Characteristics of the U.S. Economy

The United States economy is primarily a free market economy; but because there is some government involvement it is characterized as a _______ economy. mixed You already learned the three main economic goals of the government are:  full employment, which is measured by the unemployment rate  stable prices, measured by indices such as the Consumer Price Index  economic growth, measured by real gross domestic product (GDP).

Government regulations aim to protect consumers and labor and reduce market failures.

Sometimes, they may seem to be too protective:

Consumers (e.g., Consumer Protection Agency, Food and Drug Administration)Food and Drug Administration Some government agencies regulate to protect Labor (e.g., Occupational Safety and Health Administration) The Environment (e.g., Environmental Protection Agency).

The government encourages competition between businesses. Competition among producers and sellers leads to greater choice, better quality and lower prices.

Government works to define, establish, and reinforce property rights. Property rights give people the right to use their possessions as they choose (within the limits of the law).

We often think of property as land, personal possessions, and other physical assets. But property can also refer to inventions and various forms of expression, also known as intellectual property. No matter what form property takes, property rights entitle the owner to determine how it is used.

Ownership of property creates a number of incentives that promote economic progress 1.Private ownership encourages people to take care of their property 2.Private ownership encourages people to make the most productive use of their property. 3.Private ownership encourages people to develop their property in ways that benefit others.

Private ownership encourages people to take care of their property If private owners fail to maintain their property, they are the people who suffer. For example, if you own a house, you have a strong incentive to fix the roof if it leaks. Otherwise the value of your house will decrease.

Private ownership encourages people to make the most productive use of their property. It is in the best interest of owners to use their property in the most productive ways possible. The owner of a farm, for example, has every incentive to plant crops that make the best use of local soil and climate conditions.

Private ownership encourages people to develop their property in ways that benefit others Owners have the potential to gain by making what they own useful to others. Consider the owners of a health club. Personally, they may have no interest in anything but weight training. Nonetheless, they might decide to offer childcare, nutrition counseling, and spa services to attract more members. By enhancing their health club in ways that benefit others, the owners stand to benefit by increasing the property’s value.

Eminent domain: the power of a government to take an individual’s property for public use if the owner is fairly compensated The Fifth Amendment to the Constitution added a new element—paying the private owner for property taken under eminent domain. “No person shall be... deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.”

What do you think is the opinion of this artist?

Redistribution of income. Look on page and take notes as we read and discuss.