Unit 9 US Economy

Financial Institution

businesses that provide banking services to consumers and businesses

Food and Drug Administration (FDA)

a federal agency responsible for regulating food and drug products sold to the public

Federal Trade Commission (FTC)

a federal agency established in 1914 to investigate and stop unfair business practices

Federal Communications Commission (FCC)

A federal agency that regulates interstate and international communication by radio, television, telephone, telegraph, cable, and satellite.

Environmental Protection Agency (EPA)

The US federal agency with a mission to protect human health and the environment.

Public goods and services

goods and services provided by the government because individuals acting alone could not provide them efficiently

examples of public goods and services

- interstate highways

- postal service

- national defense

ways government pays for public goods and services

- tax revenue

- borrowed funds

- fees

how the government influences economic activity

by taxing, borrowing and spending

effect of government tax increases

reduce funds available for private spending

effect of government tax decreases

increase funds for private spending

effects of increased government borrowing

reduces funds available for private borrowing

effects of decreased government borrowing

increases funds available for private borrowing

16th amendment

authorizes Congress to tax incomes

nation's central bank

Federal Reserve

functions of the Federal Reserve system

- maintain value of the national currency

- regulate banks

- manages the amount of money in the economy

- acts as the government's bank

Why does the Federal Reserve regulate banks?

to ensure the safety of the banking system and deposits

Why is it important that the Federal Reserve manages the amount of money in the economy?

to keep inflation low and prices stable

money

anything generally accepted as a method of payment

Why do people accept U.S. currency?

they have confidence in the government

three types of money

- coins

- currency (cash)

- deposits in banks accounts accessed by checks and debit cards

competition

the struggle among producers for the dollars of consumers

federal reserve system

the central bank of the U.S. where all other banks can borrow from

factor market

the arena of exchange in which firms purchase the factors of production from households. Also called resource market.

product market

the market in which households purchase the goods and services that firms produce

revenue

incoming money to a firm

expenditure

An amount of money spent.

income

money received, especially on a regular basis, for work.

salary

The money paid for employee services

firm

an organization that uses resources to produce a product, which it then sells in the product market.

household

a person who owns a resource to sell to a firm.

income tax

Tax paid to the state & federal governments based on income earned over the past year.

sales tax

A tax on a sale of goods or services to local & state gov't.

property tax

A tax on the value of a property, such as a house. Collected by local gov't/

Sole Proprietorship

a business owned and managed by a single individual

Partnership

A business in which two or more persons combine their assets and skills

Corporation

A business that is owned by many investors who own stock in the business.

self-assessment

an evaluation of your strengths and weaknesses; the first step in career planning.

circular flow diagram

a diagram that views the economy as consisting of households and firms interacting

factors of production

land, labor, capital, entrepreneurship. Also known as resources.

human capital

the skills and knowledge gained by a worker through education and experience

Fiscal Responsibility

Knowing what to do with your money - includes making careful decisions with your money, having insurance, maintaining a budget, saving and investing for the future, etc.

Functions of Money

medium of exchange, store of value, measure of value

Financial Institutions

Include banks and credit unions

Purpose of financial institutions

1. connect savers & borrowers, 2. provide capital to businesses, 3. Offer services like checking accounts and loans.

Discount Rate

The interest rate on the loans that the Fed makes to banks

Reserve Requirement

the percentage of deposits that banking institutions must keep and cannot loan

Government Securities (bonds)

When you buy this, you are lending money to the government. In exchange, the government promises to pay you back the money you lent, plus interest

Human Capital

The skills, education, training, and experience that makes a worker valuable.

Financial Responsibility

being able to meet your financial goals through planned earning, spending, and saving

public sector

the part of the economy that is controlled by the government

private sector

the part of the economy that involves the transactions of individuals and businesses to make a profit.

Equal Access

Everyone- no matter their gender, race, income, or background- has a fair chance to learn and succeed.

People with more education & job training...

usually earn higher incomes

Inflation

A continuous rise in the price of goods and services; it's a role of the Federal Reserve to control this.