IGCSE經(jīng)濟(jì)學(xué)課件(英文版)

IGCSE經(jīng)濟(jì)學(xué)課件(英文版)第一頁(yè)，共251頁(yè)。FactorsofproductionNaturalresources=landMan-maderesources=capitalHumanskillsandeffort=labourBusinessknow-how=enterprise第二頁(yè)，共251頁(yè)。Production

Usinginputs(resources)tomakeoutputs(goodsandservices)tosatisfytheneedsandwantsofconsumers第三頁(yè)，共251頁(yè)。Consumption

Usingupgoodsandservices(products)tosatisfyconsumers’needsandwants第四頁(yè)，共251頁(yè)。ThebasiceconomicproblemHumanwantsareunlimitedbutresourcesarescarce

第五頁(yè)，共251頁(yè)。So,weallhavetomakechoices

Thereisalimitedamountofresourcessuchasrawmaterials,machines,factoriesandskilledworkers.Butthereareanumberofdifferentwaysinwhichtheycanbeused.ResourceallocationthereforeinvolvesdecidinghowbesttousescarceresourcestosatisfyasmanyneedsandwantsaspossibleCHOICECHOICE第六頁(yè)，共251頁(yè)。ChoiceSimilarly,peopleandgovernmentsonlyhavealimitedamountofmoneybuthavemanyneedsandwantstosatisfy

$100

Food?Entertainment?Clothing?

Defence?Healthcare?Roads?$100bn第七頁(yè)，共251頁(yè)。OpportunitycostOpportunitycostisthecostofchoiceWhatwouldyoubuywithUS$10?HowshouldthegovernmentspendUS$250million?(Or,shouldthegovernmentcuttaxesbyUS$250million?)Whatoccupationwillyouchoosewhenyoufinishyourstudies?HowshouldanewbusinessinvestUS$20million?Shouldweconservemorenaturalresources?

…andwhatarethenextbestalternativesforegone?第八頁(yè)，共251頁(yè)。ProductionpossibilitycurvesAfirmproducingcarsandtrucksWhatistheopportunitycostofproducing20moretrucks?第九頁(yè)，共251頁(yè)。AneconomyproducingconsumergoodsandcapitalgoodsWhatistheopportunitycostofproducing15moretonnesofconsumergoods?Productionpossibilitycurves第十頁(yè)，共251頁(yè)。Productionpossibilitycurves

Productionpossibilitycurves(PPCs)showthemaximumcombinedoutputoftwoormoreproductsafirmoranentireeconomycanproducewithitsavailableresourcesResourcesarebeingusedefficientlyiftheyareproducingtheirmaximumoutputBut,becauseresourcesarelimited,producingmoreofoneproductmeansproducinglessofanotherPPCsarethereforeausefulwayofshowingtheopportunitycostofproducingmoreofoneproductintermsofhowmuchofanothermustbegivenup第十一頁(yè)，共251頁(yè)。IGCSE?/OLevelEconomics

2.1EconomicsystemsS2第十二頁(yè)，共251頁(yè)。

ResourceallocationBecauseproductiveresourcesarescarcerelativetohumanwantswemustdecide:Whattoproduce?Howtoproduce?Whotoproducefor?Shouldweuseresourcestoproduceasmanyconsumergoodsaspossibleorallocatesomeresources,forexample,tobuildnewroadsortoprovidebetterhealthcare?Whattoolsandmachinerywillbeneeded?Howmanyworkerswillberequiredandwhatskillswilltheyneed?Isitcheapertoemploymorelabourormoremachinery?Shouldpeopleinthegreatestneedgetthegoodsandservicestheyrequire?Orshouldtheybeproducedforpeoplewhocanpaythemostforthem?Whatpriceshouldtheypay?第十三頁(yè)，共251頁(yè)。

Economicsystems

Whoinaneconomydecideswhatgoodsandservicestoproduce,howtoproducethemandwhotoproducethemfor,andhowarethesedecisionsaremade?MarketeconomyMixedeconomyPlannedeconomyWho?PrivatesectorfirmsandconsumersHow?ThepricemechanismWho?Privatesectorfirmsandconsumers,andagovernmentHow?ThepricemechanismandgovernmentplanningWho?GovernmentHow?Governmentplanning第十四頁(yè)，共251頁(yè)。

Economicsystems

ChinaCubaNorthKoreaDenmarkFranceItalySwedenUKManydevelopedeconomiesArgentinaMauritiusNepalParaguayBahamasSingapore第十五頁(yè)，共251頁(yè)。

Themarketeconomicsystem

PrivatesectorproducersConsumersGoodsandservicesMoneyProductionExchangeConsumptionInafreemarketeconomicsystemalldecisionsaretakenbyprivatesectororganizationsandindividuals.Thereislittleornoroleforgovernmentorapublicsectorandthereforelittleornotaxationorpublicspending.第十六頁(yè)，共251頁(yè)。Thepricemechanism

Amarketisanysetofarrangementsthatbringstogetheralltheproducersandconsumersofagoodorservicesothattheycanengageinexchange.PrivatefirmsproducegoodsandservicestomaximizetheirprofitsConsumersconsumegoodsandservicestomaximizetheirutility(satisfaction)AsconsumerdemandforaproductrisesProductionbecomesmoreprofitable,soproducersincreaseoutputProductionbecomeslessprofitable,soproducersreduceoutputMarketpriceandquantitytradedMARKETPRICERISESMARKETPRICEFALLSAsconsumerdemandforaproductfalls第十七頁(yè)，共251頁(yè)。What’sgoodaboutthemarketsystem?

AwidevarietyofgoodsandserviceswillbeproducedtosatisfyconsumerwantsFirmsrespondquicklytochangesinconsumerwantsandspendingpatternsTheprofitmotiveoffirmsencouragesthemtodevelopnewproductsandusethemostefficientmethodsofproductionTherearenotaxesProfitscanbeincreasedbyincreasingsalesand/orreducingcostsofproductionIfconsumerdemandisrising,

priceswillriseandproductionbecomesmoreprofitable.EntrepreneurswillallocateresourcestotheirmostprofitableusesThereisnopublicsectorina

totallyfreemarketeconomicsystem第十八頁(yè)，共251頁(yè)。

Howthemarketsystemcanfail

Marketfailure:whenfreemarketsfailtoproducegoodsandservicesthatareworthwhileorwhenthedecisionsofproducersorconsumersresultinwastefulorharmfulactivitiesFirmswillonlyproducegoodsandservicesiftheyareprofitableFirmswillonlysupplyproductstoconsumerswhoareabletopayforthemResourceswillonlybeemployedifitisprofitabletodosoNATIONALPARK第十九頁(yè)，共251頁(yè)。

Howthemarketsystemcanfail

Marketfailure:whenfreemarketsfailtoproducegoodsandservicesthatareworthwhileorwhenthedecisionsofproducersorconsumersresultinwastefulorharmfulactivitiesHarmfulgoodsmaybeproducedifitisprofitabletodosoSomeproducersandconsumersmayignoretheharmfuleffectsoftheiractivitiesonothersandtheenvironmentSomefirmsmayrestrictcompetition,misleadconsumersandchargethemveryhighprices第二十頁(yè)，共251頁(yè)。

Themixedeconomicsystem

Inamixedeconomyagovernmentcaninterveneindifferentmarketsinanattempttocorrecttheworstmarketfailures:ItcanprovideusefulandessentialgoodsandservicesItcanprovidegoodsandservicesforpeopleinthegreatestneedItcanemploypeopleinpublicsectororganizationsandprovidefinancialsupporttoprivatesectorfirmstoboostoutputandemploymentItcanoutlawtheproductionofharmfulgoodsanddangerousactivitiesItcanoutlawbusinesspracticesthatrestrictcompetitionormisleadconsumers

第二十一頁(yè)，共251頁(yè)。

Themixedeconomicsystem

Amixedeconomythereforecombinestheadvantagesofamarketeconomic

systemwith:governmentownershipandcontrolofsomescarceresourcesgovernmentinterventionstoregulatetheactionsofprivatesectorfirmsandconsumersinsomemarkets第二十二頁(yè)，共251頁(yè)。

Howmixed?

第二十三頁(yè)，共251頁(yè)。Governmentintervention:someproblems

Bycorrectingfailuresinsomemarkets,agovernmentmaydistorttheallocationofresourcesandcauseproblemsinothers:HightaxesonpeopleandfirmscandistortmarketpricesignalsandreduceworkincentivesLandregulationscanincreaseproductioncostsandthereforereducetheprofitabilityandsupplyofsomegoodsandservicesPublicsectororganizationsmaybeinefficientandproducepoor-qualitygoodsandservicesbecausetheydonothavetomakeaprofitSomegovernmentspendingmaybeforpoliticalorevenpersonalgain第二十四頁(yè)，共251頁(yè)。IGCSE?/OLevelEconomics2.2HowmarketsworkS3第二十五頁(yè)，共251頁(yè)。Whatisamarket?Themarketforagoodorserviceconsistsofallthoseproducerswillingandabletosupplyitandallthoseconsumerswillingandabletodemanditdemandgoodsandservicesto

satisfytheirneedsandwantssupplygoodsandservicestoearnprofits第二十六頁(yè)，共251頁(yè)。Howmanyfizzydrinks?Ifcanswere$5eachManyproducersFewconsumersIfcanswere10centseachFewproducersManyconsumers第二十七頁(yè)，共251頁(yè)。DemandThewantorwillingnessofconsumerstobuyaproductTobeaneffectivedemandaconsumermusthaveenoughmoneytobuytheproductAspricerises,thequantitydemandedbyconsumerscontractsAspricefalls,thequantitydemandedbyconsumersextendsAdemandcurveslopesdownwards第二十八頁(yè)，共251頁(yè)。SubstitutesandcomplementsSubstitutescansatisfythesamewantComplementsareinjointdemandororor第二十九頁(yè)，共251頁(yè)。MarketdemandThesumofallindividualconsumerdemandsforaparticularproductAriseindemandThemarketdemandcurveshiftsoutwardsPossiblecausesare:anincreaseindisposableincomesaftertaxariseinthepriceofsubstitutesafallinthepriceofacomplementtastesandfashionfavourtheproductanincreaseinadvertisingariseinthepopulationotherfactors,e.g.hotweatherincreasesdemandforcolddrinksandsuncreams第三十頁(yè)，共251頁(yè)。MarketdemandThesumofallindividualconsumerdemandsforaparticularproductAfallindemandThemarketdemandcurveshiftsinwardsPossiblecausesare:afallindisposableincomesaftertaxafallinthepriceofsubstitutesariseinthepriceofacomplementtastesandfashionfavourotherproductsareductioninadvertisingafallinthepopulationotherfactors,e.g.hotweatherreducesthedemandforwindercoats第三十一頁(yè)，共251頁(yè)。No,iftheproductisaninferiorgoodAsincomerises,consumersbuylessastheyswitchtheirdemandtoothermorepreferableproductsYes,iftheproductisanormalgoodAsincomerises,consumersarewillingandabletobuymoreIncomeanddemandButwillariseinconsumerincomealwaysleadtoanincreaseindemandforaproduct?第三十二頁(yè)，共251頁(yè)。SupplyThewillingnessandabilityoffirmstomakeaproductavailabletoconsumersAspricerises,thequantitysuppliedbyproducersextendsbecauseproductionbecomesmoreprofitableAspricefalls,thequantitysuppliedbyproducerscontractsbecauseproductionbecomeslessprofitableAsupplycurveslopesupwards第三十三頁(yè)，共251頁(yè)。MarketsupplyThesumofallindividualproducers’decisionsaboutthesupplyofaparticularproductAriseinsupplyThemarketsupplycurveshiftsoutwardsPossiblecausesare:otherproductsbecomelessprofitabletoproduceafallinthecostoffactorsofproductionanincreaseinthesupplyofresourcestechnicalprogressandimprovementsinproductionprocessesandmachineryanincreaseinbusinessoptimismandexpectationsofprofitthegovernmentsubsidizesproductionand/orcutstaxesonprofitsotherfactors,e.g.goodweatherboostscropharvests第三十四頁(yè)，共251頁(yè)。MarketsupplyAfallinsupplyThemarketsupplycurveshiftsinwardsPossiblecausesare:otherproductsbecomemoreprofitabletoproduceariseinthecostoffactorsofproductionafallinthesupplyofresourcestechnicalfailures,suchasacutinpowersuppliesormechanicalbreakdownsafallinbusinessoptimismandprofitexpectationsthegovernmentwithdrawssubsidiesand/orincreasestaxesonprofitsotherfactors,e.g.warsandnaturaldisastersThesumofallindividualproducers’decisionsaboutthesupplyofaparticularproduct第三十五頁(yè)，共251頁(yè)。MarketequilibriumPriceperunitQuantitytradedperperiodDDSSEquilibriumquantitytraded(Qe)Marketprice(Pe)0AmarketisinequilibriumwheremarketdemandequalsmarketsupplyAttheequilibriummarketpricethequantityconsumerswishtobuyisexactlyequaltothequantityproducerswishtosellIfamarketisinequilibriumtherearenopressurestochangethemarketprice第三十六頁(yè)，共251頁(yè)。MarketdisequilibriumPriceperunitQuantitytradedperperiodDDSSPe0Amarketisindisequilibriumifthequantityconsumerswishtobuyisnotmatchedbythequantityproducerswishtosell

P1P2AtpriceP1thereisanexcesssupply.Pricewillneedtofalltopersuadeconsumerstobuymoreandforproducerstocontracttheirsupply.AtpriceP2thereisanexcessdemand.Pricewillneedtorisetoreduceconsumerdemandandtoencourageproducerstosupplymore.第三十七頁(yè)，共251頁(yè)。AnincreaseinmarketpriceIfmarketdemandrisesORIfmarketsupplyfallsPriceperunitQuantitytraded0DSDD1D1SP1PQQ1Quantitytraded0DSDSP1Q1QPriceperunitS1S1P第三十八頁(yè)，共251頁(yè)。AdecreaseinmarketpriceIfmarketdemandfallsORIfmarketsupplyrisesPriceperunitQuantitytraded0D1SD1DDSPP1Q1QQuantitytraded0DS1DS1PQQ1PriceperunitSSP1第三十九頁(yè)，共251頁(yè)。Howresponsiveisdemandtochangesinprice?$1percanNowonly90centsAfter…Before…Ifdemandisrelativelyelasticasmallchangeinpricecausesarelativelylargechangeinquantitydemanded第四十頁(yè)，共251頁(yè)。Howresponsiveisdemandtochangesinprice?After…Before…asmallchangeinpricecausesonlyarelativelysmallchangeinquantitydemandedNow

only$2$2.20Ifdemandisrelativelyinelastic第四十一頁(yè)，共251頁(yè)。PriceelasticityofdemandHowresponsiveconsumerdemandistoachangeinprice,andthereforehowrevenuesmayrespondfollowingachangeinpricePercentagechangeinprice=$1/$5=20%Percentagechangeinpassengernumbers=5/100=5%Priceelasticityofdemand=20%/5%=4Percentagechangeinprice=$0.5/$2.00=25%Percentagechangeinpassengernumbers=10/50=20%Priceelasticityofdemand=20%/25%=0.8ELASTICINELASTIC第四十二頁(yè)，共251頁(yè)。Demandforaproductwillbepriceelasticif:Why?Because:theproducthasmanyclosesubstitutesconsumerscanbuyinsteadifthepricerises,e.g.differentwashingdetergentstheproductisexpensive,suchasmanyluxuryitems,soevenasmallincreaseinpricemaybeunaffordableconsumersdonotneedtopurchasetheproductfrequentlysotheyhavetimetosearchforalternativesifpricerisesPriceelasticityofdemand10%off%changeinquantitydemandedisgreaterthanthe%changeinprice>PED>1第四十三頁(yè)，共251頁(yè)。Demandforaproductwillbepriceinelasticif:Why?Because:theproducthasveryfewclosesubstitutesforconsumers,e.g.electricitytheproductisalow-costitem,e.g.adailynewspaperorboxofmatchestheproductisanessentialitemandneededregularly,e.g.manybasicfooditemssuchasbread,riceandvegetablesPriceelasticityofdemand10%off<PED<1%changeinquantitydemandedislessthanthanthe%changeinprice第四十四頁(yè)，共251頁(yè)。PriceelasticityofsupplyHowresponsiveproducersupplyistoachangeinpriceSupplyispriceelasticWhenthe%changeinquantitysuppliedisgreaterthan%changeinpricePES>1SupplyispriceinelasticWhenthe%changeinquantitysuppliedislessthanthe%changeinpricePES<1Forexample,ittakestimetogrowcornsosupplywillbecomemoreelasticovertime第四十五頁(yè)，共251頁(yè)。Indirecttaxescanbe

addedtothepricesof

goodsandservicesButwhydogovernmentswanttoincreasethepricesandrestrictthesupplyofsomeproducts?todiscouragetheirconsumptionbecauseitcanbeharmful,e.g.cigarettestoreducetheirproductionbecauseitcanbeharmful,e.g.theburningofoilandgasreleasesharmfulemissions

toconservelimitednaturalresources,e.g.taxesonenergyandwateruseSubsidiescanbepaidtoproducerstowardstheircostsofproductionButwhydogovernmentswanttoincreasethesupplyandreducethepricesofsomeproducts?tomakeproductsmoreaffordableforthoseonthelowestincomes,e.g.basicfoodstuffstoencouragetheirconsumptionbecauseitcanbebeneficial,e.g.medicinestoencouragetheirdevelopmentandproductionbecauseitisbeneficialandcreatesemployment,e.g.windturbinesandsolarenergypanelsTaxes,subsidiesandmarketoutcomes$10+5%tax第四十六頁(yè)，共251頁(yè)。TheeffectofanindirecttaxObjective:toreduceharmfulexhaustemissionsbythereducingtheconsumptionofpetrolBeforetaxof40centsperlitre:600millionlitresofpetrolaretradedeachmonthatthemarketpriceof80centsperlitreAftertaxof40centsperlitre:500millionlitresofpetrolaretradedeachmonthatanewmarketpriceof$1perlitreButwhydoesn’tthemarketpricerisefrom80centsto$1.20perlitre?Becausedemandcontractsaspricerises,sopetrolproducersenduphavingtopaysomeofthetaxtogovernment第四十七頁(yè)，共251頁(yè)。TheeffectofasubsidyObjective:toencouragetheproductionandconsumptionofbiofuelBeforeasubsidyof$20perbarrel:40millionbarrelsofbiofuelaresuppliedandtradedeachmonthatthemarketpriceof$60perbarrelAfterasubsidyof$20perbarrel:50millionbarrelsofbiofuelaresuppliedandtradedeachmonthatanewmarketpriceof$50perbarrelButwhydoesn’tthemarketpricefallfrom$60to$40perbarrel?Becausedemandextendsaspricefallssoproducersdonothavetopassonthefullamountofthesubsidy第四十八頁(yè)，共251頁(yè)。IGCSE?/OLevelEconomics2.3SocialcostsandbenefitsS4第四十九頁(yè)，共251頁(yè)。

PrivatecostsandbenefitsPrivatesectorfirmsConsumersAimtomaximizetheirprofitsPrivatecosts=wages,rents,components,insurancepremiums,telephonebills,electricity,etc.Privatebenefits=revenuefromthesaleofproductstoconsumers

Aimtomaximizetheirutility(orsatisfaction)Privatecosts=paymentsforgoods

andservicesPrivatebenefits=satisfactionfromconsumingtheproductstheybuy第五十頁(yè)，共251頁(yè)。Someproducersandconsumersmayignoretheharmfuleffectsoftheirproductionandconsumptiondecisionsandactivitiesonotherconsumers,firmsandtheenvironmentbecausetheyareonlyconcernedwiththeirownprivatecostsandbenefits

Marketfailure第五十一頁(yè)，共251頁(yè)。

Externalcosts第五十二頁(yè)，共251頁(yè)。

SocialcostsTotalsocialcost=privatecosts+externalcosts第五十三頁(yè)，共251頁(yè)。

Externalbenefits第五十四頁(yè)，共251頁(yè)。

SocialbenefitsTotalsocialbenefit=privatebenefits+externalbenefits第五十五頁(yè)，共251頁(yè)。

Aneconomicuseofresources?Iftotalsocialbenefit>totalsocialcostIftotalsocialcost>totalsocialbenefitEconomicwelfarecanbeimprovedbyreducingproductionandconsumptionEconomicwelfarecanbeimprovedbyencouragingmoreproductionandconsumption第五十六頁(yè)，共251頁(yè)。Taxonlandfilltoincreaseby20%asthegovernmentattemptstoreducetheamountofwastethatendsupintheground.

CorrectingmarketfailureHowcanagovernmentinamixedeconomyensurethatfirmsandconsumerstakeaccountoftheexternalcostsandbenefitsoftheirdecisionsandactions?IndiatoenforcenewregulationstocurbnoisepollutionSouthAfricabansplasticbagsto

reducelitterRetailerscaughthandingoutthebagsnowfaceafineof100,000rand($13,800)ora10-yearjailsentenceTheChinesegovernmentannounces18recyclingprojectsaretoreceivegovernmentsubsidiescoveringupto50%oftotalinvestmentcosts

TheAustraliangovernmenthasbannedlivecattleexportstoIndonesiauntilsafeguardsareadoptedtoendthebrutalslaughterofanimalsGovernmentunveilsplantotaxthecarbonemissionsoftheworstpolluters第五十七頁(yè)，共251頁(yè)。

CorrectingmarketfailuresToreduceexternalcostsRaisetaxesonfirmswithactivitiesthatcreateexternalcoststoreducethosefirms’after-taxprofits,e.g.taxesonemissionsfromtheuseoffossilfuels,onlandfillwasteandmineralextractionIncreaseindirecttaxesonproductsthatareconsideredharmfultoraisetheirpricesanddiscouragetheirconsumption,e.g.taxesoncigarettes,petrol,plasticbagsUseregulationsandfinestodiscouragetheproductionorconsumptionofproductsoractivitiesthatareharmful,e.g.smokingbans,planningcontrols,legallimitsonairandwaterpollutants,anti-litterlawsToincreaseexternalbenefitsEnsurepublicsectorprovisionofsociallyandeconomicallydesirablegoodsandservices,vidingfreevaccinationsandeducation,publicparks,publictransportandroadsProvidesubsidiestoprivatesectorfirmstoreducethecostofactivitiesandproductsthathaveexternalbenefits,e.g.subsidiesforrecycling,renewableenergy,organicfarmingUseregulationstoencouragefirmstochangetheirproductionmethods,e.g.rulestophaseouttraditionallightbulbstoencourageaswitchtolow-energylightbulbs,healthandsafetyregulations,animalwelfarelaws第五十八頁(yè)，共251頁(yè)。IGCSE?/OLevelEconomics3.1MoneyandfinanceS5第五十九頁(yè)，共251頁(yè)。

Whydoweneedmoney?Toexchangeforthosegoodsandservicesweeachneedandwantbutareunabletoproduceforourselves,becausewearenotself-sufficient(individuallywecannotproduceeverythingweneedandwant)wespecializeinthosetasksandproductiveactivitieswearebestabletodoandthereforeneedtotradewithproducersofotherproducts第六十頁(yè)，共251頁(yè)。

Barter

Barterinvolvesexchanginggoodsandservices,i.e.‘payment’foroneproductismadewithanotherProblemswithbarterare:findingsomeonetos(theremustbeadoublecoincidenceofwants)??howtoagreevalues(howmanyapplestoonecow,andhowmuchcheeseforoneapple?)第六十一頁(yè)，共251頁(yè)。

ThefunctionsofmoneyamediumofexchangeagoodstoreofvalueameasureofvalueameansofdeferredpaymentIOU$20Toovercometheproblemsofbarteramoneymustbe:

Prices第六十二頁(yè)，共251頁(yè)。

ChoosingagoodmoneyAgoodmoneymustbe:acceptabletoothersinpaymentforgoodsandservicesdurablesothatitisnotworndownordamagedeasilythoughfrequentuseportablesothatitiseasytocarryarounddivisibleintosmallerunitsandvaluesscarce,otherwiseifitisfreelyavailableitwillbeoflittleornovaluetoothers第六十三頁(yè)，共251頁(yè)。

Whatismoney?Notesandcoins+bankdepositsBankdepositsare‘nearmoney’becausetheycanbewithdrawntoprovidecashtomakepaymentsreasonablyquickly第六十四頁(yè)，共251頁(yè)。

FinancingeconomicactivityBankslendmoneytopeople,firmsandgovernmentorganizationstofinancetheirspendingStockcanbesoldonthestockmarkettoprovidelong-termfinanceforcompaniesandgovernments第六十五頁(yè)，共251頁(yè)。

ThebankingsystemBanksarefinancialintermediaries:theybringtogethercustomerswhowanttosavetheirmoneywithcustomerswhowanttoborrowit第六十六頁(yè)，共251頁(yè)。SAVINGMONEYBanksneedmoneytomakeloansBanksoffersaversinteresttoencouragethemtosavetheirmoneyinsavingsaccountsTheinterestrateisarewardforsavingmoneySaversmaybeofferedhigherinterestratesforlong-termsavings

Thepriceofmoney…istheinterestrate(expressedasa%perunitofmoney)Thebaserateofinterestinaneconomyissetbythecentralbankorthegovernment.Itistheratewhichthecentralbankwillchargebanksforlendingthemmoneyiftheyrunshortofcash.Forexample:toattractsavings,abankoffersitscustomersannualinterestof3%apersonwhosaves$1,000inasavingsaccountforoneyearwillreceive$30ininterestattheendofthatyear第六十七頁(yè)，共251頁(yè)。

ThepriceofmoneyForexample:asmallfirmborrows$10,000repayableinoneyeartheinterestrateis5%peryearthetotalrepayableattheendoftheyear=$10,500BORROWINGMONEYTheinterestrateisthecostofborrowingmoneyLendingmoneytopeopleandfirmsinvolvesadministrativecostsandrisksofnon-repayment.BanksmustcoverthesecoststomakeaprofitThelongerthetermoftheloanandthegreatertheriskofnon-repaymentthehighertheinterestratechargedInterestchargesalsocompensatebanksforpriceinflationwhichwillreducethevalueofthemoneytheyhavetiedupinloans第六十八頁(yè)，共251頁(yè)。

TheroleofacentralbankThecentralbankisatthecentreofthebankingsysteminmosteconomiesThemainfunctionofacentralbank

istomaintainthestabilityofthenationalcurrencyandthemoneysupply

TheBankofEnglandTHEBANKERS’BANKSupervisesthebankingsystemandregulatestheconductofbanksHoldstheaccountsofbanksandtransfersmoneybetweenthemIslenderofthelastresorttobanksiftheyrunshortofmoney第六十九頁(yè)，共251頁(yè)。TheroleofacentralbankTheCentralBankofIndonesiaTHEGOVERNMENT’SBANKIssuesnotesandcoinsManagesthenationaldebtManagespaymentstoandfromthegovernmentManagesthenation’sgoldandforeigncurrencyreservesOperatesthegovernment’smonetarypolicy第七十頁(yè)，共251頁(yè)。

IssuingstockStockisthenameusedtodescribemoneyraisedbyajointstockcompanyorcorporation,oragovernment.Jointstockcompaniessellsharestoraisepermanentcapital.Sharesneverhavetoberepaid.Thepeopleandorganizationsthatbuysharesbecometheownersorshareholdersofjointstockcompanies.Eachshareheldinacompanyentitlesitsownertoashareofanycompanyprofits.Thispaymentfromprofitsiscalledadividend.Agovernmentsellsloanstocksorbondstoraisemoneyforafixedperiodoftime,sometimesupto25yearsormore.Bondsarerepaidwithinterestattheendoftheirterm.第七十一頁(yè)，共251頁(yè)。

ThestockmarketAstockexchange,orbourse,isabusinessorganizationthatenablesindividuals,companiesandgovernmentstobuyandsellloanstocksandcompanysharesontheglobalstockmarket.Thestockmarketistheglobalmarketforthebuyingandsellingofnewandsecond-handgovernmentstocksandcompanyshares.Thestockmarketbringstogetherallthoseindividualsandorganizationswillingandabletobuystocksandsharesandallthoseindividualsandorganizationswillingandabletosellthem.第七十二頁(yè)，共251頁(yè)。Whyisthestockmarketimportant?Farfewerstocksandshareswouldbetradediftheindividualsandorganizationsthatboughtthemwereunabletosellthemonatafuturedatetootherinvestorssotheycouldgettheirmoneyback.Ifgovernmentsandcompaniescannotselltheirnewlyissuedstocksandsharestheywillbeunabletoraisethecapitaltheyneedtofinancetheiractivities.Therewillbelesseconomicactivity.Fewergoodsandserviceswillbeproduced.第七十三頁(yè)，共251頁(yè)。Whatdeterminesshareprices?ShareholdersarelikelytoreceivebiggerdividendpayoutsDemandforsharesintheAlphaCompanyincreasesThemarketpriceandquantityofsharestradedintheAlphaCompanyincreaseDividendpaymentstoshareholdersmayfallThemarketsupplyofsharesintheBetaComp