Civics
what are the functions of the fed
1.) Regulates the Money supply 2.) Providing financial services to banks, in which it circulates currency, lends funds, and clears checks 3.) It is the governments banker and financial advisor 5) keep unemployment rate stable
There are a_______ fed reserve banks in the U.S
12
A ___ has unlimited withdraw but a ____ account is limited to 6 per month
Checking ; saving
Explain how market economies relate to democracy.
Citizens have choice of what to produce/consume Both democracy and market economies have choice
currency
Coins and paper bills used as money
mandatory spending
Required govt spending by permanent laws
What happens if you can't pay back a loan
The bank repossesses what you bough with the loan, it ruins your credit score, or your bill is sent to the debt collector
why do consumers agree to let banks use their money
The bank shares profits with savings account holders through earned interest. They earn interest from the loans, then spread money through customer
What would happen if no one paid back loans
There would be a recession
What happens when incentives are poorly designed? Give an example.
They get the opposite effect they want If unemployment paid more then your paycheck, you wont get a job because you get more money. The incentive would be the lack of feeling back and the intention was to make people stress free and find a job quickly, but people wouldnt get jobs if they got more from not working
Explain how supply, demand, and scarcity relate to inflation.
When demand is high due to low loan interest rates, but if there isn't enough of what they want (supply). If there is enough the economy is Greta, but if there isnt then there is scarcity. If there isnt enough of what a lot of people want, it goes to whoever would pay the most, meaning the price goes up Scarcity: high demand and low supply When's supply doesnt meet demand they need to hire more people, but when they cant hire people or make more, thats when inflation happens If there's only 1 dollar in the economy, then one penny gets you alit of things If theres a million dollars, then that dollar isnt worth muchsu Supply cant meet demand and too much money is in the economy
What are advantages of credits/loans
You can use it as an investment, save money in the short term, get your credit up, and wait to pay
What are the disadvantages of credits/loans
You pay more then what your buying is worth, and some things depreciate in value
Inflation
a general increase in prices and fall in the purchasing value of money.
federal budget
a plan for the federal government's revenues and spending for the coming year
money
anything that serves as a medium of exchange, a unit of account, and a store of value
Explain the federal budget. How is it determined? What is the national debate surrounding it?
How much money the government spends a year and how it is allocated (how much it takes in and sends ) Mandatory: social security, what must be spent Discretionary spending: optional, what isnt neeeded Interest on loans They debate over what should be funded and what should need The role of government is what is also argued about
How/why does the fed raise and lower interest rates
If a bank need money, they get loans from federal reserve the fed charges an interest rate to the bank, (the discount rate) the banks need to pay interest to the federal reserve, but if the fed raises the discount rate, they increases the consumer rate so that they dont lose money
Having a bad credit score can impact the ______ rate of your loans and creditcards
Interest
How do banks earn a profit? How do bank accounts factor into that
Interests from loans, and banks loan out money in savings accounts. They profit from giving out loans with interest, and using money from customers savings account
Give an example of how spending money makes money
Investments (businesses), houses, student loans with high earning degrees
checking account
A bank account from which payments can be ordered by a depositor
bond
A financial security that represents a promise to repay a fixed amount of funds
interest rate
Percentage of amount borrowed to be added to the amount loaned and paid back
What ways can you acess money from a checking account
checks, debit cards, or ATMs
Credit reporting bureaus
companies that keep track of your credit history
How does the fed moderate the economy
interest rates prices unemployment
investment
the action or process of investing money for profit or material result.
credit
to believe that someone will do something( the score is the likelihood of you paying it bacK)
Checks
written orders to a bank to pay a certain amount of money from a checking account to another person or business
credit counseling
A service to help consumers manage their debt load and credit more wisely.
surplus
A situation in which quantity supplied is greater than quantity demanded
deficit
An excess of federal expenditures over federal revenues.
discretionary spending
Federal spending on programs that are controlled through the regular budget process
Why would the federal reserve want interest rates raised or lowered?
High interest rates lower popularity. If the rate is high, they wont want to spend the loan, becuase of how expensive it is. High interest rates make people not want to spend money Low interest rates make people want to spend money They want to control the money in circulation, and if spending is too high it causes inflation
What role does the government play in controlling banks
Set interest rate make laws set up federal reserve
reserve requirement
The amount of money required to keep at banks
What is a credit score? Who tracks them? Explain why this is important to track
The credit you build up, based on how trustworthy you are, or the capability of you parying back loan, low credit score means you are risky or there isnt much info The credit reporting bureaus measure these, but they cant help you fix your creditThey know if they should give out loans to you, as if your risky and then they dont get their money back, leading to a recessions. You need to track it because of where you spend your money
Explain how federal, state, and local taxes support the economy and provide services to citizens
The government provides schools military police infrastructure Oyu cant do business without protection They support the basic systems we need from the taxmoney
How does the government borrow money?
The government sells bonds Securities- bonds- treasury bills- They sell. A treasury bill which is a kind of bod which is a kind of securiyty Sells them to pay back w interest An IOU Like a loan, but it's paid back at once Citizens can buy treasury bills
discount rate
The interest rate on the loans that the Fed makes to banks
Why are incentives important for Market Economies? Give an example an incentive
The main incentive of consumers is prices and the superiority of the product (innovative products and low prices)+ qualiry Main inventive of a product is profit. The base motivation is money. They can consume more things with the profit they make. It makes ppl continue to consume and product, with bolsters supply and demand Example: tax subsidy's : if the government gives money to those who makes solar panels, a company is more willing to produce things. Example: retirement money, like if you pay your taxes you get more money