1. Chapter 23 The Role of Government

2. Bell ringer #
Match the pictures to the economic system. Be ready to defend your answer.
1. Market
2. Mixed
3. Command B A C

3. Economic Systems- Command
The opposite of a market economy
Government owns all factors of production and keeps profits
Government decides what gets produced, how, and who gets it
People may not own anything
Command economies have roots in Socialism (pg. 620)
Socialism- belief that means of production are owned by society or government
Command economies are not efficient. Workers are not motivated. Government businesses face shortages and products are often low quality.

4. Economic Systems- mixed
Combines elements of Command and Market economies.
In the USA, individuals can own property and businesses and keep the profit
Government has limited involvement with economy
However, we can not do whatever we want. The government steps in to:
Make laws to try to ensure workplaces and products are safe (regulations)
Keep businesses from getting too large (monopolies)
Help those who need assistance

5. 1. Providing Public Goods
A. Businesses mostly produce private goods (can only be used by one person one time).
exclusion principle (meaning You can’t use it unless you pay for it) ex) car
B. Public goods are goods and services the gov’t must provide because everyone needs them and private businesses needs won’t make them. The government pays for things through taxes. ex) military protection
non-exclusion principle. ( meaning you don’t necessarily have to pay for it)

6. 2. Dealing With Externalities
A. Externality is the unintended side effect of an action that affects someone not involved in the action. Public goods create positive externalities. Ex) Everyone—not just drivers— benefits from good roads.
B. The government tries to prevent negative externalities— actions that harm an uninvolved third party.
For example, dumping toxic waste in a river

7. 3. Maintaining Competition
A. Markets work best when there are many buyers and sellers. When a market is controlled by a monopoly, or sole provider, that company can charge any price.
B. Antitrust laws are intended to control monopoly power and to preserve and promote competition. The Sherman Antitrust Act of banned monopolies and that prevented competition. The government used this law to break up AT&T to allow more competition in telephone service.

8. Use what you Learned Explain how this picture demonstrates monopolies.
Is this situation possible in a mixed, market, or command economy? Why?
How hard would it be for an individual to compete with these Tech companies?

9. Chapter 23, Section 2 How do we measure the economy?
1. Measuring Growth
A. When the economy grows, businesses produce more, hire more workers. People then have more money and buy more stuff.
B. The gross domestic product (GDP) measures of the economy’s growth. It is the dollar value of all goods and services produced in a country in a year.
C. If prices increase, GDP would go up even if the economy was not growing.

10. 2. Business Fluctuations
A. business cycle- The economy goes through alternating periods of growth and decline.
B. An economic expansion takes place when GDP goes up. At some point, GDP reaches a peak, then it starts to decline.
C. Expansions are normally longer than recessions. Recessions are painful times. The economy declines, and many people lose their jobs and security.

11. 3. Unemployment
A. civilian labor force includes all civilians over 16 years old working or looking for work.
unemployment rate is the percentage of people who are not working but are looking for jobs.
B. The unemployment rate reflects the health of the economy.
C. Unemployment affects the overall economy because when people lose their jobs, they must cut back their purchases. Some go into debt.

12. 4. Fiscal Policy
A. To try to reduce high unemployment, the government uses fiscal policy. It changes the way it taxes or spends.
B. Government will take action to increase jobs and get people spending again such as:
cut taxes to give people more money to spend. Then businesses will need more employees.
Government might buy more things itself, trying to convince businesses to hire more workers to boost production.

13. 5. Price Stability
A. Inflation is a sustained increase in the general level of prices. It hurts the economy because it reduces how much people can buy
B. Unfortunately, government can do little to prevent inflation but will do what they can if it gets out of control .

14. 6. Stocks and Stock Markets
A. Investors can earn profits from stocks in two ways: dividends and capital gains.
Dividends a corporation’s profits that are distributed to stockholders.
Capital Gain occurs when stock can be sold for more than it originally cost to buy.
Current prices of stocks:

15. C. Stock indexes -track stock prices over time
C. Stock indexes -track stock prices over time. Investors consult stock indexes to follow the performance of their stocks.
D. The Dow-Jones Industrial Average (DJIA) and Standard & Poor’s (S&P) are indexes that track a group of stocks. These indexes reflect the general well- being of the stock market as a whole.
E. Shares of stock are bought and sold at a stock market, or stock exchange.
F. Most stocks in the United States are traded on the New York Stock Exchange (NYSE), but computers allow investors to trade stocks around the clock, anywhere in the world.
G. “bull market”– mean prices are generally going up.
“bear market”- mean prices are generally going down

16. Chapter 23, Section 3 Government, the Economy, and You
1. Income Inequality
A. Education, family wealth, and discrimination are common reasons for income differences in the United States.
B. Level of education has a major impact on a person’s income. For this reason, the government offers programs such as free lunches, college grants, and low-interest loans to encourage people to improve their education.
C. The Equal Pay Act of 1963 requires equal pay for jobs that require equivalent skills and responsibilities.
The Civil Rights Act of 1964 bans discrimination on the basis of gender, race, color, religion, and national origin.
The Americans with Disabilities Act of 1990 protections to people with disabilities.

17. 2. Poverty
A. The government offers programs to help people living in poverty.
B. Food stamps are government coupons that can be used to purchase food.
C. The Women, Infants, and Children (WIC) program provides help with nutrition and health care to low-income women and children up to age 5.
D. Some programs make cash payments. Supplemental Security Income (SSI) gives payments to blind or disabled people and to persons age 65 and older.
E. There are other various government services to help Americans who have a low income.