Investments the Stock Market Objective Explain how the

Investments & the Stock Market Objective: 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 discount interest rate › Puts money into circulation › Removes money from circulation

Impact of the Federal Reserve � If the Federal Reserve raises the discount rate › Consumer credit becomes more expensive › Consumers buy fewer large goods—refrigerators, boats, etc. � If the Federal reserve lowers the discount rate › Consumer credit becomes less expensive › Consumers buy more expensive goods—cars, washing machines, etc.

What are stocks? � Stocks are shares of ownership in corporations � Shareholders have partial ownership in the corporation � Corporations are permitted to sell stock to raise capital for the corporation � Shareholders may receive dividend payments from the corporation

What other investments are traded? � Bonds—loans made by the investor to the issuer; the investor is repaid with interest › › Corporate Bonds Municipal Bonds Treasury Bonds US Savings Bonds � Futures—agreement to buy or sell a commodity (oil, gold, etc. ) at some point � Mutual Funds—combination of individual stocks � Stocks, Bonds, Futures, and Mutual Funds are called Securities.

The Stock Market’s Purpose � The stock market is where shares of stocks, bonds, and futures are bought and sold (or traded). (Can be electronic. ) � The stock exchange is the actual physical location where stocks are listed and traded. › New York Stock Exchange (NYSE) › American Stock Exchange › NASDAQ—virtual exchange

The Stock Market’s Functions � Provides companies with a way of issuing shares of stock to people who want to invest in the company. The sale of shares of stock is a way for the corporations to raise money. � Provides a place for the buying, selling and trading of stocks (and other securities).

Impact of the Stock Market on the Economy Bull Market › Stock prices going up or rising › Consumers are optimistic and buy stock hoping to earn more money › Consumers buy goods and businesses prosper � Bear Market › Stock prices are going down or falling › Consumers are pessimistic and reluctant to buy stock › Investors sell stock so they won’t lose more money › Consumers buy fewer goods and businesses may lose money. Some workers may lose jobs. �

Impact of E-commerce on the Economy � Because consumers can purchase goods on the Internet they have more choices in goods. � Global competition is increased and US businesses must compete globally. � Fewer salespeople are needed in stores—a shift in jobs is required. More people are needed in order fulfillment and customer service. � Goods are manufactured just-in-time—as they are needed for distribution.