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Chapter 16: Government’s Role in Our Economy

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1 Chapter 16: Government’s Role in Our Economy
Section 1: Government Intervention in the Economy

2 Why couldn’t it do anything else at first?
The U.S. Government can… Coin money Collect taxes Borrow money Make a postal service Build roads Regulate commerce Why couldn’t it do anything else at first? haga dinero reúna impuestos pida dinero prestado haga un servicio postal construya los caminos regule comercio

3 What are the “ground rules” for a market economy?
¿Qué es las reglas para una economía de mercado?

4 The government may only make laws that…
….protect private property against theft. ….set up corporations. Government plays a SMALL role!!! …proteja la propiedad privada contra robo. …haga corporaciones

5 What were the six needs for reform?
¿Qué fue las seis necesidades para la reforma?

6 1. Businesses have sometimes earned profits unfairly (high prices or false advertising)
1. Los negocios han ganado a veces ganancias injustamente (los precios altos o publicidad falsa)

7 2. Working conditions have sometimes been unsafe and inhumane.
2. Las condiciones de trabajo han sido a veces peligrosas e inhumanas.


9 3. Unsafe products have harmed consumers.
3. Los productos peligrosos han dañado a consumidores.

10 “Upton Sinclair's The Jungle is a vivid portrait of life and death in a turn-of-the-century American meat-packing factory. A grim indictment that led to government regulations of the food industry, The Jungle is Sinclair's extraordinary contribution to literature and social reform.”

11 4. Not all Americans have had economic security (no sick days)
4. No todos norteamericanos han tenido la seguridad económica (no días enfermos)

12 5. The economy has been unstable.
5. La economía ha sido inestable.


14 6. The environment has been damaged.
6. El ambiente ha sido dañado.


16 What are the six methods the government uses to solve these problems?
Read page 433 What are the six methods the government uses to solve these problems?

17 1. Governments regulate businesses.

18 2. Governments make direct payments to individuals (welfare, food stamps, social security)

19 3. Governments own resources and produce goods and services (PPL)

20 4. Government help pay for important economic activities.

21 5. Governments control the amount of money they spend and the amount they receive in taxes (budget).


23 6. Governments make tax rules and collect special taxes.

24 What are the downfalls to government intervention in the economy?
Read page 434 What are the downfalls to government intervention in the economy?

25 Negatives of Government Intervention
Limits individual economic freedoms. Too many taxes. Pushes toward command economy.

26 Assessment 1: Classify each example with its appropriate “Need for Reform.”
Ryan is laid off of work and cannot find another job. Charlie suffers an accident at work and hurts his back. He cannot work for at least 3 months. Melissa notices that the paper factory she works at is dumping chemical waste in to a nearby lake. The Easy Bake Oven was recalled due to a burning malfunction. Fictional Corporation was lying about the value of its stocks. In 2008 the economy suffered a slowdown, and the housing market showed significant decline.

27 Assessment 2: Classify each example with its appropriate “Method Government Use.”
The government gives money to farmers who are suffering from a drought. Financial Corporation is investigated and brought to court by the attorney general. The Consumer Product Safety Commission (CPSC) recalls the Easy Bake Oven. The government fines and regularly inspects the paper factory that Melissa works at. The Federal Reserve System has attempted to change the health of the economy after 2008. Charlie receives disability and worker’s compensation for three months. Also, Ryan collects unemployment.

28 16-2: Government Efforts to Solve Economic Problems
Monopoly – a single business with total control of an industry and the prices set. Example: Andrew Carnegie had monopoly power over the steel industry. Trust – a group of several companies that benefit from the high prices they agree to charge. Carnegie J.P. Morgan STEEL RR

29 How do you win Monopoly?

30 Why are monopolies and trusts bad in a real economy?
No competition One person controls prices 1890s: Steel Oil Sugar Meat



33 Solution to Unfair Business Practices
People demanded reasonable prices and the chance for small businesses to compete in any market. Sherman Anti-Trust Act (1890) Outlawed agreements among companies that limit competition Clayton Anti-Trust Act (1914) Outlaws many of the practices used by monopolies and Trusts 1938 – no false advertising

34 Legal Monopolies The government controls some businesses that offer necessities and public utilities. Phone service Electricity Water Rates are set by law.

35 Protecting Workers and Consumers
Safe Working Conditions Safe Products Occupational Safety and Health Administration (OSHA) (1917) Sets and enforces health and safety standards at work. Fair Labor Standard Act (1935) Triangle Shirtwaist Fire Segment 1 Segment 2 Segment 3 Food and Drug Administration (FDA) (1927) Foods, cosmetics, and drugs are safe and labeled correctly New drugs are tested Consumer Product Safety Commission (CPSC) (1972) Safety rules for toys, tools, clothes, appliances Recalls unsafe products

36 Extra Credit Writing Activity
The CPSC publishes a list of products that have been recalled because of safety issues. Go to the recalls page on the CPSC Web site for this year. Find three items related to your favorite recreational activity. Write a paragraph for each item explaining the hazard and suggest a remedy to make those products safe. Include an introduction and conclusion about the CPSC.

37 Providing Economic Security
Great Depression (1929) Factories and banks closed 12 million people unemployed in 3 years The New Deal (1933) Franklin D. Roosevelt Created jobs Social Security Act (1935) Income from retirement, injury, death, or unemployment Public Assistance Food stamps, welfare Created increased government control in the economy

38 Assessment 3: Write a persuasive paragraph for or against government intervention in the economy by writing a paragraph with: a main idea. three supporting details.

39 Maintain Economic Stability
Business Cycle Series of ups and downs Ups = growth Increased production and jobs Downs = recession Decreased production and jobs Government tries to “flatten out” the ups and downs


41 Maintaining Economic Stability
Monetary Policy Fiscal Policy Federal Reserve System Regulates the amount of money in the economy The size of the money supply affects the health of the economy. The federal budget The government is spender and a taxer. Highways, public assistance, products, and services 25% of a person’s income Cut tax rates in a recession to stimulate spending Increase spending to stimulate jobs and income for people.

42 Protecting the Environment
Environmental Protection Agency (1970)

43 16-3 Managing the Economy PDN: Predict five things the government spends its money on.

44 In 1835, under President Andrew Jackson, the US Federal Budget was balanced and the National Debt was paid in full. This has never happened since. In the economic boom of the Roaring '20s, the Federal Budget ran surpluses for ten consecutive years. This also has never happened since. In the 1930s and 1940s, depression and war initiated a half-century of chronic budget deficits. Money borrowed to pay these deficits steadily increased the National Debt. Budget surpluses became increasingly rare. During the 1970s and 1980s, the US Federal Budget ran deficits for twenty straight years. Finally in the 1990s, another economic boom enabled four years of budget surpluses. These surpluses temporarily halted the growth of the National Debt

45 16-3: Managing the Economy
PDN: Why is it important for the economy to get a “check up?” (3 lines) PDN: ¿Por qué es importante mirar la salud de la economía? (3 líneas)

46 Vocabulary Inflation Gross Domestic Product Federal Budget Deficit
Surplus National Debt Inflación producto interno totales presupuesto federal Déficit Superávit deuda pública

47 How does the government check the health of the economy?
Inflation rates Gross Domestic Product (GDP) Federal Budget

48 Gross Domestic Product
the total dollar value of all final goods and services produced within the country in a year GDP Economy Economy GDP

49 Four Types of Goods/Services
Consumer GDP Government GDP Investment GDP Net Exports

50 Inflation The general rise in prices. Inflation Economy Inflation

51 One of the most closely watched signs of the economy’s health is the rate of inflation - (%) - difficult to control - rising prices - dollar has less power - people demand higher pay - businesses raise prices because of more expensive labor costs


53 The Federal Budget the government’s plan for how it will raise and spend money planned ahead in detail Federal Revenue / Income Federal Expenses/ Expenditures Deficit or Surplus

54 Federal Revenue/ Income
Personal Income Taxes The more money you earn, the more taxes you pay Social Security Tax


56 National Debt U.S. National Debt Clock

57 National Debt 2001 = $1 trillion deficit 2002 = $3 trillion deficit 2003 = $2 trillion deficit 2004 = $5 trillion deficit What would the nationa

58 Deficit Federal Revenue = $4.5 trillion Expenditure = $10.5 trillion

59 Surplus Federal Revenue = $15 trillion Expenditures = $7.5 trillion

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