1. The American Economy

2. 3 Basic Economic Questions
WHAT
TO PRODUCE?!
HOW
TO PRODUCE?!
FOR WHOM
TO PRODUCE?!

3. ECONOMIC RESOURCES

4. FACTORS of PRODUCTION
Natural
Human/ Labor
Capital
Entrepreneur

5. Resources NATURAL HUMAN CAPITAL Money Labor WATER tools Mgt. LAND
machinery
building
Labor
Mgt.
WATER
LAND
TREES
OIL
Etc.

6. Gross Domestic Product

7. Gross Domestic Product
Total value (in $) of all the final goods and services produced in a country during a single year
used goods NOT included !!

8. Measuring GDP
Multiply the quantity of each good by its price, then add the dollar amount.
GDP is a measure of standard of living-- the quality of life based on the possession of necessities and luxuries that make lie easier

9. ECONOMIC ACTIVITY & PRODUCTIVITY

10. Circular Flow of Economic Activity

11. Consumer Sector Consumers earn $ in the FACTOR MARKET
Wages are given in exchange for labor

12. Business Sector Consumers spend $ in PRODUCT MARKETS
Business Sector receives payments for the goods & services spent in Product Market
Businesses use this $ to pay for resources

13. Government Sector
Made of all 3 levels of government: LOCAL, STATE, & NATIONAL
Government Sector produces goods & services: national defense, health, education, transportation & housing therefore receives revenue– however, most revenue comes from taxes
Government sector also acts as a consumer

14. Foreign Sector Sell to AND buy from other nations
Value of products bought and sold tends to offset each other
Results in less than 4% of nation’s GDP

15. PRODUCTIVITY & ECONOMIC GROWTH PRODUCTIVITY
measure of amount of output produced by given amount of inputs in a specific period of time
Goes up when more can be produced in same amount of time
need to use resources efficiently
SPECIALIZATION
Concentration on production of certain goods or services
Depend on others for other items needed as consumers
Improves productivity
HUMAN CAPITAL
The sum of abilities, skills, and motivation of people
Gov’t and business invest in training, healthcare and employee motivation to increase productivity
Employers get better products and better profits
Employees get higher pay, better jobs, and job satisfaction
PRODUCTIVITY &
ECONOMIC GROWTH
DIVISION OF LABOR
Breaking a job down into smaller tasks
Skill development
ECONOMIC INTERDEPENDENCE
Mutual reliance for goods and services
What is going on in another country could affect our economy

16. CAPITALISM & FREE ENTERPRISE

17. FEATURES of CAPITALISM
MARKETS
Set prices
Connect the sectors of the economy
DOLLAR VOTE
consumer sovereignty
ECONOMIC FREEDOM
C-H-O-I-C-E
Accept consequences of decisions

18. FEATURES of CAPITALISM (cont’d)
PRIVATE PROPERTY RIGHTS
Freedom to own and use our own property as we choose
Provides incentive: to work, save, invest, maintain
COMPETITION
Keeps prices low and quality of goods high
Rewards efficient producers
Forces others out

19. FEATURES of CAPITALISM (cont’d)
THE PROFIT MOTIVE
The hope for financial gain
Profit= amount left over after all costs of production have been paid
VOLUNTARY EXCHANGE
Buyers and sellers willingly exchanging in market transactions
Who benefits?
BOTH!!

20. SPREAD of CAPITALISM Adam Smith 1776, Wealth of Nations
Described life and trade in England
Described basic principles of economics

21. SPREAD of CAPITALISM (cont’d)
LAISSEZ-FAIRE
French, “to let alone”
Hands off approach to business
Government should NOT interfere with the market place
A strictly limited role for government in the economy

22. The ECONOMY & YOU

23. CONSUMER RIGHTS & RESPONSIBILITIES
PROTECTING CONSUMER RIGHTS
caveat emptor – let the buyer beware!
Consumerism
Fair Packaging and Labeling Act
Pure Food and Drug Act 1906
Better Business Bureau

24. CONSUMER RIGHTS & RESPONSIBILITIES (cont’d)
CONSUMER BILL OF RIGHTS
(Started under JFK, re-addressed under Nixon)
Right to a SAFE PRODUCT
Right to BE INFORMED
Right to CHOOSE
Right to BE HEARD
Right to REDRESS

25. CONSUMER RIGHTS & RESPONSIBILITIES (CONT’D)
CONSUMER RESPONSIBILTIES
REPORT the problem IMMEDIATELY
KEEP records of efforts to resolve problem
EXHIBIT ethical behavior

26. YOUR ROLE as a CONSUMER Decision Making Uses of Income
Disposable Income
Uses of Income
What are your goals?
Discretionary Income
YOUR ROLE
as a
CONSUMER
Deciding about
your Savings
Saving for the Future
Saving
Saving Regularly
Interest