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UNIT FOUR AMERICAN FREE ENTERPRISE. Basic Principles of American Free Enterprise System 1Profit Motive The desire of individuals and business improve.

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Presentation on theme: "UNIT FOUR AMERICAN FREE ENTERPRISE. Basic Principles of American Free Enterprise System 1Profit Motive The desire of individuals and business improve."— Presentation transcript:

1 UNIT FOUR AMERICAN FREE ENTERPRISE

2 Basic Principles of American Free Enterprise System 1Profit Motive The desire of individuals and business improve your situation. 2Open Opportunity Everyone has the same opportunities to enter markets either as a consumer or producer/provider. Thom Jensen Click on image

3 3 Legal Equality We all have legal rights in the marketplace. 4Private Property The right to private ownership of property. Basic Principles of American Free Enterprise System Click on image

4 5 Free Contract You can freely enter into financial agreements. 6 Voluntary Exchange Free to sell and buy products, with limited government intervention. Basic Principles of American Free Enterprise System

5 7 Competition Producers struggle for consumer $$$. Basic Principles of American Free Enterprise System Vs.

6 Role of Consumer in the American Free Enterprise System We have “god-like” power with our $$$$$. We decide who lives and who dies by choosing to purchase goods or not to purchase goods. DOLLAR VOTES

7 Role of Producer in the American Free Enterprise System 1) To provide the goods and services that the consumers want and need. 2)To pay a “fair” wage to employees so they may make purchases. 3)To provide protection for the environment, workers and consumers.

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9 Why do we need the government in the market place? The Role of Government in the American Free Enterprise If men were angels, no government would be necessary. James Madison Federalist Papers # 51 We the people of the United States, in order to form a more perfect union, 1) establish justice, 2) insure domestic tranquility, 3) provide for the common defense, 4) promote the general welfare, and 5) secure the blessings of liberty to ourselves and our posterity, do ordain and establish this Constitution for the United States of America.

10 1) Protecting Consumers Example: Public Disclosure Laws Business must provide information about their products to the consumer. Example: Warning Labels The Role of Government in the American Free Enterprise

11 April 28, 1988 Aloha Airlines Flight 243

12 2) Business operates in a safe manner Ensure that workers are safe. Protect the environment Ensure that products are produced in safely. The Role of Government in the American Free Enterprise

13 3)Provide Public Goods Provide goods and services that would be impractical or impossible for private business to supply. Examples: Libraries, roads, parks Fire and Police, National Defense, Schools The Role of Government in the American Free Enterprise

14 4)Protect against MARKET FAILURES If a business can not make a profit, it will not be provided. Example: Public Housing or Low Cost Housing The Role of Government in the American Free Enterprise

15 5)Providing a SAFETY NET The Great Depression showed what happens when a society did not provide “Safety Nets”. Massive Unemployment Poverty The Role of Government in the American Free Enterprise

16 6)Promoting Growth and Stability Tracking Economic Indicators Gross Domestic Product- Most important Total value of all products produced over a period of time. Unemployment New Home Sales Construction Spending The Role of Government in the American Free Enterprise

17 What is a RECESSION? 2 Consecutive Quarters (6 months in a row) of negative growth in the GDP. (Gross Domestic Product) We usually don’t know we are in a recession or depression until after we are already in one!! The Government did not officially announce we were in recession until Dec (It started in Dec 2007) Dec 08 Dec 2007 Notice June 2009

18 +5% -5% GDP Growth GDP- Gross Domestic Product Total Value of all products/services of a country during a period of time ExpansionContractionRecessionRecovery Expansion The Business Cycle Peak Trough Expansion is only after we have crossed the previous peak. Expansion

19 HOPEFULLYRECESSION NOTICE THERE HAVE BEEN 11 RECESSIONS SINCE THE END OF WORLD WAR II AVG EVERY 5-6 YEARS THE GREAT RECESSION

20 The Business Cycle Expansion Economy is growing. Jobs are being created. Low unemployment. GDP is increasing Contraction Economy slows down Fewer jobs being created. Increased unemployment. GDP is still positive, but it is decreasing. Recession Economy is in decline Almost no jobs being created. Higher unemployment GDP is negative. (must be negative for two consecutive quarters of the year.) Recovery Economy starts to grow Jobs start to be added Unemployment starts turning around. GDP is increasing, but has not reached the previous peak. Peak Economy at its high point Trough Economy at its lowest point before turning around.

21 Alphabet Soup


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