Financial Markets Stock Market, cont. Types of investments:
Stock: share of a company
Bond: loan to a company, the govt.
Future: contract to buy/sell stock at a future date at a set price (have to do it)

6. Financial Markets Stock Market, cont.
Stock index: measures performance of stock market
Dow Jones, S&P 500
Bull market – stock prices are rising
Bear market – stock prices are falling

7. Economic Indicators
Gross Domestic Product (GDP): the market value of all final goods and services produced within a nation in a given time period
In order to be counted in GDP a good must be:
Final, not intermediary – Ex. Fabric to make shirt = intermediary, shirt = final
Made during that year – Ex. Car produced this year, sold next year is part of this year’s GDP
Must be produced within nation’s borders

8. Economic Indexes
GDP = Consumption (C) + Investment (I) + Government Spending (G) + Net Exports (X)
Not included in GDP:
Nonmarket activities – ex. Home childcare
Underground economy – black market
Quality of life – distribution of money

9. Economic Indexes real v. nominal GDP
Real – adjusted for inflation, nominal – not