Economics- Money Matters. Economics 1.A social science- deals with production of goods and services...
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Transcript of Economics- Money Matters. Economics 1.A social science- deals with production of goods and services...
![Page 1: Economics- Money Matters. Economics 1.A social science- deals with production of goods and services 2.With limited or scarce resources 3.For consumption.](https://reader036.fdocuments.in/reader036/viewer/2022062314/56649ee15503460f94bf19d0/html5/thumbnails/1.jpg)
Economics- Money Matters
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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
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Factors of Production1.Land- natural resources
2.Labor- people
3.Capital- machinery/technology
4.Entrepreneurship- profit
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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
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• Opportunity Cost- what did you give up to do something?–Time, opportunity, relationships
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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
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New Economy• Technology advances
wealthy countries and raises global competition
• Negative side- Takes fewer workers to produce the same quality of output
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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
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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
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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
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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
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6 Rules of Negotiating
1.Always tell the truth2.Use the power of cash
• It is emotional• It is visual• It has immediacy
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6 Rules of Negotiating
3. Use Walk Away Power
4. Shut Up!
5. “That’s not good enough”
6. “If I take away” Technique
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Where to Find Deals• Flea Markets
• Ebay
• Conventions
•Individuals•Public Auctions•Coupons•Garage Sales
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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
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Global Competition• U.S accounts for 13% of all
trade worldwide
• Major export- Chemicals (and people)
• Major Import- Oil
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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
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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
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Global Competition• Definition: The integration of industry, commerce, communication, travel and culture among countries
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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
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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
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Investment Options1. Money Markets (C.D)- Get
from banks• Very low risk with check
writing privileges• Great for emergency
savings
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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
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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
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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