1. 2.03 PowerPoint
Objective 2.03 Explain how the Federal Reserve, Stock Market, and e-commerce impact the United States’ economic system.

2. The Federal Reserve Central Bank of the United States
Regulates the money supply in the US economy
Raises and lowers the interest rate
Puts money into circulation
Removes money from circulation

3. Federal Reserve System

4. Impact of the Federal Reserve
If the Federal Reserve raises the discount rate
Consumer credit becomes more expensive
Consumers buy fewer large goods —homes, cars, boats, etc.

5. Impact of the Federal Reserve
If the Federal reserve lowers the discount rate
Consumer credit becomes less expensive
Consumers buy more expensive goods
If you borrow $1000 at an annual interest rate of 4%, at the end of the year you'll owe $1040.

6. Interest Rate Examples:
If you borrowed $1,000 at an annual interest rate of 9%,
at the end of the year you would owe __________
If you borrowed $1,000 at an annual interest rate of 4%,
$1090
$1040

7. What are stocks? Shares of ownership in corporations
Corporations sell stock to raise capital for the corporation
How to make money on a stock:
Dividends from the corporation
Value of stock goes up

8. The Stock Market’s Purpose
The stock market is where shares of stocks, are bought and sold.
The stock exchange is the actual physical location where stocks are listed and traded.
New York Stock Exchange (NYSE)
NASDAQ—virtual exchange

9. The Stock Market’s Functions
Provides a way to issue shares of stock
Provides a place for the buying, selling and trading of stocks

10. Impact of the Stock Market on the Economy
Bull Market
Stock prices going up or rising
Consumers are optimistic and buy stock
Consumers buy goods and businesses prosper

11. Impact of the Stock Market on the Economy
Bear Market
Stock prices are going down or falling
Consumers are pessimistic and reluctant to buy stock
Consumers buy fewer goods and businesses may lose money.
Some workers may lose jobs.

12. Impact of E-commerce on the Economy
More choices in goods.
Global competition is increased
Fewer salespeople are needed in stores
More people are needed in order fulfillment and customer service.
Goods are manufactured JIT