Chapter 2 Sec 2 Evaluating Economic Performance “The social economic goals of the US include economic freedom, economic security, and economic equity.”

Objectives After studying this Section you will be able to: Describe the basic economic and social goals used to evaluate economic performance. Evaluate the trade-offs among economic and social goals. Understand the 7 goals of the US Economy

Economic and Social Goals 1. Economic FREEDOM! In the US, people place a high value on the freedom to make their own economic decisions. Business owners like the freedom to choose WHERE and HOW they produce. How does WHERE something is produced effect the American worker? What are some treaties that effect this? By producing outside the US, this effects the American worker to keep a good job. NAFTA< Free Trade agreements<ETC.

2. Economic Efficiency Most people recognize that resources are scarce and that factors of production must be used wisely. Economic decisions making must be efficient so that benefits GAINED are GREATER than costs INCURRED.

3. Economic Equity Most Americans have a strong sense of justice, fairness, and impartiality. Many believe in equal pay for equal work. DO NOT discriminate on age, sex, race, creed, or ability in employment. When it comes to selling products, advertisers should NOT make false claims. Most states have “Lemon Laws”.

4. Economic Security Social Security- A federal program of disability and retirement benefits that covers most working people. Retirees, Disabled, Survivors, and Medicare recipients are eligible for benefits. Medicare provides health insurance for persons 65 and older.

Social Security The Social Security Act was drafted by President Roosevelt's committee on economic security. By passing this act, President Roosevelt became the first president to advocate the protection of the elderly.

Ida May Fuller, the first recipient In 2009, $11.3 Trillion of benefits were paid out. As of 2009 there are 420 million SSN. Social Security payroll taxes are collected under authority of the Federal Insurance Contributions Act (FICA) Ida got $22.50 in 1940

5. Price Stability Must have stable prices Inflation A  simple commonly used definition of the word inflation is simply "an increase in the price you pay or a decline in the purchasing power of money". In other words, Price Inflation is when prices get higher or it takes more money to buy the same item. High Inflation rate can discourage new businesses.

Inflation Rate the rate of change of prices (as indicated by a price index) calculated on a monthly or annual basis Current Inflation Rate 1.1% was over 5% Had steadily increased since Jan 2008.

U.S. Inflation Rate Forecast Month Forecast Jan 2011 1.3 Feb 2011 1.8 Mar 2011 1.9 Apr 2011 2.2 May 2011 2.6 Jun 2011 2.9 Jul 2011 2.8 Updated Friday, December 24, 2010 http://forecasts.org/inflation.htm

Zimbabwean Hyperinflation Officially Estimated Mid-November 2008 (latest measurable)79,600,000,000% Prices double about every 24.7 hours

What NOT to do! As of 7/18/2008 you need 100 of these to equal 4¢ U.S.

Consumer Price Index is a measure of the average price of consumer goods and services purchased by households. Current CPI: 216.30

Fixed Income An income that does not increase even though prices go up- Find that bills are harder to pay and planning for the future is MUCH harder.

6. Full Employment People must work in order to purchase items. How can we create NEW JOBS? What sector? What will the qualifications be?

7. Economic Growth Must have it in order to the Nation’s economy moving! Growth is needed so people have more goods and services to purchase

Future Goals! You must decide what is important to you! Which one of the 7 Economic Goals is the MOST important? Why?

QUESTIONS? How will the increase of the Federal Minimum Wage might involve a conflict of goals? What is false advertising?

Chapter 2 Section 3 Capitalism and Economic Freedom Under capitalism, the basic economic decisions are made through the free interaction of people looking out for their best OWN interests, Competition and Free Enterprise

CONCEPTS Capitalism is a market economy in which private citizens make their own economic choices. In a free enterprise system, there is LIMITED government interference and businesses are free to compete.

With economic freedom, people and businesses make their own economic decisions. The result of voluntary exchange, in which buyers and sellers are free to decide whether or not to complete a transaction, results in both buyers and sellers believing that the good/service obtained is of more value than the money spent.

Concepts Private property rights motivate people to succeed. Any rewards are earned and kept. The profit motive encourages entrepreneurship and is largely responsible for the free enterprise system. Competition among sellers helps lower prices.

Role of Entrepreneur Use land, capital, and labor to make profits. When an entrepreneur is successful, everyone benefits. They also attract other firms to the industry. The search for profits leads to: New Products, greater competition, more production, higher quality and lower prices.

Role of the Consumer The consumer has much power in a free market economy. Consumer sovereignty describes the role of the consumer as ruler of the market Consumers in the American economy express their wants in the form of purchases in the marketplace.

Role of Government As a protector, a government may pass and enforce laws meant to prevent the abuse of consumers and workers Governments are both providers and consumers. The US government provides education and welfare and is the 2nd largest consuming group after consumers.

Gov’t As a regulator, the government works to preserve competition The promoting of national goals is an important role of any government. In the US, achieving economic equity and security has resulted in a mixed economy, or modified private enterprise economy.