Roles and Functions of Various Economic Institutions & Business Organizations (8.07) J. Worley

Types of Businesses Sole Proprietorship Sole Proprietorship Business owned by an individual or members of a house Business owned by an individual or members of a house Unlimited Liability- Owner is responsible for all debts incurred by the business Unlimited Liability- Owner is responsible for all debts incurred by the business Limited Life- Cease to function at the same time that their owners do Limited Life- Cease to function at the same time that their owners do Partnership Partnership Business in which two or more people pool their resources and share the risks and profits Business in which two or more people pool their resources and share the risks and profits Gov’t provides help for both of these through SBA Gov’t provides help for both of these through SBA AKA- Small Business Association AKA- Small Business Association

Types of Businesses (cont.) Corporation Corporation Firm that exists as a legal entity in the same way a person does which is usually owned by a number of shareholders Firm that exists as a legal entity in the same way a person does which is usually owned by a number of shareholders Shareholders buy stock in the corporation which grants them a share of ownership in the business Shareholders buy stock in the corporation which grants them a share of ownership in the business Limited Liability- Shareholders lose only what they invest Limited Liability- Shareholders lose only what they invest Bonds are means of loaning money Bonds are means of loaning money Unlimited Life- Live on after the death of an individual Unlimited Life- Live on after the death of an individual Dividends- Payments made to shareholders from the profits of the firm Dividends- Payments made to shareholders from the profits of the firm

Types of Businesses (cont.) Cooperatives Cooperatives Large number of producers pool their resources together Large number of producers pool their resources together Franchises Franchises Businesses in which sole proprietors and partnerships purchase the local rights to a trademark corporation Businesses in which sole proprietors and partnerships purchase the local rights to a trademark corporation EX- McDonalds EX- McDonalds

Organized Labor Labor Unions Labor Unions Organization of workers who come together to engage in collective bargaining with employers Organization of workers who come together to engage in collective bargaining with employers Collective Bargaining- Negotiating wages and working conditions as a group rather than as individuals Collective Bargaining- Negotiating wages and working conditions as a group rather than as individuals Craft Unions Craft Unions Groups of skilled laborers of the same occupation (NEA) Groups of skilled laborers of the same occupation (NEA) Industrial Unions Industrial Unions Workers within the same industry who may be of various skill levels (United Auto Workers) Workers within the same industry who may be of various skill levels (United Auto Workers)

Settling Disputes Between Labor & Business Mediation Mediation A neutral 3 rd party gets involved to help labor and employers come up with a solution A neutral 3 rd party gets involved to help labor and employers come up with a solution Arbitration Arbitration Involves a 3 rd party whose decision is legally binding Involves a 3 rd party whose decision is legally binding Strike Strike When workers refuse to work until owners meet their demands When workers refuse to work until owners meet their demands Lock-Out Lock-Out Employees are not permitted to return to work Employees are not permitted to return to work

Anti-Trust Laws Anti-Trust laws were passed to prohibit monopolies Anti-Trust laws were passed to prohibit monopolies Social Security Act (1935)- Provided income for retirees and widespread unemployment benefits Social Security Act (1935)- Provided income for retirees and widespread unemployment benefits National Labor Relations (1935)- Gave employees the right to join unions without interference from employees and to choose representatives for the purposes of collective bargaining National Labor Relations (1935)- Gave employees the right to join unions without interference from employees and to choose representatives for the purposes of collective bargaining Fair Labor Standards Act (1938)- Laws restricting child labor, establishing a minimum wage, and regulating workplace safety Fair Labor Standards Act (1938)- Laws restricting child labor, establishing a minimum wage, and regulating workplace safety Taft-Hartley Act (1947)- Prohibited closed shop rules that forced employees to hire only union workers Taft-Hartley Act (1947)- Prohibited closed shop rules that forced employees to hire only union workers

Investment Decisions Made by Individuals, Businesses, & Gov’t (8.08)

Investments Mutual Funds- Money pooled from a number of investors to buy a range of stocks Mutual Funds- Money pooled from a number of investors to buy a range of stocks Investors money is dispersed among several companies Investors money is dispersed among several companies Pension Funds- Mutual funds set up by employers to allow their employees to save for retirement Pension Funds- Mutual funds set up by employers to allow their employees to save for retirement Capital Investment/Investment Spending- The use of household saving to buy capital for the business Capital Investment/Investment Spending- The use of household saving to buy capital for the business Reserve Requirement- The amount of money banks are required to keep on hand Reserve Requirement- The amount of money banks are required to keep on hand

Banking System Time Deposit- Accounts that individuals only have access to after a set amount of time (CDs) Time Deposit- Accounts that individuals only have access to after a set amount of time (CDs) Demand Deposit- Accounts that earn little interest but are available immediately Demand Deposit- Accounts that earn little interest but are available immediately Credit Cards- Card used as a loan to defer payment to a later date Credit Cards- Card used as a loan to defer payment to a later date Debit Cards- Looks like a credit card by serves the same function as writing a check Debit Cards- Looks like a credit card by serves the same function as writing a check Commercial Bank- Financial institutions whose main functions are to receive deposits of money, extend credit,, and provide loans Commercial Bank- Financial institutions whose main functions are to receive deposits of money, extend credit,, and provide loans

Banking System (cont.) Savings and Loan Associations- Saving institutions designed to aid home building (Mortgages on homes) Savings and Loan Associations- Saving institutions designed to aid home building (Mortgages on homes) Credit Unions- Cooperative associations that serve only their member (SECU) Credit Unions- Cooperative associations that serve only their member (SECU) Federal Deposit Insurance Commission (FDIC)- Created by the Gov’t to make sure all banks, credit unions, and savings and loan association are able to cover their deposits Federal Deposit Insurance Commission (FDIC)- Created by the Gov’t to make sure all banks, credit unions, and savings and loan association are able to cover their deposits

Types of Insurance Life- Provides money to one’s family if one dies Life- Provides money to one’s family if one dies Health/Medical- Meant to cover health and medical expenses Health/Medical- Meant to cover health and medical expenses Comprehension- Cover a much wider range of catastrophes Comprehension- Cover a much wider range of catastrophes Used by businesses to make sure things do not happen on their property or against their property Used by businesses to make sure things do not happen on their property or against their property Liability- Protection from claims arising from injuries or damage to other people or property Liability- Protection from claims arising from injuries or damage to other people or property

Role of Money in Trading, Borrowing, and Investing (8.09)

Economic Exchanges Currency- Coins or notes used in exchange of goods Currency- Coins or notes used in exchange of goods Coins- Metal currency Coins- Metal currency Checks- Authorizes a transfer of funds from funds from a checking account Checks- Authorizes a transfer of funds from funds from a checking account Legal Tender- Promises of the Gov’t that a piece of paper has a specific value Legal Tender- Promises of the Gov’t that a piece of paper has a specific value

Functions of Money Medium of Exchange- Money was assessed a value and used in exchange for any number of goods in a market place Medium of Exchange- Money was assessed a value and used in exchange for any number of goods in a market place Collateral- Anything of value that can be used to cover the value of loan should one be unable to pay Collateral- Anything of value that can be used to cover the value of loan should one be unable to pay Credit- Defers payment to a later date with interest Credit- Defers payment to a later date with interest Barter- Trade goods you possess for those you want Barter- Trade goods you possess for those you want Interest Rates- Amount paid to a lender in exchange for using the lender’s money Interest Rates- Amount paid to a lender in exchange for using the lender’s money