Transcript The Investment Sector

Business, The Government,
and Consumption Sectors
SWBAT
• Define and provide examples for the three
spending sectors in the economy
• Understand the different types of
business firms
Standard 12.3a/b; 12.4, 12.5
Students analyze the aggregate economic behavior of the
U.S. economy
Warm-Up
• What is the largest sector of GDP?
• What are some basic types of
businesses?
• What are the three levels of
government?
• Who pays taxes, who do they pay
them to, and what do they pay for?
The three spending
sectors – in depth
• The Government Sector
• The Consumption Sector
• The Investment Sector
The Investment Sector
Review
• What are the 4 shortcomings of GDP?
• What is the difference between real GDP
and nominal GDP?
• What does per capita GDP measure?
• What was the per capita GDP of the U.S. in
2008?
Business Firms
• People are free to risk their time and their
savings to start a business
• If a business succeeds, they are rewarded
with profit
• If a business fails, they could lose a bundle
• Most new businesses fail within the first 5
years
3 Types of Business Firms
1. Sole Proprietorship
2. Partnership
3. Corporations
1. Sole Proprietorship
• Simplest form of business organization
• Owned and managed by a single individual
• Earns all the firm’s profits and is responsible for
all the firm’s losses
• About 75% of all businesses in the U.S. are
owned by sole proprietorship
• But only make up 5% of all U.S. business sales
• Draw a quick symbol to represent sole
proprietorship
2. Partnership
• Involves 2 or more individuals who agree
to contribute resources to the business in
return for a share of the profit
• Account for about 8% of all businesses
• And 8% of all business sales
• Draw a quick symbol to represent
partnership
3. Corporations
• Is a legal entity with an existence that is distinct
from the people who organize it, own it, and run
it
• The corporation can earn a profit, lose money, be
sued, and even be found guilty of a crime
• 15-20% of all businesses are corporations
• But accounts for 86.5% of all business sales
• Draw a quick symbol to represent corporation
Draw a Pie Graph
• Draw a pie graph
that represents
what percentage
makes up:
-Sole Proprietorship
-Partnership
-Corporation
Business
Firms
Draw a Pie Graph
• Draw a pie graph
that represents
how much of total
business sales each
business firm
makes
% of
Business
Business
Sales
Firms
South Park on YouTube Clip
http://www.youtube.com/watch?v=AflGXjsY990
Questions for Review:
1. How do citizens of South Park feel about the opening of
“Wall-mart?”
2. Briefly summarize 3-4 events you see in the clip.
3. Is the clip for or against the expansion of Wall mart?
Give evidence to support your answer.
The clip you just saw of “Wall-mart” in
South Park contains no dialogue. In
pairs, create dialog of what is happening
between the characters.
Assignment
1.Your dialogue must contain the main
characters: Eric Cartman, Stan Marsh,
Kyle Broflovski, & Kenny McCormick.
2. It must be at least one page long and
depict the clip you just saw.
**Possible extra credit for presentations!**
Walmart
http://www.youtube.com/watch?v=nerobNiMlxE
• Based on this clip, write down 2-3 facts
that you have learned about Walmart
corporation.
Advantages and Disadvantages
• Each of the 3 types of business firms has
advantages and disadvantages
• Read the handout to figure them out!!
• Complete the worksheet “Advantages &
Disadvantages of Business Firms”
Advantages & Disadvantages of
Business Firms
Read the handout, take good notes because:
1. You will present one of them!
2. You can’t take it home with you!
After Your Group Is Done Reading…
• Create a visual representation of your
Advantage/Disadvantage to convey the
meaning to the class.
• Be sure to include:
– The name of your Business Firm
– If it is an Advantage or Disadvantage
– A summary – Include category headings & new
vocab.
– An image
– Explanation of how it could affect you as young
adults entering the economic world
In each group, explain the
following in your own words:
•
•
•
•
•
•
1=Advantages of Sole Proprietorship
2=Disadvantages of Sole Proprietorship
3=Advantages of Partnerships
4=Disadvantages of Partnerships
5=Advantages of Corporations
6=Disadvantages of Corporations
The Business Sector – Wrap Up
Total spending done by businesses in the US is
production of:
• New plants (factories, buildings and stores) &
equipment (assembly lines, machinery, tools,
cash registers, computers, & office furniture)
• additions to inventory
• new residential housing
This is 10% of GDP and the most
volatile (unstable) sector of the economy
APPRECIATION V. DEPRECIATION
Appreciation
• A gain in value over time
Depreciation
• A loss in value due to time
and use
• Ex: Picasso painting
• Ex: Laptop computers
Now: Come up with three new examples
for each.
1. _______________
1. ________________
2. _______________
2. ________________
3._______________
3. ________________
Investment Sector Wrap-up
• If you started a business which one would
begin? Compare the different types of
business firms and explain your choice
using statistics of success and
advantages and disadvantages of each.
• ½ page minimum!
The Consumption Sector
•The total of all spending done by consumers
in the US on final goods and services
•This is the largest sector of GDP and makes
up 60% of GDP (2/3)
Review:
What we spend v. what we save
 Gross v. Net:
 Gross – its gross I don’t get my whole
paycheck; that they take out so many taxes and
deductions!
 Net – Its what is taken out! Bye bye water, hello
little fishy! (This adds to their DI)
 US consumers spend 90-95% of their
disposable income
 Disposable Income—money you take home
on pay day
What do people spend it on? [½ and ½]
Durable
Non-Durable
expensive items
bought on time that
usually lasts for
Years
Ex. #1: ___________
Ex. #2: ___________
Ex. #3: ___________
items bought and
consumed everyday
Ex. #1: ___________
Ex. #2: ___________
Ex. #3: ___________
BUDGET ACTIVITY
Can You
Create a
Budget?
Creating A Budget – Things to consider…
**Do the activity on the back to figure out how you
would budget your money on a typical salary
Category
Durable or
Non-Durable
Priority #
**Income
--
--
**Expenses
--
--
Shopping
Taxes
Rent
Utilities
Clothing
Food
Car Payment
Entertainment
Furniture
Budget
Amount
Wrap-Up/Review
 Was it easy or hard for you to budget your
money? Explain your experience.
 Explain the difference between durable vs.
non-durable goods.
 What is the example of plants and
equipment?
 List examples of 2 goods that depreciate
and 2 that appreciate.
The Government Sector
The Government Sector
Government spending consists of transfer
payments, which are:
• Social security
• Welfare
• Medicare
• Unemployment
**Talk to the person next to you to review
what each one means.
=>Another reason GDP is imperfect!
• TRANSFER PAYMENTS are NOT included in the GDP! It is
only counted if you spend the money afterwards on goods
and services
Top 3 Areas of Spending for “Uncle
Sam” (Federal):
1. Social Security
(retirement
benefits for the
elderly)
2. National Defense
(the military)
3. Interest on
National Debt
Interest on the National
Debt
•
•
•
•
The United States total public debt, commonly called the national debt, or U.S. government debt, is the amount of
money owed by the United States federal government .
Debt held by the public is all federal debt held by states, corporations, individuals, and foreign governments, but
does not include intra-governmental debt obligations or debt held in the Social Security Trust Fund.
Types of securities held by the public include, but are not limited to, Treasury Bills, Bonds, United States Savings
Bonds, and State and Local Government Series securities.
On 30 September 2008, the total U.S. federal debt passed the
$10 trillion
mark for the first time, which equals about $32,895 per capita!
=>Basically, we won’t ever be able to pay
off the national debt
because it is too large, so we just pay interest!
Source: Wikipedia
U.S. NATIONAL DEBT CLOCK
The Outstanding Public Debt as of 17 Nov 2008 at 10:47:24 PM GMT is:
The estimated population of the United States is 305,112,880
so each citizen's share of this debt is $34,838.36.
The National Debt has continued to increase an average of
$3.90 billion per day since September 28, 2007!
Concerned? Then tell Congress and the White House!
REAL TIME LINK:
http://www.babylontoday.com/national_debt_clock.htm
What about State & Local
Government Spending?
Areas:
1. Health
2. Welfare
3. Public Security
4. Education
5. Police & Fire Protection
6. Infrastructure
How does the government
get $$$???
What is Taxation?
• It is the basic source of revenue for
government
2 Basic Types of TAXES
Direct Tax
Progressive
tax on a person
(i.e. social security)
tax that places burden
on those best able to
pay (i.e. income tax)
Indirect Tax
tax on a thing (i.e.
sales tax)
Regressive
tax where burden is
more on poor (i.e.
excise tax - Federal sales tax
on a specific good)
Categorize the following as: Regressive or
Progressive AND Indirect or Direct
• 1. In the US, people who earn $50K or less are
taxed marginally at 15% while people who earn
above $100k are taxed 35%.
• 2. Oil, tobacco, and alcohol are examples of this
type of tax.
• 3. All residents of Hawthorne pay a 1.5%
property tax to support local schools.
• 4. An elderly man living off of social security
pays sales tax at Starbucks.
• 5. Ms. Stack works part-time at UCLA to
conduct research on low performing schools and
pays taxes on her income.
•
•
•
•
•
Categorize the following as: Regressive or
Progressive AND Indirect or Direct
ANSWERS
1. In the US, people who earn $50K or less are
taxed marginally at 15% while people who earn
above $100k are taxed 35% (progressive/direct).
2. Oil, tobacco, and alcohol are examples of this
type of tax. (regressive-excise/indirect).
3. All residents of Hawthorne pay a 1.5%
property tax to support local schools.
(regressive/indirect).
4. An elderly man living off of social security
pays sales tax at Starbucks.
(regressive/indirect).
5. Miss Varee works part-time at USC to conduct
research on low performing schools and pays
taxes on her income (progressive/direct).
Sources of Revenue
1. Personal Income (38%)
–
Tax Deductions: Medical, Charity,
State/Local
2. Social Security (33%)
–
Payroll tax covers SS and Medicare
3. Corporate Income Tax (11%)
4. Excise Tax- Federal sales tax on a
specific good
“Married With Children”
http://www.youtube.com/watch?v=R8l59kr3nmY
“Married With Children”
• Why is Al so desperate for money that he
is willing to sell Peggy’s hair?
• List things that households might cut
back on in times of financial stress and
recession.
• Have you noticed the recession in your
household? Have your parents/family cut
back on any luxury/normal goods lately?
• What will the government use Al’s taxes
to for pay for?
• If people don’t pay taxes, what will the
government have to cut back on?
Wrap-Up/Review
• Which business firm makes up the largest
% of business firms? Which one makes
up the largest % of business sales?
• What is Disposable Income and what can
households choose to do with this?
• What are some things that the
government spends money on?
• List and explain the 4 different types of
taxes.
• What are the 4 sources of government
revenue?