Free Enterprise Free Enterprise Free Enterprise economy: businesses allowed to operate with limited gov’t involvement. Free Enterprise economy: businesses

Free EnterpriseFree Enterprise

Free Enterprise economy:Free Enterprise economy: businesses businesses allowed to operate with limited gov’t allowed to operate with limited gov’t involvement. involvement. © nperskine 2012© nperskine 2012

Interest Interest groups:groups:

private private organizations organizations that try to that try to persuade public persuade public officials to act or officials to act or vote according vote according to group to group members’ members’ interests. interests.

– Raise funds to Raise funds to support political support political campaigns in an campaigns in an attempt to attempt to influence influence candidates. candidates.

– Can bring about Can bring about changes that changes that benefit only its benefit only its members members instead of instead of society as a society as a whole. whole.

Ex)Ex) NRA, NRA, Greenpeace, Greenpeace, etc.etc.

© nperskine 2012© nperskine 2012


American PovertyAmerican PovertyFour-person family: $22,000Four-person family: $22,000Single individual: $11,000 Single individual: $11,000 (2011). (2011).

Welfare:Welfare: gov’t aid to the gov’t aid to the poor. Gov’t is trying to poor. Gov’t is trying to combat the reliance upon combat the reliance upon welfare by many recipients welfare by many recipients (i.e. those not looking for (i.e. those not looking for jobs). jobs). – Food stamps, subsidized Food stamps, subsidized

housing, and legal aid. housing, and legal aid.


Poverty in 2010 U.S. CensusPoverty in 2010 U.S. CensusUSA: 15.1% USA: 15.1% Texas: 18.5%Texas: 18.5%

California: 22.6%California: 22.6%

Check out your states’ poverty rate and median household Check out your states’ poverty rate and median household income: income: http://money.cnn.com/interactive/news/economy/median-poverty-income/?iid=EL


Gov’t Programs for the Poor, Elderly, Gov’t Programs for the Poor, Elderly,

etc.etc. Cash transfersCash transfers: : states states

distribute federal $ to distribute federal $ to the poor (the poor (entitlement entitlement programsprograms)) Welfare recipientsWelfare recipients

Average per household Average per household $200 month$200 month

*Regulations vary by *Regulations vary by statestate


Social Security:Social Security:

direct cash transfers direct cash transfers

to elderly (retirement to elderly (retirement

income) and disabled.income) and disabled.• $25,392$25,392 max for single person per max for single person per

year year • 15%15% of income of income

--The problem: The problem: Too many Too many Baby BoomersBaby Boomers, ,

too few too few workers to workers to support support them. them.


Medical: Medicare: covers

Americans age 65 . Medicaid: covers some

poor people who are either unemployed or not insured.

Education: provided by gov’t for all citizens, including poor. Funds programs from

preschool to college. Financial Aid, Affirmative

Action, NCLB, Standardized testing, Basic Aid, etc.

© nperskine 2012

Public Goods Provided by Gov’t Federal gov’t provides many

goods and services that the public can’t fund on their own. Roads, parks, schools, military,

etc. How does the gov’t gather funds

for these public goods? Taxation and borrowing

© nperskine 2012

Externalities:Externalities: an economic side effect an economic side effect that affects those who are not directly that affects those who are not directly involved with the good or service.involved with the good or service.Positive externalities: Positive externalities: benefits those benefits those

who do not pay for the goods/services.who do not pay for the goods/services.Ex) A college degreeEx) A college degree

- Education benefits not only students, but society - Education benefits not only students, but society as a whole because educated workers are generally as a whole because educated workers are generally more productive. more productive.

Negative externalities: Negative externalities: the unintended the unintended costs of goods/services that people incur.costs of goods/services that people incur.Ex) Automobiles Ex) Automobiles

- Driving cars = pollution- Driving cars = pollution


InflationInflation

Too much currency in Too much currency in circulation circulation Leads to dollar’s value Leads to dollar’s value

decreasing relative to decreasing relative to other currencies’ values. other currencies’ values.

CPICPI (Consumer Price (Consumer Price Index): measures changes Index): measures changes in the price level of in the price level of consumer goods and consumer goods and services purchased by services purchased by households. households.


Gross Domestic ProductGross Domestic Product GDP:GDP: total value of total value of

all goods/services all goods/services produced in an produced in an economy. economy. • Economists follow a Economists follow a

country’s GDP to country’s GDP to predict business predict business cycles.cycles.

• This measures This measures economic growth economic growth in a country.in a country.

Country2012 (in trillions)

—

— European Union $18.084

1 United States $15.8

2People’s Republic of China

$7.2

3 Japan $5.9

4 Germany $3.5

5 France $2.8

6 United Kingdom $2.6

7 Brazil $2.5

8 Italy $2.2

9 Russia $2.1

10 Canada $1.8© nperskine 2012© nperskine 2012

GDP cont’dGDP cont’d

• Highest per Highest per capita:capita: 1. Qatar 1. Qatar 2. Liechtenstein 2. Liechtenstein 3. Luxemburg3. Luxemburg

• 2010: 2010: http://www.infhttp://www.infoplease.com/oplease.com/world/countrieworld/countries/highest-gdp-s/highest-gdp-per-per-capita.htmlcapita.html


Business cycles are fluctuations in Business cycles are fluctuations in between expansion and contraction between expansion and contraction (decline). (decline). • These cycles are important because if the These cycles are important because if the

economy doesn’t have enough jobs, high economy doesn’t have enough jobs, high school grads have trouble finding work. school grads have trouble finding work.

• If prices rise while incomes stay the same, If prices rise while incomes stay the same, our ability to buy what we need declines. our ability to buy what we need declines.

Ex: Inflation 3% growth and income grows only Ex: Inflation 3% growth and income grows only 2% in one year, your money loses 2% in one year, your money loses realreal value. value.


Unemployment Rates

Economists would like to see the unemployment rate between 4.5%-6%.

National rate: 10% in 2009 and 7.7% in 2012

Find your state’s unemployment rate: http://www.ncsl.org/issues-research/labor/2012-state-unemployment-rates.aspx

© nperskine 2012

Unemployment Rate

Unemployment is defined as those who are part of the labor force and are actively looking for a job.

When a person gives up on finding a job, they are considered a “discouraged worker.”

When a person is working for a job that does not meet his/her qualifications, he/she is underemployed.

© nperskine 2012

InnovationInnovation Technological progress allows U.S. Technological progress allows U.S.

economy to operate efficiently and economy to operate efficiently and increase GDP.increase GDP. Also allows U.S. businesses competitive Also allows U.S. businesses competitive

advantage in world economy. advantage in world economy.

Ex) Thomas Edison’s invention of the light bulb Ex) Thomas Edison’s invention of the light bulb in 1879 made possible a longer workday. in 1879 made possible a longer workday.

© nperskine 2012

Gov’t supports and funds Gov’t supports and funds innovationinnovation

Funds projects and research at Funds projects and research at universities, government firms, universities, government firms, and private firms. and private firms. MIT, Texas A&M MIT, Texas A&M NASANASA


Patents and CopyrightsPatents and Copyrights

• Patents: gives the inventor of a new product the exclusive right to produce and sell it for 20 years.

• Copyrights: grants authors exclusive rights to publish and sell his or her creative rights.

Trademarks: any word,

name, symbol, device, or any combination, used to identify/distinguish the goods/services of one seller or provider from those of others, and to indicate the source of the goods/services.


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Free Enterprise Free Enterprise Free Enterprise economy: businesses allowed to operate with limited gov’t involvement. Free Enterprise economy: businesses