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1 The stock market

2 Lesson objectives I will understand what a stock market is. I will identify what caused the downturn in the American Stock Market

3 Lesson outcomes I will explain what a stock market is. I will identify what caused the downturn in the American Stock Market. I will create a classroom stock market

4 Keywords Economy all the financial transactions in a country Stock market where percentages of companies are traded Shares percentages of companies Recession when a country s economic growth decreases for three quarters of a financial year Mortgage a loan from a bank to buy a house

5 Stock markets Stock markets run most of the developed d world s economies. A stock market is a place where percentages of companies are bought and sold. A share is a percentage of ownership in a company. If a company does well, the price of that percentage of the company goes up and investors make money. If a company doesn t do well, the price of that percentage goes down, and investors lose money

6 Stock markets If a company is doing well, more people want to buy shares in that company and the price of the share goes up. Investors also make money from dividends. These are the profits of the company shared out between the owners of the shares. The more of a company you own, the more you will make

7 Task Today s task is to run a stock market in the classroom. Five traders will be appointed to sell the shares. Each trader can only sell 100 shares to buyers. Each person will have 10 to spend on shares. Read about the companies and decide which shares you would like to buy

8 Company 1 Russian Football Federation This company runs football leagues in Russia. It has been awarded a contract for running all the football matches in Russia for the World Cup. Its shares are 25p each

9 Company 2 Fauva Cars This is a French sports cars manufacturer. It has recently had great success at the World Car Show with an experimental flying car. Its shares are 50p each

10 Company 3 Choco PLC Choco PLC is chocolate manufacturer. It is based in the UK but gets its raw ingredients from 14 different countries. It is very popular in England and France. Its shares are 75p each

11 Company 4 GP Oil GP Oil is an international company with many bases. It specialises in oil and other non-renewable fuels. Its shares are 1 each

12 Company 5 Royal Bank of Oberrion This company is the national bank of Oberrion. It not only lends to private people p in their home country but also to countries around the world. Its shares are 1 each

13 Task You have ten minutes to buy your shares. Choose your companies carefully! Write down on your sheet how many shares you ve bought in each company. A trader needs to initial your sheet to prove that you have bought that number of shares

14 Oh no! GP Oil has had bad publicity because it is not able to clean up an oil spill. Its shares are now worth 50p each instead of 1. How much money have you lost?

15 Celebration! Choco PLC is appointed Chocolatier to the Queen of England. Its shares go up to 1 each. How much money have you made?

16 Fantastic! The Bank of Oberrion has made 124 billion in profit. For each share you own in the Bank, you receive 30 in dividend. How much money have you made?

17 Interesting Fauva Cars agrees to provide all the cars for the football World Cup. It will only do so if Choco PLC is dropped d as the food sponsor. The Russian Football Federation shares go up to 75p. Fauva Cars shares go up to 60p. Choco PLC shares go down to 75p. How much money have you made/lost?

18 It s all gone wrong There is a conflict between Oberrion and another country. GP Oil can no longer pump p oil in that country. Its shares go down to 20p. Choco PLC cannot get its ingredients into England. Its shares are worth 35p. Fauva Cars is unaffected. Its shares are still worth 60p. The World Cup attracts less people than expected because of the conflict. RFF shares are now worth 50p. The Bank of Oberrion goes bust. Its shares are worth 0.5p

19 Task Add up how much money you spent. Add up how much money you lost. How much are you left with? Why do you think using the stock market to make money is so unpredictable?

20 The American Stock Market and recession America has one of the biggest economies and, therefore, one of the biggest stock markets in the world. America is blamed for starting the global recession in It is accused of giving mortgages to people who could not repay the money they borrowed. This meant that the bank had to take the houses back and sell them for less than they were worth. This meant the bank lost money

21 America and recession The housing market is an indicator of how the country s economy is doing. If it crashes, it causes house prices to drop dramatically and people s loan repayments become unaffordable as interest rates start to rise. This leads to businesses starting to fail as people p go bankrupt and this leads to problems on the stock market. As more and more businesses closed, the bank had less and less money to lend and interest rates went up

22 The Dow Jones On 11 October 2007, the Dow Jones (the American Stock Market) hit its highest h ever price. By 6 March 2009, the Dow Jones had lost 54 per cent of its value to hit the lowest point since the 1987 crash. There were lots of different reasons for this

23 Reasons for the recession 1. The global l economy was in decline because of high oil and energy prices which were pushing up prices and inflation all over the world. 2. The Bush administration was blamed because of its high spending during its terms in office. 3. The Obama administration was blamed because of its fiscal stimulus package

24 1. Oil and energy prices Conflict in the Middle East has led to it being dangerous and expensive to pump and export oil. This means the price goes up. Large Western economies run on oil and if the price of oil goes up, so does the price of everything else

25 2. The George W. Bush administration During Bush s terms in office ( ), 2009) there was lots of controversial spending: The war in Iraq divided America and cost billions of dollars. Taxes for rich Americans were cut. There was a muddled bailout for banks that failed but had to be paid for by tax payers. More money was spent than the country paid in tax

26 3. The Obama administration The Obama Administration i ti (2009 ) attracted t blame too: It was a new administration and did not have the skills to manage the crisis. The fiscal crisis got worse in the first two months after the election. Obama had to get the support of Congress before he could enact any policies and this took a long time

27 2011 In 2011 the Dow Jones is still recovering. It started to recover in 2009 but this has been hampered by house prices being slow to recover and problems with job creation in America. In the first two quarters of 2011 the American economy remained static. This is worrying as the economy needs more jobs to grow. If America s economy stays static, it will affect recovery in the UK and the UK may slide back into recession

28 America and the UK As America and the UK are closely l linked through h trade and politics, their economic ups and downs greatly affect one other. America s housing crash affected the UK because UK banks had leant money to American banks. When the US housing market crashed, UK banks lost their money. This started the UK recession. It is because of this recession that unemployment is high, especially for year olds

29 Plenary silent debate Go to the pieces of paper around the room and write down your ideas about the following questions: 1. Do you feel the bankers that run the stock market have a social responsibility s towards ordinary people? 2. What signs to you see that the UK has been in recession? 3. How has the recession affected you personally? 4. Do you think the stock markets should be allowed to use public money to buy stocks and shares?

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