Chapter 19 The American Economy

Section 1: Economic Resources Chapter 19 Section 1: Economic Resources

The US is responsible for about 1/3 of the world’s total production Goods are tangible products like books and cars etc. Another form of production is Services which is work that is performed for someone else

Factors of Production are the resources necessary to produce goods and services, such as: 4 Natural Resources are resources from the earth that make production possible Fertile fields, forests, mineral deposits, etc. Labor is the human resources referring to both the physical and mental efforts people put forth

Capital is the tools, machinery, and buildings used to make other products Entrepreneur is the individual(s) who start the new business, create new products, manage, etc. Entrepreneurs are thought of as the driving force in the American Economy l

Gross Domestic Product The GDP Measures the overall success of a country This is the total value of goods and services produced by a country It is also an important measure of the Standard of Living which is the quality of life we enjoy

Section 2: Economic Activity and Productivity Chapter 19 Section 2: Economic Activity and Productivity

When people earn their money they spend it in the Product Markets in exchange for goods and services The government also plays a significant role in the economy The government offers services sometimes accepting small fees but these rarely cover all the costs and they receive most of their funding through taxes

Economic growth is important because it raises our standard of living What are the 5 factors of Economic Growth? Productivity is how efficient one can be with a given amount of resources The business owners who have the most efficient output of goods will have the most profit

Specialization is when a person, business, or country can produce a certain good better than anyone else Specialization improves productivity Education is the foundation for specialization The more specific one’s specialization the more compensation they will receive for their services- generally

Division of Labor is a form of specialization that improves productivity by breaking up a job into specific tasks Human Capital is the sum of the skills, abilities and the motivation of people Businesses can increase productivity by offering employees training, better jobs, and higher pay

Economic Interdependence is that we rely others and others rely on us to provide goods and services This helps regions of the country benefit in an area in which they lack in exchange for offering in ways in which they have an abundance Example: Georgia Peaches in exchange for Alaskan oil

Section 3: Capitalism and Free Enterprise Chapter 19 Section 3: Capitalism and Free Enterprise

The Economy of the US is based on Capitalism an economic system in which private citizens own the and use the factors of production in order to seek a profit Free Enterprise is allowing competition to flourish with a minimum of government interference

The two major ideals of Capitalism are that 1) people will work for compensation and 2) the government should be involved as little as possible Adam Smith in the Wealth of Nations (1776) believed that individuals striving for profit would benefit society as a whole Founded on the idea of Laissez- fair meaning let the people do what the will

The key element in our economic freedom is the ability to make choices Job you choose Products you buy Products you sell Price of those products With freedom comes responsibility- profit and failure are yours- it is not the government’s job to bail you out

Capitalism has the goal of making money Profit is the money left over after all costs of production have been paid Profit Motive is the driving force that encourages individuals to improve their material well-being

Competition is key to getting the best product for the best price Competition is the struggle that goes on between sellers and buyers to get the best products at the lowest prices Competition is key to getting the best product for the best price Competition rewards the most efficient producers and forces the least efficient out of business Make for better products at better prices for happier consumers

In the US markets we refer to Consumer Sovereignty meaning that the consumer is king The market will naturally adjust to the demands of consumers Ex: if no one likes the new iphone and therefore doesn’t buy it the prices go down, apple makes less money and will make a better product in the future

If something is yours you will tend to take better care of it We also have Private Property Rights which allows us to the freedom to own and use or get rid of our property as we choose As long as it doesn’t interfere with the rights of others This gives people the incentive to work, save, invest- we get to keep any gains If something is yours you will tend to take better care of it

Voluntary Exchange is the act of buyers and sellers freely and willingly engaging in market transactions Both you and the seller benefit from the exchange of properties You get a product and they get your money

Section 4: The Economy and You Chapter 19 Section 4: The Economy and You

Consumerism is a movement to educate buyers about the purchases they make and to demand better and safer products from manufacturers It is our responsibility to learn about the products we buy and ignore the ones that are a bad value

Consumers do have 5 rights The right to a safe product The right to be informed The right to choose The right to be heard The right to redress Disposable Income is the money you have left over after taxes Discretionary Income is the money you have left over after you have paid all the necessities You use this money to satisfy wants

You should create your own personal Budget Buying the things you want now may possibly keep you from meeting your long term goals and purchases To reach you long term goals you may Save or set aside a portion of your money to be used later When you save you earn Interest- money gained by allowing the bank to keep your money