View
220
Download
0
Category
Tags:
Preview:
Citation preview
Economics- Money Matters
Economics1. A social science- deals with
production of goods and services
2. With limited or scarce resources
3. For consumption now and into the future
Factors of Production1.Land- natural resources
2.Labor- people
3.Capital- machinery/technology
4.Entrepreneurship- profit
Cost• Cost- what someone gives up to
get something else
• Cost is subjective- what is in your mind when you make a decision
• There is no value in a good without subjectivity
• Opportunity Cost- what did you give up to do something?–Time, opportunity, relationships
Currency Rates• Increase in U.S demand for
Japanese goods will increase the demand for yen and raise the dollar price of yen
• When the dollar price of yen increases, the dollar has depreciated=Japanese goods more expensive
New Economy• Technology advances
wealthy countries and raises global competition
• Negative side- Takes fewer workers to produce the same quality of output
Law of Scarcity• Problem
1. Unlimited wants and needs
2. Limited/Scarce resources
• Law of scarcity applies• Economics is concerned with
doing the best with what we have
How a society runs an economy
1. Adam Smith• Laizze-Faire- no government
involvement in economics• Capitalism- businesses set the tone,
hire more people and spend money• Need entrepreneurs to kick start this• Lasted from 1776-1929
How to Save Smart1. $1000 Emergency Fund
2. Pay off all debt except a house
3. 3-6 Months expenses in savings
4. Invest 15% of your money into ROTH IRA plans
5. Pay off your home
6. Build Wealth
Bargains• The key to opening the door to huge
bargains is to negotiate everything–Everything is negotiable at some point
• To get a deal, make sure you know more than the other person
6 Rules of Negotiating
1.Always tell the truth2.Use the power of cash
• It is emotional• It is visual• It has immediacy
6 Rules of Negotiating
3. Use Walk Away Power
4. Shut Up!
5. “That’s not good enough”
6. “If I take away” Technique
Where to Find Deals• Flea Markets
• Ebay
• Conventions
•Individuals•Public Auctions•Coupons•Garage Sales
Comparative Advantage• What happens when you produce
too much?• Answer: Trade (The best way to
have economic growth)• Downside to trading- dependency• Biggest U.S trading partner-
Canada
Global Competition• U.S accounts for 13% of all
trade worldwide
• Major export- Chemicals (and people)
• Major Import- Oil
Global Competition• Major world traders
1. U.S, Japan and Germany- 2.9 Trillion in exports
2. Middle East- Oil
3. Asian Tigers- China, India
Global Competition• Nations trading together will be using
their scare resources more effectively• Free trade
1. Promotes Competition
2. May lower prices
3. More goods available
4. Improve product quality
Global Competition• Definition: The integration of industry, commerce, communication, travel and culture among countries
Global Competition• Pros
1. Increased trade=more competition on U.S Businesses
2. Lower production costs=cheaper products• Cons
1. If you cannot lower production costs=lose market share/employment
2. Outsourcing
How to Invest• The key to investments is
interest rates
• You want your money to make money for you
• The higher the possible interest rate, the greater the risk
Investment Options1. Money Markets (C.D)- Get
from banks• Very low risk with check
writing privileges• Great for emergency
savings
Investment Options2. Single Stocks
• Very high risk
• When you buy stock, you are buying a small piece of ownership in the company
• Your return comes as the company increases in value or pays you some of its profits
Investment Options3. Bonds• A bond is a debt instruments by
which the company pays you money.
• Your return is based on changing interest rates= BAD IDEA
Investment Options4. Mutual Funds- Investors pool
their money to invest• Portfolio managers manage the
pool or fund• Your return comes as the value of
the fund is increased• Great long term options
Recommended