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 discount interest rate
Puts money into circulation
Removes money from circulation

3. 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.

4. 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

5. 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.

6. 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

7. 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).

8. 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.

9. 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.