Presentation Pro © 2001 by Prentice Hall, Inc. Economics: Principles in Action C H A P T E R 3 American Free Enterprise

123 Go To Section: 4 American Free Enterprise C H A P T E R 3 American Free Enterprise SECTION 1 Preserving Economic Freedoms SECTION 2 Providing a Safety Net SECTION 3 Providing Public Goods SECTION 4 Promoting Growth and Stability Chapter

123 Go To Section: 4 Chapter 3, Section 1 Preserving Economic Freedoms S E C T I O N 1 Preserving Economic Freedoms How does the government protect Americans’ economic rights within our system of free enterprise? What policies does the government create to serve the public interest? How does the government intervene to protect public health, safety, and well-being?

123 Go To Section: 4 A Tradition of Free Enterprise 1. Consumers influence producers through their buying decisions. Chapter 3, Section 1 2. Consumers influence the government’s economic policies through voting and other techniques. Americans have traditionally favored economic freedom over economic regulation. What is the role of consumers in our free enterprise system?

123 Go To Section: 4 The Public Interest Public interest can be described as concerns of the public as a whole. Chapter 3, Section 1 Government responds to public interest by enacting public policy, or laws and standards on topics of public interest. Consumers can influence public policy through voting or by joining an interest group, which is a private organization that tries to persuade public officials. Consumers are aided by public disclosure laws, which require companies to give consumers full information about their products

123 Go To Section: 4 Protecting Health, Safety, and Well-Being Chapter 3, Section 1 Many federal agencies regulate industries whose goods and services affect the well-being of the public. Major Federal Regulatory Agencies Agency and Date CreatedRole 1906 Food and Drug Administration (FDA) Sets and enforces standards for food, drugs, and cosmetic products Enacts and enforces antitrust laws to protect consumers 1914 Federal Trade Commission (FTC) Regulates interstate and international communications by radio, television, wire, and satellite, and cable 1934 Federal Communications Commission (FTC) Regulates civil aviation, air-traffic and piloting standards, and air commerce 1958 Federal Aviation Administration (FAA) Promotes equal job opportunity through enforcement of civil rights laws, education, and other programs 1964 Equal Employment Opportunity Commission (EEOC) Enacts policies to protect human health and the natural environment 1970 Environmental Protection Agency (EPA) Enacts policies to save lives, prevent injuries, and protect the health of workers 1970 Occupational Safety and Health Administration (OSHA) Enacts policies for reducing risks of harm from consumer products 1972 Consumer Product Safety Commission (CPSC) Regulates civilian use of nuclear products1974 Nuclear Regulatory Commission

123 Go To Section: 4 Providing a Safety Net S E C T I O N 2 Providing a Safety Net What role does the government play in fighting poverty? What government programs attempt to aid those facing poverty? Chapter 3, Section

123 Go To Section: 4 The Poverty Problem The poverty threshold is an income level below that which is needed to support families or households. Chapter 3, Section 2 Welfare is a general term that refers to government aid to the poor. The poverty threshold is determined by the federal government and is adjusted periodically

123 Go To Section: 4 Redistribution Programs Chapter 3, Section 2 Cash transfers are direct payments of money to eligible people

123 Go To Section: 4 Other Redistribution Programs Besides cash transfers, other redistribution programs include: In-kind benefits In-kind benefits are goods and services provided by the government for free or at greatly reduced prices. Medical benefits Health insurance is provided by the government for the elderly and disabled (Medicare) and for poor people who are unemployed or are not covered by their employer’s insurance (Medicaid). Education benefits Federal, state, and local governments all provide educational opportunities for the poor. Chapter 3, Section

123 Go To Section: 4 Chapter 3, Section 3 Providing Public Goods S E C T I O N 3 Providing Public Goods What is a market failure? What are public goods? How does government manage externalities?

123 Go To Section: 4 Market Failures A market failure is a situation in which the market, on its own, does not distribute resources efficiently. Chapter 3, Section 3 Would the free market ensure that roads are built everywhere they are needed? It’s doubtful. Neither could individuals afford to pay for a freeway

123 Go To Section: 4 Public Goods Public goods are funded by the public sector, the part of the economy that involves transactions of the government. A free rider is someone who would not choose to pay for a certain good or service, but who would get the benefits of it anyway if it is provided as a public good. Chapter 3, Section 3 A public good is a shared good or service for which it would be impractical to make consumers pay individually and to exclude nonpayers

123 Go To Section: 4Externalities Chapter 3, Section 3 An externality is an economic side effect of a good or service that generates benefits or costs to someone other than the person deciding how much to produce or consume

123 Go To Section: 4 Promoting Growth and Stability S E C T I O N 4 Promoting Growth and Stability How does the government track and seek to influence business cycles? How does the government try to promote economic strength? Why and how does the government encourage innovation? Chapter 3, Section

123 Go To Section: 4 Tracking Business Cycles Macroeconomics is the study of the behavior and decisionmaking of particular economies. A business cycle is a period of macroeconomic growth followed by a period of contraction. One measure of a nation’s macroeconomy is gross domestic product (GDP). GDP is the dollar value of all final goods and services produced in a certain economy. Chapter 3, Section

123 Go To Section: 4 Promoting Economic Strength Chapter 3, Section 4 Policymakers pursue three main outcomes as they seek to stabilize the economy

123 Go To Section: 4 Encouraging Innovation Federal agencies fund many research and development projects. Also, new technology often evolves out of government research. Chapter 3, Section 4 The government encourages the development of new technologies in several ways. Technology is the process used to produce a good or service. A patent gives the inventor of a new product the exclusive right to produce and sell it for 20 years