© 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 9 1 Financial Institutions and Markets Individual Checking and Savings 9-1 Business Banking and Capital Markets 9-2 Labor Movement and Markets 9-3

© 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 9 2 L earning O bjectives 9-1 Individual Checking and Savings Explain how individuals use checking accounts, including the costs and benefits. LO1-1 Describe the purpose and types of savings plans, and interest earnings on savings. LO1-2 Evaluate the risks, costs, and benefits of maintaining accounts and using services of financial institutions. LO1-3

© 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 9 3 Vocabulary 9-1 Individual Checking and Savings Checking Accounts financial institution checking account reconciliation Savings Accounts savings account interest compound interest Banking Services debit card service fee

© 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 9 4 Checking Accounts Financial institutions are businesses that provide banking services to consumers and businesses. Commercial banks, savings banks, credit unions, savings and loans, and brokerage firms are all types of financial institutions. These businesses or institutions are frequently referred to as banks because you can deposit money into various types of accounts, such as checking and savings, and purchase certificates of deposit (CD). 9-1 Individual Checking and Savings

© 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 9 5 Checking Accounts A checking account is a demand deposit account where you can make withdrawals and deposit money. It provides a safe place to keep money. It is a demand deposit because account holders can quickly and easily access their money. Checking accounts are a low-risk way to manage your income and pay your bills. 9-1 Individual Checking and Savings

© 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 9 6 Checking Accounts Reconciliation is the process of verifying that the amount in your checking account matches the bank’s record of the amount in the account. Whether a monthly paper statement or an online statement is received, it is important to verify deposits, withdrawals, and the balance in the account. Errors can result in overdraft fees. With online banking, it is possible to check your balance daily to see up-to-the-minute changes in your account. 9-1 Individual Checking and Savings

© 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 9 7 Vocabulary CHECKPOINT Checking Accounts 9-1 Individual Checking and Savings financial institutions checking account reconciliation Why is it important to reconcile your bank account? It is important to reconcile so that errors can be detected along with possible fraud that occurs against bank accounts.

© 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 9 8 Savings Accounts A savings account is an account where you set aside money for future use. A savings account often has more restrictions than a checking account. For example, you may be limited by the number of withdrawals in a month. Savings accounts are insured by the FDIC. Savings accounts typically earn a low rate of interest. 9-1 Individual Checking and Savings

© 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 9 9 Savings Accounts Interest is the earnings you receive on your balance in an account. 9-1 Individual Checking and Savings Compound interest is interest that continues to accumulate on both principal and interest causing money in an account to grow at a more rapid rate.

© 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 9 10 Vocabulary CHECKPOINT Savings Accounts 9-1 Individual Checking and Savings savings account interest compound interest Why is it important to start saving early in your life? Money saved from an early age will grow larger and faster. People who wait until middle age to start saving won’t realize the same benefits of long periods of compounding of interest.

© 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 9 11 Banking Services A debit card is similar to an ATM card, except that it can also be used to make point-of-sale (POS) purchases at businesses. 9-1 Individual Checking and Savings A service fee is an amount of money charged for maintaining a checking account.

© 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 9 12 Vocabulary CHECKPOINT Banking Services 9-1 Individual Checking and Savings debit card service fee What is the purpose of a debit card? A debit card allows an account holder access to his or her money at ATMs and for point-of-sale transactions.

© 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 9 13 L earning O bjectives 9-2 Describe business banking, services, and accounts.LO2-1 Explain how savings lead to capital formation in an economy. LO2-2 Business Banking and Capital Markets

© 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 9 14 Vocabulary 9-2 Business Banking sweep account credit line relationship banking productions loan Savings and Capital Formation capital market commercial paper Business Banking and Capital Markets

© 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 9 15 Business Banking A sweep account is one that is used to cover a minimum balance. When funds drop to a pre-set level, money is automatically moved from a separate account to the main business account. The separate, or sweep account, is a business investment account where higher rates of interest are paid and where the account receives deposits of loan funds and other types of financing. 9-2 Business Banking and Capital Markets

© 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 9 16 Business Banking A credit line is a pre-arranged plan that allows a business to access funds from a lender as needed. 9-2 Business Banking and Capital Markets Relationship banking is an ongoing group of services provided by a banking service that involves assessing what a business has to offer to the bank and determining services and fees that can be offered to the business.

© 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 9 17 Business Banking A production loan is a loan made to a business that will be used to buy something that will help repay the loan. Because a production loan is less risky than a loan made to a consumer, interest rates are lower. Business loans are usually pre-arranged with the financial institution, similar to lines of credit. 9-2 Business Banking and Capital Markets

© 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 9 18 Vocabulary CHECKPOINT Business Banking 9-2 Business Banking and Capital Markets sweep account credit line relationship banking production loan How are consumer loans different from business loans? Consumer loans are more risky because consumers buy products and services that are personal in nature. Businesses buy items that will generate income to repay the loan.

© 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 9 19 Savings and Capital Formation Capital markets exist where businesses are able to go to finance operations as well as large purchases over long periods of time. 9-2 Business Banking and Capital Markets Commercial paper involves one corporation borrowing from the excess cash of another corporation.

© 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 9 20 Vocabulary CHECKPOINT Savings and Capital Formation 9-2 Business Banking and Capital Markets capital market commercial paper How does savings money lead to capital formation? Money that is saved by individuals is then available to financial institutions for loans to others. When businesses borrow it, it becomes “capital formation” because it allows the business to borrow money. Thus it is part of the capital (money) market.

© 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 9 21 L earning O bjectives 9-3 Labor Movement and Markets Explain the conditions that led to the need for labor unions in this country. LO3-1 Describe the formation of labor unions, laws passed, and the significance of the labor market in the free market system. LO3-2

© 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 9 22 Vocabulary 9-3 Labor Movement and Markets The Need for Labor Rights work conditions The Labor Movement labor union collective bargaining strike injunction closed shop union shop public employee union

© 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 9 23 The Need for Labor Rights Work conditions refers to the nature of the workplace and what is required for workers to succeed. Many factory and industrial jobs were unsafe. Because there were no laws protecting workers or their rights, workers often experienced serious injuries that could have been prevented. 9-3 Labor Movement and Markets

© 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 9 24 Vocabulary CHECKPOINT The Need for Labor Rights 9-3 Labor Movement and Markets work conditions What was it like to work in a factory in the 1800s? Life as a worker in the early factories could be described as long hours of hard work in an often unsafe working environment for low pay and benefits.

© 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 9 25 The Labor Movement A labor union is a legal group that is formed to represent workers for the purpose of collective bargaining. 9-3 Labor Movement and Markets Collective bargaining is the process of negotiating with employers on behalf of workers. Collective bargaining seeks to protect workers from unfair practices, as well as provide better pay and more favorable working conditions.

© 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 9 26 The Labor Movement A strike is a legal action of a union where members refuse to work until a labor agreement is reached. 9-3 Labor Movement and Markets An injunction is a court order requiring people to stop a certain activity. Most injunctions were issued to stop strikes and other organized activities by union members.

© 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 9 27 The Labor Movement A closed shop is a business that is required by union contract to hire only union members, meaning if individuals are not members of the union, they cannot be employed at that shop. 9-3 Labor Movement and Markets A union shop is a business that requires employees to join a union after they are hired. A public employee union is a union of employees who work for city, county, state, or federal government.

© 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 9 28 The Labor Movement An agency shop does not require union membership, however the employment must pay fees to the union to cover the collective bargaining process. Right to work laws make union and agency shops illegal. An employee can work without being required to have any union affliation.

© 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 9 29 Vocabulary CHECKPOINT The Labor Movement 9-3 Labor Movement and Markets labor union collective bargaining strike injunction closed shop union shop public employee union Why were labor unions needed in the 1800s and beyond in this country? Labor unions were needed to protect workers’ rights; to provide a safe environment and reasonable working conditions and pay.