Investments

1
Investments the Stock Market

• Objective 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 goodsrefrigerators,
  boats, etc.
• If the Federal reserve lowers the discount rate
• Consumer credit becomes less expensive
• Consumers buy more expensive goodscars, 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?

• Bondsloans made by the investor to the issuer
  the investor is repaid with interest
• Corporate Bonds
• Municipal Bonds
• Treasury Bonds
• US Savings Bonds
• Futuresagreement to buy or sell a commodity
  (oil, gold, etc.) at some point
• Mutual Fundscombination of individual stocks
• Stocks, Bonds, Futures, and Mutual Funds are
  called Securities.

6
The Stock Markets 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
• NASDAQvirtual exchange

7
The Stock Markets 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 wont 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 storesa shift in
  jobs is required. More people are needed in
  order fulfillment and customer service.
• Goods are manufactured just-in-timeas they are
  needed for distribution.