2 Basic Principles of American Free Enterprise System Thom Jensen1 Profit MotiveThe desire of individuals and business improve your situation.Click on image2 Open OpportunityEveryone has the same opportunities to enter markets either as a consumer or producer/provider.Click on image
3 Basic Principles of American Free Enterprise System 3 Legal EqualityWe all have legal rights in the marketplace.Click on image4 Private PropertyThe right to privateownership of property.
4 Basic Principles of American Free Enterprise System 5 Free ContractYou can freely enter into financial agreements.6 Voluntary ExchangeFree to sell and buy products,with limited governmentintervention.
5 Basic Principles of American Free Enterprise System 7 CompetitionProducers strugglefor consumer $$$.Vs.Vs.Vs.Vs.
6 Role of Consumer in the American Free Enterprise System We have “god-like” power with our $$$$$.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.
9 Why do we need the government in the market place? The Role of Government in the American Free EnterpriseWhy do we need the government in the market place?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.If men were angels, no government would be necessary.James MadisonFederalist Papers # 51
10 The Role of Government in the American Free Enterprise 1) Protecting ConsumersExample: Public Disclosure LawsBusiness must provide information about their products to the consumer.Example: Warning Labels
12 The Role of Government in the American Free Enterprise 2) Business operates in a safe mannerEnsure that workers are safe.Protect the environmentEnsure that products are produced in safely.
13 The Role of Government in the American Free Enterprise 3) Provide Public GoodsProvide goods and services that would be impracticalor impossible for private business to supply.Examples: Libraries, roads, parksFire and Police,National Defense,Schools
14 The Role of Government in the American Free Enterprise 4) Protect against MARKET FAILURESIf a business can not make a profit, it will not be provided.Example:Public Housing or Low Cost Housing
15 The Role of Government in the American Free Enterprise 5) Providing a SAFETY NETThe Great Depression showed what happens when a societydid not provide “Safety Nets”.Massive UnemploymentPoverty
16 The Role of Government in the American Free Enterprise 6) Promoting Growth and StabilityTracking Economic IndicatorsGross Domestic Product-Most importantTotal value of all products produced over a period of time.UnemploymentNew Home SalesConstruction Spending
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)NoticeDec 08June 2009Dec 2007
18 Expansion is only after we have crossed the previous peak. The Business Cycle+5%ExpansionContractionRecessionRecoveryExpansionExpansionPeakGDP GrowthExpansion is only after we have crossed the previous peak.Trough-5%GDP-Gross Domestic ProductTotal Value of all products/services of a country during a period of time
19 RECESSION THE GREAT RECESSION NOTICE THERE HAVE BEEN 11 RECESSIONS SINCE THE END OF WORLD WAR IIAVG EVERY 5-6 YEARSHOPEFULLYTHE GREAT RECESSION
20 The Business Cycle Expansion Contraction Recession Recovery Peak Economy is growing.Jobs are being created.Low unemployment.GDP is increasingContractionEconomy slows downFewer jobs being created.Increased unemployment.GDP is still positive, but it is decreasing.RecessionEconomy is in declineAlmost no jobs being created.Higher unemploymentGDP is negative. (must be negative for two consecutive quarters of the year.)RecoveryEconomy starts to growJobs start to be addedUnemployment starts turning around.GDP is increasing, but has not reached the previous peak.PeakEconomy at its high pointTroughEconomy at its lowest point before turning around.