Download presentation
Presentation is loading. Please wait.
1
The U.S. Economy: Private and Public Sectors Chapter 5
2
Households as Income Receivers The Functional Distribution of Income
3
Households as Income Receivers The Personal Distribution of Income
4
Households as Spenders Personal Taxes – U.S. Households pay an average 13% of income in taxes. Personal Saving – U.S. Households save an average of 3% of their income.
5
Households as Spenders Personal Consumption Expenditures – The remaining 84% of household income is spent on durable and non-durable goods, and services.
6
The Business Population A plant is a physical establishment – a factory, farm, mine, store, or warehouse. A firm is a business organization that owns and operates plants. An industry is a group of firms that produce the same, or similar, products.
7
Sole Proprietorships AdvantagesDisadvantages Easy to set up and organizeLimited Capital Little complex paper work and legal expense Proprietor must carry out all management functions Self-employment and freedom of actionUnlimited Liability – personal assets are risked. Strong incentive to manage business effectively due to personal liability
8
Partnership AdvantagesDisadvantages Easy to organizeDivided Authority/Potential Conflicts Not much complex paper work or legal expense Finances are better than sole proprietorship, but are still limited Financial resources greater than sole proprietorship Unlimited Liability Limited Life
9
Corporation AdvantagesDisadvantages Ease of Attaining Capital (Stocks and Bonds) Double Taxation Limited LiabilityThe Principle-Agent Problem Unlimited Life
10
The Public Sector: Government’s Role Providing the Legal Structure Maintaining Competition – - Monopoly Redistributing Income – - Transfer Payments – - Market Intervention – - Taxation
11
The Public Sector: Government’s Role Reallocating Resources and Market Failure Spillovers or Externalities – - Spillover Costs – - legislation – - specific taxes – - Spillover Benefits – - subsidize consumers – - subsidize suppliers – - provide goods via government Public Goods and Services – - Free-rider problem
12
The Public Sector: Government’s Role Quasi-Public Goods The Reallocation Process Promoting Stability – - Unemployment – - Inflation Government’s Role: A Qualification
13
The Circular Flow Revisited Government Resource Market Households Product Market Businesses
14
Federal Finance
16
State and Local Finance State Finances Local Finances – - Property Taxes
Similar presentations
© 2024 SlidePlayer.com. Inc.
All rights reserved.