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Business, The Government, and Consumption Sectors SWBAT Define and provide examples for the three spending sectors in the economy Understand the different.

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Presentation on theme: "Business, The Government, and Consumption Sectors SWBAT Define and provide examples for the three spending sectors in the economy Understand the different."— Presentation transcript:

1 Business, The Government, and Consumption Sectors SWBAT Define and provide examples for the three spending sectors in the economy Understand the different types of business firms Standard 12.3a/b; 12.4, 12.5 Students analyze the aggregate economic behavior of the U.S. economy

2 Warm-Up What is the largest sector of GDP? What are some basic types of businesses? What are the three levels of government? Who pays taxes, who do they pay them to, and what do they pay for?

3 The three spending sectors – in depth The Government Sector The Consumption Sector The Investment Sector

4

5 Review What are the 4 shortcomings of GDP? What is the difference between real GDP and nominal GDP? What does per capita GDP measure? What was the per capita GDP of the U.S. in 2008?

6 Business Firms People are free to risk their time and their savings to start a business If a business succeeds, they are rewarded with profit If a business fails, they could lose a bundle Most new businesses fail within the first 5 years

7 3 Types of Business Firms 1.Sole Proprietorship 2.Partnership 3.Corporations

8 1. Sole Proprietorship Simplest form of business organization Owned and managed by a single individual Earns all the firm’s profits and is responsible for all the firm’s losses About 75% of all businesses in the U.S. are owned by sole proprietorship But only make up 5% of all U.S. business sales Draw a quick symbol to represent sole proprietorship

9 2. Partnership Involves 2 or more individuals who agree to contribute resources to the business in return for a share of the profit Account for about 8% of all businesses And 8% of all business sales Draw a quick symbol to represent partnership

10 3. Corporations Is a legal entity with an existence that is distinct from the people who organize it, own it, and run it The corporation can earn a profit, lose money, be sued, and even be found guilty of a crime 15-20% of all businesses are corporations But accounts for 86.5% of all business sales Draw a quick symbol to represent corporation

11 Draw a Pie Graph Draw a pie graph that represents what percentage makes up: -Sole Proprietorship -Partnership -Corporation Business Firms

12 Draw a Pie Graph Draw a pie graph that represents how much of total business sales each business firm makes Business Firms % of Business Sales

13 South Park on YouTube Clip Questions for Review: 1.How do citizens of South Park feel about the opening of “Wall-mart?” 2.Briefly summarize 3-4 events you see in the clip. 3.Is the clip for or against the expansion of Wall mart? Give evidence to support your answer.

14 The clip you just saw of “Wall-mart” in South Park contains no dialogue. In pairs, create dialog of what is happening between the characters. Assignment 1.Your dialogue must contain the main characters: Eric Cartman, Stan Marsh, Kyle Broflovski, & Kenny McCormick. 2. It must be at least one page long and depict the clip you just saw. **Possible extra credit for presentations!**

15 Walmart Based on this clip, write down 2-3 facts that you have learned about Walmart corporation.

16 Advantages and Disadvantages Each of the 3 types of business firms has advantages and disadvantages Read the handout to figure them out!! Complete the worksheet “Advantages & Disadvantages of Business Firms”

17 Advantages & Disadvantages of Business Firms Read the handout, take good notes because: 1.You will present one of them! 2.You can’t take it home with you!

18 After Your Group Is Done Reading… Create a visual representation of your Advantage/Disadvantage to convey the meaning to the class. Be sure to include: –The name of your Business Firm –If it is an Advantage or Disadvantage –A summary – Include category headings & new vocab. –An image –Explanation of how it could affect you as young adults entering the economic world

19 In each group, explain the following in your own words: 1=Advantages of Sole Proprietorship 2=Disadvantages of Sole Proprietorship 3=Advantages of Partnerships 4=Disadvantages of Partnerships 5=Advantages of Corporations 6=Disadvantages of Corporations

20 The Business Sector – Wrap Up Total spending done by businesses in the US is production of: New plants (factories, buildings and stores) & equipment (assembly lines, machinery, tools, cash registers, computers, & office furniture) additions to inventory new residential housing This is 10% of GDP and the most volatile (unstable) sector of the economy

21 APPRECIATION V. DEPRECIATION Appreciation A gain in value over time Ex: Picasso painting Depreciation A loss in value due to time and use Ex: Laptop computers Now: Come up with three new examples for each. 1. _______________ 2. _______________ 3._______________ 1. ________________ 2. ________________ 3. ________________

22 Investment Sector Wrap-up If you started a business which one would begin? Compare the different types of business firms and explain your choice using statistics of success and advantages and disadvantages of each. ½ page minimum!

23 The Consumption Sector The total of all spending done by consumers in the US on final goods and services This is the largest sector of GDP and makes up 60% of GDP (2/3)

24 Review: What we spend v. what we save  Gross v. Net: Gross – its gross I don’t get my whole paycheck; that they take out so many taxes and deductions! Net – Its what is taken out! Bye bye water, hello little fishy! (This adds to their DI)  US consumers spend 90-95% of their disposable income  Disposable Income—money you take home on pay day

25 What do people spend it on? [½ and ½] Durable expensive items bought on time that usually lasts for Years Ex. #1: ___________ Ex. #2: ___________ Ex. #3: ___________ Non-Durable items bought and consumed everyday Ex. #1: ___________ Ex. #2: ___________ Ex. #3: ___________

26 BUDGET ACTIVITY Can You Create a Budget?

27 Creating A Budget – Things to consider… **Do the activity on the back to figure out how you would budget your money on a typical salary CategoryBudget Amount Durable or Non-Durable Priority # **Income-- **Expenses-- Shopping Taxes Rent Utilities Clothing Food Car Payment Entertainment Furniture

28 Wrap-Up/Review  Was it easy or hard for you to budget your money? Explain your experience.  Explain the difference between durable vs. non-durable goods.  What is the example of plants and equipment?  List examples of 2 goods that depreciate and 2 that appreciate.

29 The Government Sector

30 Government spending consists of transfer payments, which are: Social security Welfare Medicare Unemployment **Talk to the person next to you to review what each one means. =>Another reason GDP is imperfect! TRANSFER PAYMENTS are NOT included in the GDP! It is only counted if you spend the money afterwards on goods and services

31 Top 3 Areas of Spending for “Uncle Sam” (Federal): 1.Social Security (retirement benefits for the elderly) 2. National Defense (the military) 3. Interest on National Debt

32 Interest on the National Debt The United States total public debt, commonly called the national debt, or U.S. government debt, is the amount of money owed by the United States federal government. Debt held by the public is all federal debt held by states, corporations, individuals, and foreign governments, but does not include intra-governmental debt obligations or debt held in the Social Security Trust Fund. Types of securities held by the public include, but are not limited to, Treasury Bills, Bonds, United States Savings Bonds, and State and Local Government Series securities. On 30 September 2008, the total U.S. federal debt passed the $10 trillion mark for the first time, which equals about $32,895 per capita! =>Basically, we won’t ever be able to pay off the national debt because it is too large, so we just pay interest! Source: Wikipedia

33 U.S. NATIONAL DEBT CLOCK The Outstanding Public Debt as of 17 Nov 2008 at 10:47:24 PM GMT is: The estimated population of the United States is 305,112,880 so each citizen's share of this debt is $34, The National Debt has continued to increase an average of $3.90 billion per day since September 28, 2007! Concerned? Then tell Congress and the White House!tell Congress and the White House REAL TIME LINK:

34 What about State & Local Government Spending? Areas: 1.Health 2.Welfare 3.Public Security 4.Education 5.Police & Fire Protection 6.Infrastructure

35 How does the government get $$$???

36 What is Taxation? It is the basic source of revenue for government

37 2 Basic Types of TAXES Direct Tax tax on a person (i.e. social security) Indirect Tax tax on a thing (i.e. sales tax) Progressive tax that places burden on those best able to pay (i.e. income tax) Regressive tax where burden is more on poor (i.e. excise tax - Federal sales tax on a specific good )

38 Categorize the following as: Regressive or Progressive AND Indirect or Direct 1. In the US, people who earn $50K or less are taxed marginally at 15% while people who earn above $100k are taxed 35%. 2. Oil, tobacco, and alcohol are examples of this type of tax. 3. All residents of Hawthorne pay a 1.5% property tax to support local schools. 4. An elderly man living off of social security pays sales tax at Starbucks. 5. Ms. Stack works part-time at UCLA to conduct research on low performing schools and pays taxes on her income.

39 Categorize the following as: Regressive or Progressive AND Indirect or Direct ANSWERS 1. In the US, people who earn $50K or less are taxed marginally at 15% while people who earn above $100k are taxed 35% (progressive/direct). 2. Oil, tobacco, and alcohol are examples of this type of tax. (regressive-excise/indirect). 3. All residents of Hawthorne pay a 1.5% property tax to support local schools. (regressive/indirect). 4. An elderly man living off of social security pays sales tax at Starbucks. (regressive/indirect). 5. Miss Varee works part-time at USC to conduct research on low performing schools and pays taxes on her income (progressive/direct).

40 Sources of Revenue 1.Personal Income (38%) –Tax Deductions: Medical, Charity, State/Local 2. Social Security (33%) –Payroll tax covers SS and Medicare 3. Corporate Income Tax (11%) 4. Excise Tax- Federal sales tax on a specific good

41 “Married With Children”

42 “Married With Children” Why is Al so desperate for money that he is willing to sell Peggy’s hair? List things that households might cut back on in times of financial stress and recession. Have you noticed the recession in your household? Have your parents/family cut back on any luxury/normal goods lately? What will the government use Al’s taxes to for pay for? If people don’t pay taxes, what will the government have to cut back on?

43 Wrap-Up/Review Which business firm makes up the largest % of business firms? Which one makes up the largest % of business sales? What is Disposable Income and what can households choose to do with this? What are some things that the government spends money on? List and explain the 4 different types of taxes. What are the 4 sources of government revenue?


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