1. UNIT FOUR AMERICAN FREE ENTERPRISE

2. Basic Principles of American Free Enterprise System
Thom Jensen
1 Profit Motive
The desire of individuals and business improve your situation.
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2 Open Opportunity
Everyone has the same opportunities to enter markets either as a consumer or producer/provider.
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3. Basic Principles of American Free Enterprise System
3 Legal Equality
We all have legal rights in the marketplace.
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4 Private Property
The right to private
ownership of property.

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

5. Basic Principles of American Free Enterprise System
7 Competition
Producers struggle
for 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 Enterprise
Why 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 Madison
Federalist Papers # 51

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

11. April 28, 1988
Aloha Airlines Flight 243

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

13. The Role of Government in the American Free Enterprise
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

14. The Role of Government in the American Free Enterprise
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

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

16. The Role of Government in the American Free Enterprise
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

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)
Notice
Dec 08
June 2009
Dec 2007

18. Expansion is only after we have crossed the previous peak.
The Business Cycle
+5%
Expansion
Contraction
Recession
Recovery
Expansion
Expansion
Peak
GDP Growth
Expansion is only after we have crossed the previous peak.
Trough
-5%
GDP-
Gross Domestic Product
Total 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 II
AVG EVERY 5-6 YEARS
HOPEFULLY
THE GREAT RECESSION

20. The Business Cycle Expansion Contraction Recession Recovery Peak
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