Bell Ringer What does it mean to you when America is described as the “Land of Opportunity”?

Objectives Define the basic principles of the U.S. free enterprise system. Identify the benefits (advantages) and costs (disadvantages) of the U.S. economic system.

Intro: What is Free Enterprise? The American tradition of free enterprise has been a key factor in supporting the belief that it is the “land of opportunity.” Free enterprise is a more accurate and up-to-date name for capitalism.

Principles of Free Enterprise Profit motive (aka, Self Interest) In a free enterprise, businesspeople make decisions based on what will increase their profits Open opportunity (aka, Competition) The American principle of open opportunity says that anyone can compete in the marketplace.

Principles, cont. Legal equality Private property American free enterprise believes in the principle that everyone has the same legal rights. Private property The free enterprise system allows people to make their own decisions about their own property. Freedom to buy and sell People can decide what agreements to enter into, as well as what, when, and how they want to buy and sell. Checkpoint Answer: Legal equity, private property, and the freedom to buy and sell

Benefits/Advantages What are the benefits of free enterprise? Free enterprise makes it possible for people who have ideas and persistence to start businesses and make themselves successful. Hard work + Opportunity = $$$ Free enterprise also offers a great deal of economic freedom to the consumer.

Costs/Disadvantages What are the costs of free enterprise? Although free enterprise rewards hard work, it doesn’t provide everyone with an equal opportunity. Free enterprise tends to reward those who already have wealth It sacrifices equality for freedom

How do you think wealth is distributed in the U.S.? Bell Ringer How does America slice its “economic pie”? (aka, economic equity) How do you think wealth is distributed in the U.S.? In other words… How much more wealthy do you think the richest people are than the poorest people? 10 times? 100? 1000?

Bell Ringer http://www.youtube.com/watch?v=QPKKQnijnsM “Wealth Inequality in America” How do your predictions compare with the distribution shown in the video?

Income Inequality Questions Who are the “1%”? What are some of the consequences of the rise of income inequality in the U.S.? What, if anything, should the government do to help the “99%”?

Objectives Identify the role of the U.S. government in free enterprise. Define “regulation” and they ways in which government may intervene in the marketplace.

Role of the U.S. Government Self interest Competition Legal equality Private property Freedom to buy/sell 12

The Role of Govt. The role of the government in the marketplace includes: Carrying out the constitutional responsibilities to protect property rights, contracts, and other business activities Making sure that producers provide consumers with information Enforcing regulations, or the rules/laws that control the way that businesses can operate. “Food Defect Action Levels”

Negative Effects of Regulation Possible negative effects of government regulation include: Rules are costly for businesses to implement Regulations can limit competition Increases government spending

Major Federal Regulatory Agencies Answers: Answers will vary. Possible answers: (a) CPSC (b) SEC (c) EEOC.

EPA Regulation Cost/Benefit Analysis Create a cost/benefit analysis, including at least five costs and five benefits, for the Environmental Protection Agency (EPA). Consider the impact on businesses, the environment, and the general public. Answer the following question in 3-5 sentences: “Based on your cost/benefit analysis, is it worth it to the U.S. to keep the Environmental Protection Agency (EPA) in service? Why/why not?”

Bell Ringer One of the principles of American Free Enterprise is private property. How does the government protect or enforce private property laws? Provide examples. 17

Eminent Domain One right granted by the Constitution is the 5th Amendment, which protects private property from being taken from a citizen without due process. However, the government has the right to take private property for public use (as long as it pays fair market value). This is known as eminent domain.

Read the article about the Supreme Court decision on eminent domain. Circle key terms, underline/highlight relevant information Study the political cartoon about the decision. Using the political cartoon, complete the Political Cartoon Analysis Guide.

Objectives Explain why the government tracks and seeks to influence economic progress. Analyze the concept of “creative destruction.”

Introduction How does the U.S. government encourage growth and stability? The U.S. government encourages growth and stability by: Tracking economic progress Promoting employment Encouraging the development of new technologies

Tracking Economic Progress One measure of the nation’s economic well-being is gross domestic product (GDP). GDP = the total value of all final goods and services produced in a country in a given year Current U.S. GDP = Answer: Approximately 4 trillion dollars $18.57 trillion 22

Employment Employment The government strives to make sure there are enough jobs for everyone who is able to work. An unemployment rate between 4 percent and 6 percent is considered healthy. What is it today? 4.1 percent as of October 2017 25 percent in 1933; 10 percent in Oct. ‘09

The Government’s Role 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 and DARPA Granting patents and copyrights, which are an incentive to innovation

Technological Progress Technological progress has enabled the U.S. economy to operate more efficiently. Many inventions have improved productivity in the United States, including: The light bulb, which made a longer workday possible The assembly line, which led to mass production at affordable costs Checkpoint Answer: Improved technology helps the economy to operate more efficiently. List at least three more technological innovations that improve productivity. 25

“Creative Destruction” In order for there to be progress and economic growth, new innovations constantly replace outdated ideas and technology. In economics, this process is called “creative destruction.” How did we get to the Tesla Model S?

“Creative Destruction” Think about all of the inventions that have been replaced by the smart phone. Draw a timeline, visual, comic, or graphic that represents the “creative destruction” process by which the smart phone replaced older technologies.

Key Terms gross domestic product (GDP): the total value of all final goods and services produced in a country in a given year patent: a government license that gives the inventor of a new product the exclusive right to produce and sell it copyright: a government license that grants an author exclusive rights to publish and sell creative works

Bell Ringer What is “poverty”? Google  “the state of being extremely poor” US Dept. of Health and Human Services: “The set minimum amount of gross income that a family needs for food, clothing, transportation, shelter and other necessities.” In 2018, the gross yearly Federal Poverty Line is $24,600 for a family of four.

Objectives Explain how “poverty” is defined by the federal government. Identify the main programs through which the government redistributes income to address poverty.

The Poverty Problem In a free market, the wealth is spread unevenly throughout society, which leaves some people below the poverty threshold (the “Haves” and “Have-Nots”). The U.S. Bureau of the Census sets the poverty threshold based on the cost of the goods a family needs to buy.

The Poverty Problem The current Federal Poverty Line (FPL) is set at $24,600 for a family of four. This number is determined by multiplying the cost of a minimum food diet by three and annually adjusting for inflation. Because of this, many people consider the FPL to be set far too low.

The Government’s Role How does government help the poor? By providing a safety net to groups like the very young, the very old, the sick, the poor, and the disabled through various federal, state, and local programs.

Redistribution Programs Cash transfer programs Temporary Assistance for Needy Families (TANF) - sends welfare payments directly to the states, which design and run their own welfare programs Social Security - collects money from current workers and redistributes funds to retired and disabled persons Currently: 66 years old; avg. $1,377 per month

Redistribution Programs Cash transfer programs Unemployment Insurance - Provides money to workers who have lost their jobs as long as recipients offer proof that they have made efforts to get work. Worker’s Compensation - Provides state funds to workers injured on the job.

In-Kind Benefits In-kind benefits Food stamps - Qualified people receive assistance with their monthly food purchases Subsidized housing - Qualified people are allowed to rent housing for less than the regular rent (Section 8) Legal aid - Qualified people receive legal advice at no charge

Medical and Educational Benefits The government provides health care to the elderly (Medicare), the disabled, the poor (Medicaid), and children who are uninsured (CHIP).

Key Terms welfare: government aid to the poor cash transfers: direct payment of money by the government to the poor, disabled, or retired people in-kind benefits: goods and services provided for free or greatly reduced prices