Economics Bell Work Wednesday, February 24th Using Chapter 3, Section 1, identify which benefits of free enterprise you are enjoying if you: Quit your job in order to take a different job at a higher salary Buy a car from your neighbor Sign a petition urging your government to lower property taxes

Promoting Growth & Stability Chapter 3, Section 2

Tracking Business Cycles Macroeconomics The study of economic behavior and decision-making in a nation’s whole economy. Example: Great Depression spurred economic decisions to stabilize the economy

Tracking Business Cycles Microeconomics The study of economic behavior and decision-making in small units, such as households and firms Example: Buying and selling on eBay

Tracking the Business Cycle How does the U.S. government encourage growth and stability? The U.S. government encourages growth and stability by: Tracking business cycles Promoting a high employment rate Keeping prices stable Encouraging the development of new technologies Taking pride in the American work ethic

Tracking the Business Cycle Even under the free enterprise system, the government intervenes to influence macroeconomic trends. One measure of the nation’s economic well-being is gross domestic product (GDP).

Promoting Economic Strength Gross Domestic Product (GDP) The total value of all final goods and services produced in a country in a year.

Promoting Economic Strength During a period of growth, GDP goes up and in a period of contraction, GDP goes down. This pattern of a period of expansion followed by a period of contraction is called a business cycle. Changes in the business cycle take place because individuals and businesses, acting in their own self-interest, make decisions about factors such as prices, production, and consumption.

Promoting Economic Strength Three goals the government tries to meet when promoting economic strength: High employment Healthy economy = between 4 and 6% unemployment Economic growth Govt. may cut taxes or increase spending Stability and security Prices surge = strain on consumers Prices sink = producers feel the pain

Promoting Economic Strength Referendum: proposed laws, submitted directly to the public, on spending or other economic issues Voters make choices based on self-interest.

Technology and Productivity How does improved technology help the economy? Technological progress has enabled the U.S. economy to operate more efficiently. Example: light bulb made the workday longer

Technology and Productivity Obsolescence: situation in which older products and processes become out of date. Example: Telephone operators lost their jobs to computerized dialing systems. Physical and human resources can be used in other ways: industrial buildings can be converted into apartments, people can be retrained to to other jobs.

Technology and Productivity The government promotes innovation and invention to help maintain the country’s technological advantage by: Funding research and development projects at universities Establishing their own research institutions, like NASA Granting patents and copyrights, which are an incentive to innovation

Technology and Production Patent: a government license that gives the inventor of a new product the executive right to produce and sell it Example: titanium screw used for dental implants Copyright: a government license that grants an author exclusive rights to publish and sell creative works Examples: Literary, dramatic, musical, artistic, intellectual works