1. Sources of Capital CHAPTER 9 SECTION 1: Saving SECTION 2: Investing
Holt Economics
4/17/2017
CHAPTER 9
Sources of Capital
SECTION 1: Saving
SECTION 2: Investing
SECTION 3: Stocks, Bonds, and Futures
SECTION 4: Borrowing and Credit
Chapter 9

2. Objectives: Saving SECTION 1
What benefits do people gain by saving money?
How do savings accounts differ from time deposits?
How do economists measure savings?

3. Benefits of saving money:
SECTION 1
Saving
Benefits of saving money:
security
interest

4. Difference between savings accounts and time deposits:
SECTION 1
Saving
Difference between savings accounts and time deposits:
Savings accounts
offer liquidity
have variable interest rates
Time deposits
require the saver to leave money in the account for a specific amount of time
offer higher and fixed interest rates
offer reduced liquidity

5. SECTION 1
Saving
Economists measure savings by calculating the savings rate, or the percentage of people’s unspent disposable income.

6. Objectives: Investing SECTION 2
What are the goals and elements of a personal financial plan?
How do financial investment and real investment differ?
How does real investment affect economic growth?

7. Goals and elements of a personal financial plan:
SECTION 2
Investing
Goals and elements of a personal financial plan:
spending and saving plan—to create a personal budget
investment plan—to put money to work
retirement plan—to save and invest money for retirement
estate plan—to allow the transfer of a person’s property after death

8. Difference between financial investment and real investment:
SECTION 2
Investing
Difference between financial investment and real investment:
financial investment—exchanging property ownership and payments to make a profit
real investment—using money to create new capital goods

9. SECTION 2
Investing
Real investment affects economic growth by increasing the number of capital goods used by producers.

10. Objectives: Stocks, Bonds, and Futures SECTION 3
Why and how do people invest in stocks?
What factors influence stock prices?
How do corporate and government bonds differ from stocks?
What are the advantages and disadvantages of futures?

11. Why and how people invest in stocks:
SECTION 3
Stocks, Bonds, and Futures
Why and how people invest in stocks:
to gain profit
to limit the risk on their investments
to become a part owner of a corporation
How to invest in stock:
buy from a broker
buy from an investment bank

12. Factors that influence stock prices:
SECTION 3
Stocks, Bonds, and Futures
Factors that influence stock prices:
corporate finances
investor expectations
external forces, such as changes in the economy or international events

13. Corporate and government bonds
SECTION 3
Stocks, Bonds, and Futures
Corporate and government bonds
offer lower interest than stock dividends
offer less risk than stock

14. Advantages of futures:
SECTION 3
Stocks, Bonds, and Futures
Advantages of futures:
high profit potential
guarantee that original purchase price of the futures will be honored
Disadvantages of futures:
high risk
requires specialized knowledge about commodities being bought or sold

15. Objectives: Borrowing and Credit SECTION 4
How do lenders make money on loans?
What factors influence a credit rating?
How can credit help the economy?

16. Ways lenders make money on loans:
SECTION 4
Borrowing and Credit
Ways lenders make money on loans:
interest
repossession

17. Factors that influence a credit rating:
SECTION 4
Borrowing and Credit
Factors that influence a credit rating:
ability to pay
number of assets owned
credit history

18. Benefits of credit to the economy:
SECTION 4
Borrowing and Credit
Benefits of credit to the economy:
stimulates growth
promotes stability

19. CHAPTER 9
Wrap-Up
1. Identify which of the following savings plans would provide the greatest possible liquidity: regular savings accounts, certificates of deposit, savings bonds. Explain your answer.
2. Why do economists study savings rates? Name one important determinant of savings rates in the United States.
3. Explain the difference between financial investment and real investment. Provide an example of each type of investment.

20. CHAPTER 9
Wrap-Up
4. Describe the different ways that you can earn profits from stock purchases. Compare a capital gain and a capital loss.
5. How does a broker’s job differ from that of a market analyst?
6. What are the benefits and liabilities of credit? Describe three pieces of legislation that protect consumers from unfair credit practices.