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Economic Systems and Institutions

Economic Systems and Institutions. KCCT Coach Chapter 9. Size of Economic Systems. ECONOMY refers to the structure of the management of resources Generally, when you hear people speak of “the economy”, they are referring to the NATIONAL ECONOMY

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Economic Systems and Institutions

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  1. Economic Systems and Institutions KCCT Coach Chapter 9

  2. Size of Economic Systems • ECONOMY refers to the structure of the management of resources • Generally, when you hear people speak of “the economy”, they are referring to the NATIONAL ECONOMY • ECONOMIC SYSTEMS can be large or small—for a country or just one person

  3. Size of Economic Systems • Any entity that has and uses resources has an economy • this includes Countries, States, Cities, Households, Businesses, and individuals • a BUDGET is a plan for the management of the resources for an economy • you can BUDGET money, time, people, water, oil, etc. (any resource)

  4. Please select a Team. • Toxic wasters • Globe trotters • Awesome As • Pretty Purple Princesses • Rockstar M&Ms • Golden Cobras Response Grid

  5. Which economy is largest? • individual • city • state • national Response Grid

  6. A budget is a type of: • economy • plan • currency • product Response Grid

  7. Participant Scores

  8. Financial Institutions • a FINANCIAL INSTITUTION is an establishment dedicated to helping individuals and businesses to manage money • the most common form of FINANCIAL INSTITUTION is a BANK

  9. Custody of Funds • BANKS offer a safe, secure place to keep your money • Most people DEPOSIT (place in the custody) their paychecks in banks • Keeping your money in the bank prevents robbery and also reduces the temptation to spend your money

  10. Loaning Money • One way banks make money is by issuing LOANS (they let people borrow money) • Loans are amounts of money lent that are paid back with INTEREST (a charge for borrowing money)

  11. Exchanging Currency • Banks keep all DENOMINATIONS (sizes) of money on hand • Denominations include bills and coins • banks will exchange money for you • banks will also exchange US currency for foreign currency

  12. Issuing Money • banks also issue money—usually when people cash checks • a CHECK is a promise of money from one person/organization to another • when a check is brought to a bank, the teller checks to see if the writer’s account can cover the amount • checks eliminate the hassle of carrying large amounts of cash

  13. Extending Credit • CREDIT is an amount of money a person is allowed to spend, provided they pay it back in a timely manner • Credit can be given in the form of a loan, on CREDIT CARDS, or on a “tab” • CREDIT CARDS authorize the holder to spend a certain amount of money and repay it with INTEREST

  14. A bank is one type of financial institution. Which of the following is another type of financial institution? • grocery store • department of public utilities • investment company • realty agency Response Grid

  15. Which of the following can you NOT do at a bank? • deposit money • withdraw money • buy something • apply for credit Response Grid

  16. A bank will issue you money if you present them with a valid… • form of identification • check • loan • denomination Response Grid

  17. Team Scores

  18. Free Enterprise and Profit • the US economic system is based on FREE ENTERPRISE (private businesses are free to organize and operate for profit in competition with other businesses without strict government control) • the only government control is to protect the public interests

  19. Profit • In a free enterprise system, businesses seek to earn a PROFIT (the difference between the cost to produce the product or provide the service and the REVENUES) • REVENUE is the full amount of money received

  20. Loss • In some cases a business is not able to sell its product/service for a PROFIT. • If the product/service is sold for less than the production cost, then the business takes a LOSS • The goal in a free enterprise system is to maximize PROFITS and minimize LOSSES

  21. Marketing • when businesses compete in a free enterprise system, they sell the same or similar products/services to the same MARKET, or group of people to whom the product/service is readily available for purchase • the goal is to get your target MARKET to buy from you and not your competition

  22. Market Competition • the most common way businesses compete is through pricing. The goal is to under price your competition, but still make a profit • Businesses also compete through service quality—they will also offer WARRANTIES (guarantees) on their products.

  23. You are a manufacturer of tires. It costs you $30 to make a particular model of tire, which you sell for $50. What is your profit? • $20 • $30 • $50 • you take a loss, not a profit Response Grid

  24. The most common way businesses compete with each other is through… • government regulation • offering completely different products • pricing • eliminating profits Response Grid

  25. Racing Leader Board

  26. Which group faces competition in a free enterprise system? • stores • manufacturers • service providers • all of the above Response Grid

  27. You are a plumber. Your expenses for fixing a sink total $35. You charge the customer $55 for the repair. What is your revenue? • $20 • $35 • $55 • you do not have a revenue in this transaction Response Grid

  28. Quality Clocks produced a digital clock for $10 and tried to sell it for $15. Unfortunately, nobody wanted to pay that much for the clock, so they finally had to drop the price to $8 to sell it. This means that Quality clocks took a loss of how much? • $2 • $5 • $8 • $10 Response Grid

  29. Team MVP

  30. Which of the following would you do at a bank? • buy products • print currency • apply for a loan • make a profit Response Grid

  31. Which of the following would have the smallest economy? • Nation • Household • County • State Response Grid

  32. Free enterprise means that businesses… • rely on the government to set prices • try to take a loss • compete with one another • try to avoid revenues Response Grid

  33. Fastest Responders (in seconds)

  34. It cost you $11 to produce a widget. Which price would result in your taking a loss? • $10 • $11 • $12 • $20 Response Grid

  35. Which of the following statements is true? • individuals and households can have budgets • only the federal government has a budget • only government entities have economies • individuals and households do not have economies Response Grid

  36. Racing Leader Board

  37. Which of the following is NOT a financial institution? • investment advisement agency • bank • meat market • savings and loan company Response Grid

  38. What percentage of your current points would you like to wager on the next question? • 0% • 25% • 50% • 75% • 100% Response Grid

  39. Revenues are equal to… • the losses taken by the business • the prices paid by customers • the profit taken by the business • the taxes paid by the business Response Grid

  40. Racing Leader Board

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