C. both A and B

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Monday, March 26

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You, the Consumer

By Cindy Grigg

Every time you buy something, you are sending a message. The message is "This is a good product; keep making it." Whenever you buy food, snacks, music, clothing, or other items, you send a message to producers to use the resources out there for the things you like best.

You are already an important part of the economy. You may make money by doing chores. Some of you may already have part-time jobs. When you use your money to buy something to use yourself, you are a consumer. The economy depends on consumer purchases to keep going. If everyone all of a sudden decided not to buy things anymore, the economy would stop.

All of us use goods and services. Through time, economic systems have developed to meet individuals' needs for food, clothing, shelter, entertainment, medical care, and the many other things that people buy. Economic systems evolved to serve consumers.

Consumers can be people like you. Consumers can also be businesses and governments. Businesses that use resources such as wood, steel, or energy to make products are consumers of those resources. Government agencies also purchase goods and services.

Economic systems exist to answer three questions. First, what will be produced? Next, what land, labor, raw materials, and machines will be used in production? And third, who will receive the goods and services produced?

The United States has a market system. Most people work to earn money and use it to buy the things they need and want. Consumers are very important to the economy in deciding what will be produced. Unless consumers buy what products are offered for sale, producers will have no money to buy the raw materials and pay for the labor they need to produce more goods or services.

Smart consumers look for information about goods and services available and get the best bargains possible. You have already had years of experience spending money! You already know that no one has all the money to buy all the things he or she would like to have. This is called scarcity. Scarcity can be a lack of money. Scarcity also means that there is not enough of a product to allow everyone who wants it to buy it. Resources used to make products are scarce. The things you want are produced with resources that could also be used for other things instead. The market system balances your wants with the wants of others, as well as with all of the costs involved in producing and selling things.

Let's say you now have enough money to buy a pair of expensive sneakers you've been wanting. You are free to spend the money any way you choose. You realize that the money could be spent for other things you want. Suppose you could buy ten new music CD's for the same amount of money. Economists call this kind of a trade-off opportunity cost.

In this example, the opportunity cost of one pair of expensive sneakers is ten music CD's. The opportunity cost of ten music CD's is one pair of sneakers. Of course, there are other alternatives as well. The market system in a society like the United States offers many choices. The smart consumer considers all the alternatives, recognizes the opportunity cost of any one choice, and makes a decision. Your choice, along with other consumers' choices, sends a message to producers. If you and most other consumers choose not to spend that much money on sneakers, you are telling the producer to stop making the sneakers or to make them available at a lower price.

Consumers are powerful and important in an economic system. Your consumer choices are limited by the amount of money you have available for spending. Consumers try to get the most for their money. Consumers are telling producers what cost, quality, and features are most important to you. If you choose to buy one pair of sneakers rather than ten CD's, you are telling producers to make more sneakers and fewer CD's because buying

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the sneakers means you can't buy the CD's.

Government, businesses, and consumers are all big spenders in the U.S. economy. Consumer spending is the largest part of the economy. It is consumer spending that keeps factories producing goods and keeps workers employed. As individual consumers, we may not have much power. But together we are the force that keeps the economy going. Producers must consider consumer demands when deciding what to sell and how much to charge for their goods. By buying or not buying a particular good, you are sending a message to the producer of that good. Consumers are powerful!

You, the Consumer

Questions

1. When consumers buy a particular product, what message are they sending to producers? A. This is a good product; keep making it. B. Use the resources available to make this product. C. The price is reasonable for this product. D. all of the above

2. What is a consumer? A. Individuals who buy goods and services for their own use B. Businesses who buy goods and services to use, making products to sell C. Government agencies that buy goods and services to use D. all of the above

3. In an economic system, what are the three questions that must be answered?

4. What type of economy does the United States have?

5. What is opportunity cost?

A. the value or cost of choosing one thing over another B. the trade-off you make when you choose to spend money for something C. the value you give up in a buying choice D. all of the above

6. Consumers' choices are limited by:

A. scarcity of goods B. scarcity of money C. both A and B D. none of the above

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7. What keeps factories producing goods and workers employed?

Date

8. Whose spending is the largest part of the U.S. economy?

A. government B. consumer C. business D. all of the above

9. Suppose a factory makes "widgets" and no one buys widgets anymore. What will happen to the factory?

A. It will make lots of money and hire more employees. B. It will lose money and lay-off or fire employees. C. It will keep making as many widgets as it can. D. all of the above

10. What do all smart consumers try to do?

A. get the best bargains they can for their money B. spend as much money as they can because it helps the economy C. always buy the cheapest product D. save all their money and not spend any of it

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Tuesday, March 27

Date

How Does a Savings Account Work?

By Sharon Fabian

For many young people, a savings account is their first banking experience (unless you count those lollipops you got at the drive-up window with Mom or Dad). A bank account in which children deposit money and watch their savings grow can be an early lesson in the importance of making good financial decisions.

For teens, savings accounts can be especially important once they begin to earn money on their own. Those savings accounts might represent savings for a first car or for a college education. And for adults, savings accounts are a practical way to save for occasional large expenses such as an unexpected plumbing repair or a family trip to watch your favorite football team compete in a big game. So it is probably a good idea to know something about how a savings account works.

First of all, do you know what the bank does with your money after you deposit it? Banks don't just keep your money locked up in their safe until you ask for it back. They loan it out to other people. The money you deposit in your account might be passed on to someone for a new car loan or for a mortgage on their first house. From many years of doing business, bankers know how much money they will need to keep on hand for day-to-day business and how much they can lend out.

But why do the banks lend out your money? It is how they stay in business. When banks loan someone money, they charge interest - the interest they receive is their income.

Banks also pay interest to the people who keep their savings in their bank, but it is always a smaller amount than the interest they charge on their loans.

The amount of interest you can earn on a savings account has changed over the years along with the economy. When the economy is booming, banks can pay higher interest. When the economy is slow, banks pay less interest. Interest on a savings account has ranged from several percent to less than one percent.

The interest you earn on a savings account might not be much, but still it's free money - money that you wouldn't have had if you kept your money in a piggy bank on your dresser. And there are ways to earn even more money on your savings. Money Market Accounts and Certificates of Deposit are other types of savings plans that many people use. These plans pay more interest, but they have drawbacks, too. For example, you usually need a bigger deposit to open one, and you may have to wait months before you can take your money out.

If you are thinking about opening a savings account for the first time, you may wonder if your money will be safe in the bank. The answer is yes; savings accounts are one of the safest ways to save money. The money you deposit in a savings account is insured by an agency called the Federal Deposit Insurance Corporation, or FDIC for short. You can $100,000 in a bank, and the FDIC will guarantee its safety. And the money that banks do keep on hand is kept locked up in a huge safe, protected from robbers much more securely than that piggy bank in your bedroom.

You're also a little bit less likely to spend money once you've deposited it in a savings account. It is still there for when you really want to use it, but it's not burning a hole in your pocket. Putting money away in a savings account from time to time can give you the feeling that you are making progress, saving for your future.

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How Does a Savings Account Work?

Questions

1. A savings account ______.

A. pays you some interest B. pays higher interest than a Certificate of Deposit C. charges you interest D. pays you high interest

2. According to this article, ______ can be a good habit to get into.

A. saving money in a bank B. saving money at home C. loaning money D. borrowing money

3. A savings account could be used for ______.

A. saving money so you won't spend it so quickly B. saving for a video game player C. saving to buy birthday presents D. all of the above

4. The amount of interest banks pay on savings accounts ______.

A. is always 2% B. varies C. is never more than 1% D. is usually about 0.5%

5. Which of the following is NOT a way of saving money in a bank?

A. Money Market Account B. savings account C. mortgage D. Certificate of Deposit

6. The FDIC is an agency that ______.

A. insures savings B. loans money C. pays interest on checking accounts D. operates banks

7. Why do banks loan money and pay interest on savings accounts?

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8. If you wanted to have a savings account, what do you think you would have to do first?

Write about something that you would like to have or do in the future - something that would be worth saving for.

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Wednesday, March 28

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How Does a Checking Account Work?

By Sharon Fabian

A checking account is one of the many different accounts that banks offer. A checking account usually pays no interest, or very little, so it's not the best place to put your hard-earned savings. What it does offer is convenience. A checking account is useful for money that you will be spending soon. Many people use a checking account to pay their everyday bills.

With a checking account, you can deposit money in the bank. Then when you are ready to spend some of it, to pay your electric bill for example, you write a check. You send the check to the electric company. When the electric company cashes the check, the bank takes money out of your account and gives it to them.

What bank should you choose for your checking account? That's up to you, but there are a few things you might want to consider. One thing is the bank's location; does the bank have a branch at a convenient location near your home or work? Another thing is the bank's schedule; is it open at hours when you will be able to get there? You also might want to consider whether the bank has an online banking option or even online bill paying. And it's a good idea to find out whether the bank offers a free checking account or whether there will be fees to pay.

There are also online banks that have advantages and disadvantages of their own. An advantage of some online banks is that they might pay a small amount of interest on a checking account. A disadvantage is that there is no one you can visit in person to talk to about your account.

Once you have an account, you will need to make deposits and write checks. You might also have direct deposits made to your account. And you might use a debit card or online banking to spend your money.

You will probably use a check ledger to keep track of the money in your account. The ledger is the little account book that comes with your checks. Every time you put money into your account, you write the amount in your ledger and add it to your previous total. Every time you spend money from the account, you write in the amount and subtract.

It is important to keep a good record of the money in your account. This way you will always know how much money you have left to spend. It will also help to prevent you from bouncing a check. Bouncing a check means writing a check for more money than you have in the bank. In this case, the bank can't cash the check, so people say that it "bounces" back.

Some checking accounts come with a feature known as overdraft protection. Overdraft protection is like a small loan that is attached to your checking account, but you only borrow the money when you actually need it. If you have overdraft protection and accidentally write a check for more money than you have in your account, that amount of money is loaned into your account so that your check can be cashed. But if you choose to have overdraft protection, be careful because banks may charge high fees for this service.

Debit cards are another extra that come with many checking accounts, and they have pros and cons, too. They are convenient and easy to use, and if you have a debit card, you may rarely need to carry cash. However, it can be difficult to keep track of your spending with a debit card. If you don't keep your check ledger up to date with every debit card purchase, it is easy to overspend. Also, debit cards can be stolen.

Whichever kind of checking account you choose, one good thing to do is to take a careful look at your account each month. Look over the monthly statement that the bank provides. Check to be sure that it matches your own records.

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A checking account can be a very useful tool. It can help you pay your bills and manage your finances. A checking account is also a responsibility, and knowing how a checking account works is the first step toward managing your account well.

How Does a Checking Account Work?

Questions

1. You can open a checking account by ______. A. going to a bank B. going to an online bank C. both A and B D. neither A nor B

2. Checking accounts are especially useful for money that you want to ______. A. save for one or two years B. use to pay bills C. spend at fast food restaurants D. save for many years

3. You can take money out of your checking account to pay a bill by ______. A. writing a check B. using a debit card C. using online banking D. all of the above

4. All checking accounts are free. A. false B. true

5. Checking accounts never pay interest. A. false B. true

6. A ledger is ______. A. a bank official B. another name for a check C. a type of debit card D. an account book

7. Explain one advantage and one disadvantage of having overdraft protection on your checking account.

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