1. The United States Economy

2. Our System The U.S. Economy is a mixed-market economy. It is based on: free markets private property profit competition consumer sovereignty

3. Free Enterprise In the U.S. economic system people are free to start and own their own businesses Entrepreneur is someone who starts his own business There are 3 types of businesses: Sole Proprietorship (1 owner) Partnership (2 or more owners) Corporation

4. Corporations Corporations are very different from other types of businesses: treated like a person under the law it must pay taxes and obey the law or face punishment its independence gives its owners legal protection Ownership is measured in shares There may be numerous owners

6. Individuals Individuals get cash from: selling their labor (to business and government) selling natural resources (to business and government) Individuals use cash to: buy products (from business) pay taxes (to government) savings (financial capital invested in business)

7. Business Business gets cash from: profits from selling products (to individuals, other businesses and government) Investment of financial capital (from individuals’ savings) Business uses cash: pay for resources and labor for production pay taxes (to government)

8. The Government The U.S. Government gets cash from: taxes (paid by individuals and business) loans (from individuals, business and other governments) Government uses cash to: provide public goods and services

9. Public Goods and Services Public Goods and Services are provided by the government for the use of everyone. Ex: national defense police schools public transportation Post office Interstate highways

10. Public or private?

17. How the Government got so big 16 th Amendment created the income tax this greatly increased the money available to the government it made it possible for government to become a more active player in the economy

18. Tax and Spend Higher Taxes: government can spend more spending more increases demand, employment and production higher spending can lead to inflation (rise in prices that comes with growth) Lower Taxes: government spends less reduces demand, may slow the economy’s growth

19. Just borrowing Government borrows more money: less money available for individuals and business to borrow can lead to less private sector employment and growth Government borrows less: more money available for private sector borrowing can lead to more people buying homes and businesses creating new jobs

20. National Debt