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Understanding the U.S. Economic System: Financial Markets and Institutions

This chapter delves into the U.S. economic system, focusing on the vital role of financial markets and institutions. It discusses mechanisms for trading stocks, bonds, and commodities, including prominent exchanges like the New York Stock Exchange and NASDAQ. The section covers various financial institutions, from commercial banks to investment bankers, and their roles as intermediaries between savers and borrowers. Additionally, it explores business and government incentives that motivate financial behaviors, ultimately shaping personal finance management for consumers and workers alike.

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Understanding the U.S. Economic System: Financial Markets and Institutions

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  1. Chapter 1 Section 2 The U.S. Economic System

  2. Financial Markets • Mechanism that provides the means for purchasing and selling stocks, bonds, commodities, and other financial instruments. • New York Stock Exchange • NASDAQ • Commodities – Fungible • Derivatives

  3. Financial Institutions • Commercial Banks • Credit Unions • Savings and Loan Associations

  4. Non-Depository Institutions • Act as an intermediary between savers and borrowers. • Securities Exchange Commission (SEC) • Insurance Companies • Investment Bankers • Mutual Fund • Brokerage Firms

  5. Business Incentives • How do incentives affect how you manage your personal finances? • Encourages specific behavior and helps to motivate individuals to take specific action • Workers – rewards, wages • Consumers – sales, loyalty programs

  6. Gov’t Incentives • Producers – no taxes or lower taxes • Savers and Investors – tax deferment, tax free • Citizens – tax deductions, tax credits

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