Splash Screen. Chapter Intro 2 Section 1: The Role of Government Free enterprise is the freedom of...
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Transcript of Splash Screen. Chapter Intro 2 Section 1: The Role of Government Free enterprise is the freedom of...
Splash Screen
Chapter Intro 2
Section 1: The Role of Government
Free enterprise is the freedom of individuals and businesses to operate and compete with a minimum of government interference or regulation. In order to encourage competition and prevent monopolies, governments take steps to regulate economies.
Chapter Intro 2
Section 2: Measuring the Economy
An economic system is the way a society organizes the production and consumption of goods and services. Our government plays a limited, but important, role in measuring and trying to balance the alternating periods of growth and decline called the business cycle.
Chapter Intro 2
Section 3: Government, the Economy, and You
People form governments to establish order, provide security, and accomplish common goals. A major focus of government programs is to help people in poverty.
Section 1-Main Idea
Guide to Reading
Big Idea
Free enterprise is the freedom of individuals and businesses to operate and compete with a minimum of government interference or regulation.
Section 1
Providing Public Goods
Governments usually provide public goods, while businesses usually provide private goods.
Section 1
Providing Public Goods (cont.)
• Businesses provide private goods and governments provide public goods .
Section 1
• Private goods only consumed once
– Someone can be excluded from goods and services if unwilling to pay
– Include items such as clothes and food
– Private services: haircuts, insurance, medical services, and so on
Providing Public Goods (cont.)
Section 1
• Public goods shared by everyone
– Government provides
– Examples: Libraries, roads, parks
– Taxes pay for them
– Produce positive and negative externalities, or unintended side effects
Providing Public Goods (cont.)
Section 1
Maintaining Competition
One government role is to ensure competition in the economy.
Section 1
Maintaining Competition (cont.)
• Governments protect citizens by regulating business.
Section 1
• A monopoly is one provider controlling a market.
– Antitrust laws preserve competition
– Sherman Antitrust Act passed in 1890
– Mergers threaten competition
Maintaining Competition (cont.)
Section 1
• Areas where government regulation is key:
– Natural monopolies, such as gas, water, or local telephone service
– Food and Drug Administration and Federal Trade Commission
– Product safety—unsafe products are recalled
Maintaining Competition (cont.)
Federal Regulatory Agencies
Section 2-Main Idea
Guide to Reading
Big Idea
An economic system is the way a society organizes the production and consumption of goods and services.
Section 2
Measuring Growth
The real gross domestic product is the most accurate measure of an economy’s performance.
Section 2
Measuring Growth (cont.)
• The real GDP tells whether the economy is growing.
• Economists measure periods of growth and decline.
Section 2
• GDP:
– Dollar value of all goods and services produced in a year
– Price increases raise GDP but don’t grow economy
– Real GDP removes distortions
Measuring Growth (cont.)
Section 2
• The business cycle is alternating periods of growth and decline in the economy.
Measuring Growth (cont.)
Model of the Business Cycle
Section 2
Business Fluctuations
The economy goes through alternating periods of growth and decline.
Section 2
Business Fluctuations (cont.)
• Periods of increase and decline affect the American economy.
– Real GDP up: expansion
– Real GDP down for six months in a row: recession
U.S. Business Activity Since 1880
• Average recession lasts one year
• Many people lose jobs
Section 2
• Civilian labor force:
– All civilians 16 or older who work or seek work (half of all people in the U.S.)
– Unemployment rate measures those in civilian labor force who are seeking work
– Impact of unemployment
Business Fluctuations (cont.)
Unemployment Rate and the Business Cycle
Section 2
• Changes in government spending or taxes is fiscal policy.
– Political climate affects ability to implement policy
Business Fluctuations (cont.)
Section 2
• Inflation reduces purchasing power.
– Consumer price index (CPI) measures inflation
– Causes speculation
– Distorts pricing
Business Fluctuations (cont.)
Section 2
Stocks and Stock Markets
Stock markets are usually good indicators of the health of the economy.
Section 2
Stocks and Stock Markets (cont.)
• Stock markets are indicators of economic health.
– Profits in form of dividends and capital gains
– Stock value determined by supply and demand
Section 2
• Stock market indexes track stock prices over time.
– Dow-Jones Industrial Average (DJIA)
Stocks and Stock Markets (cont.)
• 30 representative stocks
• 500 largest stocks
– Standard and Poor’s (S&P)
Section 2
• Stocks sold at stock exchanges
– New York Stock Exchange (NYSE)
– NASDAQ (electronic market)
Stocks and Stock Markets (cont.)
Section 2
• Stock prices reveal investors’ attitudes.
– Bull market is optimistic
– Bear market is pessimistic
Stocks and Stock Markets (cont.)
Section 3-Main Idea
Guide to Reading
Big Idea
People form governments to establish order, provide security, and accomplish common goals.
Section 3
Income Inequality
Education, family wealth, and discrimination are reasons for income differences.
Section 3
Income Inequality (cont.)
• Income is influenced by education, family wealth, and discrimination.
• College graduate has the potential to earn twice the income of high school graduate.
Section 3
• Women and minorities experience discrimination on the job.
– Fewer promotions
– Lower salaries
Income Inequality (cont.)
Section 3
• Laws reduce discrimination
– Equal Pay Act of 1963
– Civil Rights Act of 1964
– Americans with Disabilities Act of 1990
– Courts help enforce
Income Inequality (cont.)
Section 3
Poverty (cont.)
• Government has created programs to help poor people.
• Incentives encourage self-improvement
Section 3
Poverty (cont.)
• Guidelines determine eligibility for programs
– Revised yearly
– Based on what is needed to survive
– 2006: $9,800 annual income and below is impoverished
– Nearly 37 million people impoverished
Section 3
• Federal welfare programs
– Food Stamp program
– Women, Infants, and Children (WIC)
– Supplemental Security Income (SSI)
– Temporary Assistance to Needy Families (TANF)
Poverty (cont.)
Section 3
• Workfare usually at state level
• Progressive income tax
Poverty (cont.)
– People with lower incomes taxed at a lower rate
Section 3
• Earned Income Tax Credit (EITC)
– Provides tax credits or cash assistance
– Helps almost 20 million people each year
Poverty (cont.)
VS 1
Government and the Economy
Government’s Role
• Government provides public goods.
• Government regulates the economy to ensure competition.
VS 2
Government and the Economy
Measuring the Economy
• Real GDP is GDP that has been adjusted for inflation.
• The real gross domestic product is the most accurate measure of an economy’s performance.
• Government must deal with unemployment, inflation, and periods of growth and decline called the business cycle.
• Stock markets are usually good indicators of the health of the economy.
VS 3
Government and the Economy
The Problem of Poverty
• Education, family wealth, and discrimination are reasons for income differences.
• Government uses several different programs and policies to combat poverty.
Figure 1
Figure 2
Figure 3A
Figure 3B
Figure 4
TIME Trans
DFS Trans 1
It is an exaggerated claim in terms of the number of patients and results, so it is probably not true.
DFS Trans 2
DFS Trans 3
Vocab1
private goods
goods that, when consumed by one individual, cannot be consumed by another
Vocab2
public goods
economic goods that are consumed collectively, such as highways and national defense
Vocab3
externality
the unintended side effect of an action that affects someone not involved in the action
Vocab4
monopoly
when the market creates a sole provider for a good or service
Vocab5
antitrust law
legislation to prevent new monopolies from forming and police those that already exist
Vocab6
merger
a combination of two or more companies to form a single business
Vocab7
natural monopoly
a market situation in which the costs of production are minimized by having a single firm produce the product
Vocab8
recall
situation in which a company pulls a product off the market or agrees to change it to make it safe
Vocab9
exclude
to shut out
Vocab10
achieve
to accomplish or successfully gain
Vocab11
minimize
to make as small as possible
Vocab12
real GDP
GDP after adjustments for inflation
Vocab13
business cycle
alternating periods of growth and decline that the economy goes through
Vocab14
civilian labor force
all civilians 16 years old or older who are either working or are looking for work
Vocab15
unemployment rate
the percentage of people in the civilian labor force who are not working but are looking for jobs
Vocab16
fiscal policy
the federal government’s use of spending and taxation policies to affect overall business activity
Vocab17
inflation
sustained increase in the general level of prices
Vocab18
consumer price index (CPI)
measure of change in price over time of specific group of goods and services
Vocab19
period
a length of time
Vocab20
implement
to put into practice
Vocab21
food stamps
coupons that can be used to purchase food
Vocab22
Women, Infants, and Children (WIC)
a program that provides help for nutrition and health care to low-income women, infants, and children up to age 5
Vocab23
workfare
programs that require welfare recipients to exchange some of their labor in return for benefits
Vocab24
progressive income tax
a tax that takes a larger percentage of higher incomes than lower incomes
Vocab25
Earned Income Tax Credit (EITC)
a program that gives tax credits and even cash payments to qualified workers
Vocab26
survive
to continue to exist
Vocab27
supplement
something that supplies what is needed or makes an addition
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