Chapter Eighteen

The American Economy

Goods and Services

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American Production

Goods and Services• goods and services are produced by a country’s economy• the availability of plentiful and affordable goods depends

on mass production

Goods = products that are manufactured and that consumers can buy and own.

Services = work that does not produce an actual product, but which consumers can buy.

measures of economic well-being• gross domestic product (GDP)

• dollar value of all goods and services produced annually in U.S.• unemployment rate• business failure rate• tax revenue from American businesses and citizens

mass production• rapid production by machine of large numbers of identical objects• requires many large, complex machines and vast amounts of

power

origins of mass production• Eli Whitney

• one of the first inventors to make mass production possible• 1798 contract to make muskets for the U.S. Army

• promised to manufacture and deliver 10,000 muskets in just two years• special demonstration in Washington, D.C.

• 10 gun barrels, 10 triggers, 10 stocks, and 10 locks• took the four parts and quickly put together a finished musket

• his methods have become the basis of all mass production

U.S. Economy

Mass Productionmachine tools

• machinery built to produce parts that are exactly the same• identical interchangeable parts

• Whitney = instead of boring each gun barrel by hand he made a machine that did nothing but bore identical gun barrels

interchangeable parts• parts made by machine tools that are exactly alike

• wore out parts can easily be replaced by new standard, identical parts• Whitney = any gun barrel would fit any gun stock made by Whitney and

other parts were also interchangeable and would fit any of the guns

division of labor• a system in which each worker performs a specialized portion of a

total job • each worker is a specialist at a certain part of the job • specialization speeds the entire process

• Whitney = triggers, stocks, and locks for Whitney's guns were made by different groups of workers so no single worker made a complete gun

• The use of machine tools, interchangeable parts, and the division of labor helped increase production

waterpower• force of falling water

• early factories were located near streams• dams were built to hold back water to turn waterwheels

steam power• heating water to run a turbine or piston

• replace waterpower in the late 1700s• Scottish engineer James Watt invented a practical steam engine• leading source of industrial power during the 1800s

internal combustion engine• power released by exploding gasoline

• developed in late 1800s• used to run small machines and automobiles

electricity• channeling electric currents

• late 1800s the work of Thomas Edison made the widespread use of electricity practical and affordable

• contributed most to modern mass production• nearly every American factory uses electricity as main source of power

Power Sources

automobile manufacturing• good example of modern mass production

• each worker is highly skilled at a specialized job• addition of assembly line to production process

assembly line• introduced by Henry Ford • uses machines and workers to move a product through stages of

production until it is completed• large conveyor belt system moves items through the factory

feeder line (side line)• parts are brought to the main assembly line exactly when and

where they are needed

most large industries use these methods of production

Modern Mass Production

Mass Production in the Worldmass production was first developed in the U.S.• has spread to other countries around the world• used more effectively in some countries than in others

command economy• does not have the same incentives, or motives, as a free economy• lack of a profit motive discourages people from working hard and

increasing productivity • lower productivity means that there is less money available for

modernizing factories

free-market economy• encourages businesspeople to take risks• possibility of making a profit continues to encourage new innovations

in production and marketing

The Service SectorU.S. has a service economy

• shift from producing goods to providing services

personal services• performed directly on customers

• medical care, haircutting, physical training

repair services• performed on owned goods

• auto repair

retail services• selling new or used goods

• malls, online sellers

professional services• performed by trained or licensed professionals

• banking, financial planning, legal, insurance

service training depends on the type of service• little or no experience, on-the-job training, formal apprenticeship,

advanced degrees