The Role of Government in Our Economy

Think about it…… What are some government regulations that affect what you do?

Regulating Business Government aids in improving quality of life for citizens. Helps people so they are not abused by business. Pass laws to protect and regulate business.

Regulating Business Three levels of government: –Federal –State –Local Federal gov’t regulate interstate commerce or business between states. State gov’t regulate intrastate commerce or business within a state.

Regulating Business Laws govern: –Production processes –Protect competition –Business agreements –Creative properties Businesses and people that break laws face penalities.

Protecting Competition An oligopoly is when a small number of companies control the market without actually forming a trust. A company that controls an entire industry is called a monopoly.

Monopolies Problematic for several reasons: –Not competing against anyone. –Can charge any price. –Quality not a priority. –Limit choices for consumers

Protecting Competition Trust – group of companies that band together to form a monopoly and cut out competition. Gov’t passed antitrust laws to promote competition. Laws allow gov’t to break up monopolies, regulate them, or control them.

Protecting Competition Federal Trade Commission (FTC) to enforce antitrust laws. 1940’s gov’t sued movie studios for trying to take over film industry. FTC regulates interstate trade. Maintains standards for honest advertising.

Protecting Business Agreements One of the most basic ways the government protects business is by enforcing contracts. A contract is a legal agreement between two or more parties to conduct business. Can be written, verbal, or even done with a handshake.

Contracts Ex: Rental agreement, gym membership, warranty. A contract protects all the parties that agree to it. When one party fails to live up to the terms of a contract it is called a breach of contract. Easier to prove breach if contract is written.

Protecting Creative Properties Laws protect the right to own creative property. Inventions, art, music, etc is protected by: –Copyright –Patent –Trademark

Copyright A copyright gives artists the sole right to own their creations, such as plays, photos, music, paintings, and books. Person creating automatically holds copyright. Once registered with US Copyright Office additional legal protection is granted. Copyright last 70 years past owner’s death

Patent A patent gives you the sole right to own an invention. –Depending on the type of patent it is protected: Design patent for 14 years Utility and plant patents for 20 years

Trademark A trademark is a brand name, trade name, trade characteristic, or a combination of these that is given legal protection by the federal government.

Regulating Production Government regulates the production process of certain goods. Stops companies from polluting. Limits the amount of waste factories can discharge into the environment. Imposes minimum wage and safety requirements. FDA- Regulates food and drug production.

Government as a Provider

Think about it….. What are some things that the government provides for you or your community?

Government’s Role in Society Government role not limited to law making. Provides services to the public. Offers incentives to businesses and people. Activities occur at all levels of government.

Providing Goods & Services Gov’t is largest provider of goods and services. Public goods and services – provided by the gov’t and paid for with taxes –Highways –Bridges –Water treatment –National defense

Providing Goods & Services Private goods and services – provided by businesses and paid for by the consumer. –Clothing –Food –Toys Social welfare services – improve quality of life –Libraries –Parks –Museums

Providing Goods & Services Social welfare services cost are high and paid for by gov’t revenues. Revenue – income that gov’ts get from all sources such as taxes and fees. Some times businesses provide public good or service. Privatization- when a business offers a public good or service. Gov’t oversees the business –Example: Café’s in gov’t buildings

Aiding Citizens People’s well being is also a gov’t concern. Federal gov’t offers transfer payments. These payments are an expense to the government to help people. Examples of transfer payments: –Unemployment –Veterans’ benefits –Social Security

Providing Employment Government is the largest employer. Employees more than 3 million people. –Mayors –Firefighters –Presidents –Teachers

Consuming Goods & Services Government is the largest consumer of goods and services. Has to buy all supplies for schools and offices. It has to maintain military. Buys directly from businesses or has equipment specially made for them.

Supporting Business SBA supports small businesses. –Offers loans and advice US government helps businesses compete internationally. Provide subsidies or monetary grants to encourage certain behaviors. Given to firms that benefit the public. –Ex: Agriculture and steel companies.

How Government is Funded Tax is an amount of money and people business pay government. Types of taxes: –Sales –Income –Real estate Taxes pay for public goods and services.

Taxes All 3 levels of government collect tax. Federal pays for defense and national highways. State pays for state police and DMV. Local pays for streets and parks. All three pay for public education.

Providing Incentives Incentive is a temporary reduction or elimination of a tax that is meant to encourage or discourage an activity. –Example taxes on tanning and cigarettes. Tax break special tax benefit given to promote specific economic or social objectives. Tax deductions are a reduction in the tax you have to pay.

Incentives Some businesses get incentives to move offices. 76ers got $82 million tax credit to open a facility in Camden.

Allocating Resources Allocate resources by deciding best way to spend revenues. Prioritize projects. Spending also affects income. –Unemployment checks can increase or decrease depending on the gov’t allocation of resources.