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