EQ: HOW DOES THE PUBLIC SECTOR AND THE PRIVATE SECTOR INTERACT TO MAINTAIN A STABLE, EFFICIENT, AND GROWING ECONOMY? Chapter 3 American Free Enterprise

Chapter Objectives - Describe the tradition of free enterprise in the US - Explain the basic principles of the free enterprise system - Identify the roles of the consumer and the government in the free enterprise system - Analyze how the government promotes economic strength - For today: only write the slides with the ** EQ: HOW DOES THE PUBLIC SECTOR AND THE PRIVATE SECTOR INTERACT TO MAINTAIN A STABLE, EFFICIENT, AND GROWING ECONOMY?

Section 1: Benefits of Enterprise Open land, natural resources, and immigrants Free Enterprise- the social and political commitment to giving people the freedom & flexibility to try out their business ideas and compete in the marketplace -The U.S. Constitution safeguards these rights -private property rights (5th/14th amendments) -restricts unfair taxation, allows binding contracts EQ: HOW DOES THE PUBLIC SECTOR AND THE PRIVATE SECTOR INTERACT TO MAINTAIN A STABLE, EFFICIENT, AND GROWING ECONOMY?

**What is American Free Enterprise?** Profit Motive— force to improve material well- being Competition— rivalry to attract customers & lower costs Private Property Rights—you own your possessions Voluntary Exchange—you may decide what & when to buy & sell Open Opportunity— everyone can compete Free Contract— you decide what agreements to enter into Legal Equality— everyone has the same legal rights Public Disclosure Laws—companies provide full information EQ: HOW DOES THE PUBLIC SECTOR AND THE PRIVATE SECTOR INTERACT TO MAINTAIN A STABLE, EFFICIENT, AND GROWING ECONOMY?

Basic Principles of Free Enterprise The American economy rests on a recognition of the importance of the profit motive. Meaning business owners and managers make the choices themselves, operating in ways they believe will maximize their profits. EQ: HOW DOES THE PUBLIC SECTOR AND THE PRIVATE SECTOR INTERACT TO MAINTAIN A STABLE, EFFICIENT, AND GROWING ECONOMY?

**Roles** Role of the Government-  Gov’t regulations- protect property rights, contracts, and other business activities  Consumer protection- example: safe drugs/food  Public disclosure laws- requires companies to give consumers info about their products  Environmental Protection Role of the Consumer-  have freedom to make their own economic choices  Join interests groups- persuade public officials to act or vote according to interests of the group members EQ: HOW DOES THE PUBLIC SECTOR AND THE PRIVATE SECTOR INTERACT TO MAINTAIN A STABLE, EFFICIENT, AND GROWING ECONOMY?

Section 2: Promoting Economic Strength Because the market is vulnerable to business cycles, the government creates public policies that aim to stabilize the economy 3 Main Outcomes: 1. High employment 2. Steady growth 3. Stable prices EQ: HOW DOES THE PUBLIC SECTOR AND THE PRIVATE SECTOR INTERACT TO MAINTAIN A STABLE, EFFICIENT, AND GROWING ECONOMY?

High Employment  Provide jobs for everyone who is able to work  Keep unemployment rate between 4-6% EQ: HOW DOES THE PUBLIC SECTOR AND THE PRIVATE SECTOR INTERACT TO MAINTAIN A STABLE, EFFICIENT, AND GROWING ECONOMY?

Steady Growth  Enjoy higher standard of living  Economy must grow to provide additional goods and services EQ: HOW DOES THE PUBLIC SECTOR AND THE PRIVATE SECTOR INTERACT TO MAINTAIN A STABLE, EFFICIENT, AND GROWING ECONOMY?

Stable Prices  Gives people confidence in the economy  Stable banks and freedom from fraud  Government wants to prevent sudden, drastic shifts in prices -If prices increase, this puts a strain on consumers, especially people like Miss Eilers, who is on a fixed income and strict budget. How? EQ: HOW DOES THE PUBLIC SECTOR AND THE PRIVATE SECTOR INTERACT TO MAINTAIN A STABLE, EFFICIENT, AND GROWING ECONOMY?

Regulating Protecting health, safety & well-being  Can you identify these agencies and their purpose?  FDA food, drugs, cosmetics  FTC unfair business practices  FCC radio, TV, wire, satellite, cable, phone  FAA airline safety, air-traffic EQ: HOW DOES THE PUBLIC SECTOR AND THE PRIVATE SECTOR INTERACT TO MAINTAIN A STABLE, EFFICIENT, AND GROWING ECONOMY?

3. Government provides safety nets Transfer payments (remember Robin Hood?)  Directly as cash or “in-kind” benefits (receiving goods and services directly such as housing, food, health care) We will discuss 6 types of safety nets… EQ: HOW DOES THE PUBLIC SECTOR AND THE PRIVATE SECTOR INTERACT TO MAINTAIN A STABLE, EFFICIENT, AND GROWING ECONOMY?

For poverty What’s poverty? Who is impoverished? Poverty Thresholds for 2008 by Size of Family and Number of Related Children Under 18 Years Federal Poverty Guidelines  TANF (Temporary Assistance for Needy Families)  Work requirement “workfare”--W to W (welfare to work)  Time limit (5 yr. lifetime limit)  Since 1996, designed to be temporary & transitional EQ: HOW DOES THE PUBLIC SECTOR AND THE PRIVATE SECTOR INTERACT TO MAINTAIN A STABLE, EFFICIENT, AND GROWING ECONOMY?

Other programs Section 8 housing (HUD) “subsidized” Food stamps Free/reduced school lunch Low-income home energy assistance program Head Start EQ: HOW DOES THE PUBLIC SECTOR AND THE PRIVATE SECTOR INTERACT TO MAINTAIN A STABLE, EFFICIENT, AND GROWING ECONOMY?

For medical care Medicaid—health insurance for low income people administered by states Medicare—health insurance for seniors (part of Social Security Administration)  Remember: “aid” to the poor, “care” for the elderly  Children’s Health Insurance Program—(SCHIP) covers children who don’t qualify under Medicaid. EQ: HOW DOES THE PUBLIC SECTOR AND THE PRIVATE SECTOR INTERACT TO MAINTAIN A STABLE, EFFICIENT, AND GROWING ECONOMY?

For income/employment Unemployment insurance—temporary income benefit for those laid-off or unable to find a job (26 weeks, $405/week max.) Minimum Wage Laws (federal and state)  Federal = $7.25  CA = $8.00 currently EQ: HOW DOES THE PUBLIC SECTOR AND THE PRIVATE SECTOR INTERACT TO MAINTAIN A STABLE, EFFICIENT, AND GROWING ECONOMY?

For disability Supplemental Security Income (SSI)  Part of SSA, but not funded by payroll tax  Provides income to people who cannot work due to physical or mental disability or blindness. EQ: HOW DOES THE PUBLIC SECTOR AND THE PRIVATE SECTOR INTERACT TO MAINTAIN A STABLE, EFFICIENT, AND GROWING ECONOMY?

For catastrophe FEMA (Federal Emergency Management Agency) disaster relief, medical care, food, shelter, low- interest loans to individuals and businesses. EQ: HOW DOES THE PUBLIC SECTOR AND THE PRIVATE SECTOR INTERACT TO MAINTAIN A STABLE, EFFICIENT, AND GROWING ECONOMY?

For catastrophe FEMA (Federal Emergency Management Agency) disaster relief, medical care, food, shelter, low- interest loans to individuals and businesses. EQ: HOW DOES THE PUBLIC SECTOR AND THE PRIVATE SECTOR INTERACT TO MAINTAIN A STABLE, EFFICIENT, AND GROWING ECONOMY?