1. Chapter 19
The American Economy

2. Section 1: Economic Resources
Chapter 19
Section 1: Economic Resources

3. The US is responsible for about 1/3 of the world’s total production
Goods are tangible products like books and cars etc.
Another form of production is Services which is work that is performed for someone else

4. Factors of Production are the resources necessary to produce goods and services, such as: 4
Natural Resources are resources from the earth that make production possible
Fertile fields, forests, mineral deposits, etc.
Labor is the human resources referring to both the physical and mental efforts people put forth

5. Capital is the tools, machinery, and buildings used to make other products
Entrepreneur is the individual(s) who start the new business, create new products, manage, etc.
Entrepreneurs are thought of as the driving force in the American Economy l

6. Gross Domestic Product
The GDP Measures the overall success of a country
This is the total value of goods and services produced by a country
It is also an important measure of the Standard of Living which is the quality of life we enjoy

7. Section 2: Economic Activity and Productivity
Chapter 19
Section 2: Economic Activity and Productivity

8. When people earn their money they spend it in the Product Markets in exchange for goods and services
The government also plays a significant role in the economy
The government offers services sometimes accepting small fees but these rarely cover all the costs and they receive most of their funding through taxes

9. Economic growth is important because it raises our standard of living
What are the 5 factors of Economic Growth?
Productivity is how efficient one can be with a given amount of resources
The business owners who have the most efficient output of goods will have the most profit

10. Specialization is when a person, business, or country can produce a certain good better than anyone else
Specialization improves productivity
Education is the foundation for specialization
The more specific one’s specialization the more compensation they will receive for their services- generally

11. Division of Labor is a form of specialization that improves productivity by breaking up a job into specific tasks
Human Capital is the sum of the skills, abilities and the motivation of people
Businesses can increase productivity by offering employees training, better jobs, and higher pay

12. Economic Interdependence is that we rely others and others rely on us to provide goods and services
This helps regions of the country benefit in an area in which they lack in exchange for offering in ways in which they have an abundance
Example: Georgia Peaches in exchange for Alaskan oil

13. Section 3: Capitalism and Free Enterprise
Chapter 19
Section 3: Capitalism and Free Enterprise

14. The Economy of the US is based on Capitalism an economic system in which private citizens own the and use the factors of production in order to seek a profit
Free Enterprise is allowing competition to flourish with a minimum of government interference

15. The two major ideals of Capitalism are that 1) people will work for compensation and 2) the government should be involved as little as possible
Adam Smith in the Wealth of Nations (1776) believed that individuals striving for profit would benefit society as a whole
Founded on the idea of Laissez- fair meaning let the people do what the will

16. The key element in our economic freedom is the ability to make choices
Job you choose
Products you buy
Products you sell
Price of those products
With freedom comes responsibility- profit and failure are yours- it is not the government’s job to bail you out

17. Capitalism has the goal of making money
Profit is the money left over after all costs of production have been paid
Profit Motive is the driving force that encourages individuals to improve their material well-being

18. Competition is key to getting the best product for the best price
Competition is the struggle that goes on between sellers and buyers to get the best products at the lowest prices
Competition is key to getting the best product for the best price
Competition rewards the most efficient producers and forces the least efficient out of business
Make for better products at better prices for happier consumers

19. In the US markets we refer to Consumer Sovereignty meaning that the consumer is king
The market will naturally adjust to the demands of consumers
Ex: if no one likes the new iphone and therefore doesn’t buy it the prices go down, apple makes less money and will make a better product in the future

20. If something is yours you will tend to take better care of it
We also have Private Property Rights which allows us to the freedom to own and use or get rid of our property as we choose
As long as it doesn’t interfere with the rights of others
This gives people the incentive to work, save, invest- we get to keep any gains
If something is yours you will tend to take better care of it

21. Voluntary Exchange is the act of buyers and sellers freely and willingly engaging in market transactions
Both you and the seller benefit from the exchange of properties
You get a product and they get your money

22. Section 4: The Economy and You
Chapter 19
Section 4: The Economy and You

23. Consumerism is a movement to educate buyers about the purchases they make and to demand better and safer products from manufacturers
It is our responsibility to learn about the products we buy and ignore the ones that are a bad value

24. Consumers do have 5 rights
The right to a safe product
The right to be informed
The right to choose
The right to be heard
The right to redress
Disposable Income is the money you have left over after taxes
Discretionary Income is the money you have left over after you have paid all the necessities
You use this money to satisfy wants

25. You should create your own personal Budget
Buying the things you want now may possibly keep you from meeting your long term goals and purchases
To reach you long term goals you may Save or set aside a portion of your money to be used later
When you save you earn Interest- money gained by allowing the bank to keep your money