American Free Enterprise What is the American Dream?

Free Enterprise System United States Land of Equal opportunity People enjoy Economic Freedom

American Free Enterprise Characteristics of Free Enterprise Profit motive Open Opportunity Legal equality private property Voluntary exchange

American Free Enterprise Consumer role in Free Enterprise What do they tell business? What to produce How much to produce How do they tell them what to produce and how much to produce?

American Free Enterprise Interest groups Consumer Groups to persuade government officials to act in ways that help the group members.  Consumer’s Union. Labor Unions Business Ex. National Retail Federation

American Free Enterprise U.S. Constitution role in free enterprise Property rights  Eminent domain Taxation Contracts Gov’t Role Public disclosure laws  Info on products Public interest  Well being

American Free Enterprise Macroeconomics Big picture of the economy Unemployment Inflation (CPI) (PPI) Production GDP = (C+I+G+X) Microeconomics Small picture of the economy Focal Point Individuals and Households Earnings Individual savings Individual debt

American Free Enterprise Gov’t tracks economic growth Track business cycle (GDP) Why does the gov’t track GDP? Indicates health of economy

American Free Enterprise Government Promoting economic strength GOALS Low Unemployment  4%-6% healthy economy  Higher may take steps

American Free Enterprise Gov’t helps economic growth and stability Cutting taxes Increase government spending

American Free Enterprise STABILITY Steady Price levels Regulate financial institutions

American Free Enterprise Technology helps Production (GDP) How? Promote Innovation Become more efficient  E – mail  Light bulb  Factory PATENTS COPY RIGHTS Obsolescence

Do Now: 1. What is GDP? 2. GDP is used to track what? 3. What are the Goals of the United States government when it comes to economics? 4. When the economy falters what are some things the government can do to kick start the economy.

American Free Enterprise How does government promote productivity? University Grants Creates new technologies (NASA) Patents and copyrights

American Free Enterprise Providing Public Goods Shared good or service Paid by the public sector (taxes) What are the costs and benefits of public goods and services?

American Free Enterprise Free Rider Someone who benefits from what he or she does not directly pay for.  Ex State and national highways.  Paid by State taxes  All people get to use it.

American Free Enterprise Public Goods are an example of Market Failure Free market operating on its own, does not distribute resources efficiently. Why do individuals produce goods, what is their incentive? Would they Produce something if they would not profit?

American Free Enterprise Externality An economic side effect of a good or service: it generates benefits or costs, to someone other than the person deciding how much to produce or consume. Ex. Building a road Positive Externalities? Negative Externalities ?

American Free Enterprise What is a public good? Why is a failure of free market economy? What is a free rider? Explain externality? Give examples. When has a family reached the poverty line?

American Free Enterprise Poverty Poverty threshold – less income than what is needed to support families Government decides Annually adjusted 2006 single parent 13,896 4 person family 20,444

American Free Enterprise Government safety nets Welfare redistribution of money to the poor. FDR ’s People unwilling to get off Redistribution discouraged productivity 1996 restriction on Welfare.

American Free Enterprise Welfare Programs Temporary Assistance for Needy Families (TANF) Goal to move people from Welfare to the workforce Social Security 1935 Retired Disabled Family of disabled.

American Free Enterprise Unemployment insurance Give money to workers who have lost their jobs Workers must show they are trying to find jobs Most States only 26 weeks Could be extended Workers Compensation Provides cash for workers who are hurt.

American Free Enterprise In – kind benefits Goods or services provided for free or at greatly lowered prices. Food giveaways Food stamps Subsidized housing Legal aid

American Free Enterprise Healthcare provided the Government Medicare – those over 65 and disabilities Medicaid – poor that are unemployed or uncovered by employer Education Federal and state aid Grants Add to nations human capital Add to labor productivity.

American Free Enterprise Grants Money to private organizations from government to promote social services.

Do Now 1. Explain externality? Give examples. 2. Give a reason why the government creates safety nets for its citizens. 3. Give examples of Welfare programs in the United States.