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CH 3.1 Preserving Economic Freedoms How does the government protect Americans’ economic rights Government policies that serve public interest Government.

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Presentation on theme: "CH 3.1 Preserving Economic Freedoms How does the government protect Americans’ economic rights Government policies that serve public interest Government."— Presentation transcript:

1 CH 3.1 Preserving Economic Freedoms How does the government protect Americans’ economic rights Government policies that serve public interest Government intervention in protecting public health, safety, and well being

2 Protecting the American People Until around the 1960’s, there was little regulation of products that could affect the well being of Americans – Businesses could manufacture goods in a manner that suited their needs over the public – Govt started getting involved in public interest Concerns of the public as a whole

3 7 Major Features of American Free Enterprise 1. Economic Freedom - Individuals (where to work) – Businesses can also chose who they hire, what to produce, how much to produce, how much to charge 2. Competition - producers have the right to engage in rivalries to gain business – Drives producers to create new and better products Creates more choices for consumers

4 3. Private Property - Individuals and businesses can buy and sell as much property as they like. – Property owners can prohibit others from using their property 4. Contracts - Legally binding agreements between individuals to buy and sell goods 5. Self Interest - Decisions made by both individuals and businesses to benefit themselves Do not have to please the govt, other consumers or producers

5 6. Voluntary Exchange - Consumers and producers may freely buy and sell goods when it is worthwhile for them Both parties expect to gain from the exchange 7. Profit motive - Driven for the desire for profit Profit is a powerful incentive that leads entrepreneurs and businesses to accept the risk of business failure

6 Regulating industries that affect public safety and health is one way the govt influences the economy – This has been an issue through time Costs money Places limits on business activity Limits choice – Trade off that most Americans are willing to make on some level People are willing to give up some amount of freedoms to keep society safe If business is driven solely by profit, there is no incentive to keep people safe

7 Consumer control in Free Enterprise 1. Through what they buy, consumers tell producers what to make, how much to make, and how much to charge Consumer Sovereignty 2. By voting, consumers can control the governments policies regarding the economy The govt responds to public interest issues by creating public policy Laws and standards on topics of public interest

8 Public Policy To try to meet a goal, individuals may join an interest group A private organization which tries to persuade public officials to vote according to what they want done Raise funds to campaign for what they want Can be beneficial for the majority, or can serve the needs of a select group

9 Information Correct information is vital to making your decision when there are many goods to choose from Public disclosure laws - companies are required to give full information about their products Peanuts!!!

10 Environmental Protection Until the 1960’s there was little control over the conduct of business Pollution of water, land and air Cuyahoga River, OH 1970 - Environmental Protection Agency Strict regulations and clean up requirements How much is too much? Businesses argue that too much control limits the profits they can make Consumers ask for more protection and control

11 Protecting Health, Safety and Well Being Consumer protection Caveat emptor - buyer beware Lab tests on food, medicine Labels on food that include expiration dates Worker health and Safety Occupational Safety and Health Administration (OSHA) Regulations on workplace safety Information about health threats must be divulged

12 1906 - Food and Drug Administration Standards on food, drugs, and cosmetics 1914 - Federal Trade Commission Enforces and enacts antitrust and monopoly laws 1964 - Equal Employment Opportunity Commission Promotes equal job opportunity through enforcement of civil rights laws, education and other programs

13 1970 - Environmental Protection Agency Enacts policies to protect human health and the natural environment 1970 - OSHA Enacts policies to save lives, prevent injuries, and protect health of workers

14 Ch 3.2 Providing a Safety Net How does the US fight poverty What are some ways the US redistributes wealth

15 The Free Market and Poverty The free market has created more wealth than any other economic system – Wealth is not shared equally Many people live below the poverty threshold – Income level below what is necessary to support families or households 40% of the world’s wealth is owned by 1% of the population 85% is owned by 10%

16 Poverty Threshold – 1999 - Single parent/ one child $11,235 – 1999 - Four person Family $16,530 – 2013 - Two Person family $15,590 – 2013 - Four person family $23,550

17 Govt Role: – Those with less opportunity to be productive often suffer Lack of local jobs and few educational opportunities – Our society recognizes the need to care for the very young and the very old, the sick, the poor and the disabled Different State and Federal programs have been set up to care for these individuals

18 The Welfare System – One way to ease poverty was to collect taxes and redistribute this money to the poor 1930’s under FDR 1960’s LBJ’s “War on Poverty” Welfare payments kept getting bigger – Less and less incentive to get off of welfare – There are many redistribution programs designed to aid the poor and those in need in different ways

19 1. Cash Transfers – Direct payments to the poor, disabled and retired Social Security – 1935 – Elderly – Payroll taxes from working people to provide for retired Temporary Assistance for Needy Families (TANF) – 1990’s – A way to aid the needy, but with smaller payments – Established as a way to keep people from becoming dependent on these payments – Lifetime limit on payments – Move people into the workforce

20 – 2. Unemployment Funded by both the Federal and State Govts Provides money to eligible workers who lost their jobs Workers must show that they are continuing to look for work while receiving benefits – 3. Workers Compensation Provides money to workers injured on the job Covered by insurance paid for by employers Becoming more costly – Medical Expenses have increased since the 1970’s – Number of claims has gone up

21 4. In Kind Benefits Goods and services provided at a reduced price or for free – Food Stamps – Subsidized Housing – Legal Aid

22 5. Medical Benefits Govt provides health insurance for the elderly, the disabled and the poor through different programs – Medicare - people over 65 – Medicaid - covers some poor, unemployed, and some not covered by their employers – Works through the Social Security program Very Expensive

23 6. Education Federal, State and local Govts all provide opportunities for the poor – Federal pays preschool to college – State and local - help pay for those with learning disabilities – Adds to a nation’s human capital Shifts PPF to the right

24 CH 3.3 Providing Public Goods Market Failures Examples of Public Goods Government allocations of resources by managing externalities

25 Market Failures When a market does not distribute resources efficiently on its own – Ex. Roads Public Goods – Govt may step in when it determines that its intervention and policy outweighs the drawbacks of intervening

26 Public Goods A shared good or service for which it would be inefficient or impractical to: – 1. Make consumers pay individually – 2. Exclude non payers Ex. Roads, dams, National parks, other major public works Govt takes taxes and distributes them instead of charging for these services separately If more people use it, benefit will not diminish – Roads continue to work even with traffic

27 Public vs Private Sector Public goods are financed by taxes Public Sector – Part of the economy that involves Govt transactions Private Sector – Transactions of individuals and businesses “Free rider” problem - – People not willing to pay for good or service, but uses it if it is provided Fire prevention Market failure – consume goods without cost

28 Externalities A side effect of a good or a service that generates benefits or costs to someone else – Could be + or – – Positive Flip This House Training programs

29 Negative – Unintended costs – Part of the cost is now on someone other than the producer Water pollution Market failure because costs are not assigned properly – Govt creates + (education) – Tries to limit – (pollution = costs associated now back on producers)

30 CH 3.4 Promoting Growth and Stability How does the Govt track the business cycle Govt’s economic goals Why, how does the govt encourage innovation

31 Business Cycles Period of macroeconomic expansion followed by a period of contraction (decline) – Macro – study of decision making and behavior of entire economies – Micro – behavior and decision making of small units (indiv., small businesses and families)

32 Predicting Business Cycles Gross Domestic Product – GDP – Total value of all the final goods and services produced in an economy – Used to predict a business cycle and measure the economic well being of a nation’s economy

33 Public policy is used to stabilize the economy – three goals – 1. High employment Desirable unemployment rate 4.5 – 5.5 % Has ranged in the US between 3 and 11 last 60 yrs – 2. Steady Growth For each generation to do better than the last, economy must grow to offer additional goods and services – 3. Stability of prices Prevention of sudden shifts in prices – Dramatic price increases can alter macroeconomic decisions Regulation of banks and other financial institutions

34 Innovation – Increase in productivity = higher standard of living – Improved technology = more goods produced from the same amount of resources Operate more efficiently “more, better, faster” – Govt provides grants/subsidies to industries for research and development $ given to colleges Patents (last 20 years)/ copyrights – In the Constitution


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