Transcript 08CIV Chapter 23

Chapter Introduction
Section 1: The Role of
Government
Section 2: Measuring the
Economy
Section 3: Government, the
Economy, and
You
Visual Summary
Promoting a stable, growing
economy is a major goal of
the federal government. The
decisions that government
makes affect our economic
lives every day. As you read
the chapter, list the specific
ways in which the
government affects you
economically.
Section 1:
The Role of Government
Free enterprise is the
freedom of individuals and
businesses to operate and
compete with a minimum of
government interference or
regulation. In order to
encourage competition and
prevent monopolies,
governments take steps to
regulate economies.
Section 2:
Measuring the Economy
An economic system is the
way a society organizes the
production and
consumption of goods and
services. Our government
plays a limited, but important,
role in measuring and trying
to balance the alternating
periods of growth and decline
called the business cycle.
Section 3:
Government, the Economy,
and You
People form governments
to establish order, provide
security, and accomplish
common goals. A major
focus of government
programs is to help people in
poverty.
Guide to Reading
Big Idea
Free enterprise is the freedom
of individuals and businesses to
operate and compete with a
minimum of government
interference or regulation.
Guide to Reading
Content Vocabulary
• private good
• antitrust law
• public good
• merger
• externality
• natural monopoly
• monopoly
• recall
Academic Vocabulary
• exclude
• achieve
• minimize
Does the government do a good job
protecting private citizens from
negative effects of products?
A. Yes
B. No
A. A
B. B
0%
B
A
0%
Providing Public Goods
Governments usually provide public
goods, while businesses usually
provide private goods.
Providing Public Goods (cont.)
• Businesses provide private goods and
governments provide public goods .
Providing Public Goods (cont.)
• Private goods only consumed once
– Someone can be excluded from goods
and services if unwilling to pay
– Include items such as clothes and food
– Private services: haircuts, insurance,
medical services, and so on
Providing Public Goods (cont.)
• Public goods shared by everyone
– Government provides
– Examples: Libraries, roads, parks
– Taxes pay for them
– Produce positive and negative
externalities, or unintended side effects
Which is an example of a public good
or service?
A. Milk shake
B. Ballet shoes
C. Street lamp
D. Teeth Cleaning
0%
A
A.
B.
C.
0%
D.
B
A
B
C
0%
D
C
0%
D
Maintaining Competition
One government role is to ensure
competition in the economy.
Maintaining Competition (cont.)
• Governments protect citizens by regulating
business.
Maintaining Competition (cont.)
• A monopoly is one provider controlling a
market.
– Antitrust laws preserve competition
– Sherman Antitrust Act passed in 1890
– Mergers threaten competition
Maintaining Competition (cont.)
• Areas where government regulation is key:
– Natural monopolies, such as gas,
water, or local telephone service
– Food and Drug Administration and
Federal Trade Commission
– Product safety—unsafe products are
recalled
Federal Regulatory Agencies
Do you agree that the company that holds
a monopoly is the only one that really
benefits?
A. Agree
B. Disagree
A. A
B. B
0%
B
A
0%
Guide to Reading
Big Idea
An economic system is the way a
society organizes the production and
consumption of goods and services.
Guide to Reading
Content Vocabulary
• real GDP
• fiscal policy
• business cycle
• inflation
• civilian labor
force
• consumer price
index (CPI)
• unemployment
rate
Guide to Reading
Academic Vocabulary
• period
• implement
During the ten-year expansion period
that began in the 1990s, how might the
government have prepared for the next
recession?
A. Raised taxes
0%
D
A
D. Increased the GDP
0%
A
B
C
D0%
C
C. Reduced spending
A.
B.
C.
0%
D.
B
B. Required citizens to
save money
Measuring Growth
The real gross domestic product is the
most accurate measure of an
economy’s performance.
Measuring Growth (cont.)
• The real GDP tells whether the economy
is growing.
• Economists measure periods of growth
and decline.
Measuring Growth (cont.)
• GDP:
– Dollar value of all goods and services
produced in a year
– Price increases raise GDP but don’t
grow economy
– Real GDP removes distortions
Measuring Growth (cont.)
• The business cycle is alternating periods
of growth and decline in the economy.
Model of the Business Cycle
Do you agree that price increases can be a
good way for businesses to succeed in
times of economic decline?
A. Agree
B. Disagree
A. A
B. B
0%
B
A
0%
Business Fluctuations
The economy goes through alternating
periods of growth and decline.
Business Fluctuations (cont.)
• Periods of increase and decline affect the
American economy.
– Real GDP up: expansion
– Real GDP down for six months in a row:
recession
• Average recession lasts one year
• Many people lose jobs
U.S. Business Activity Since 1880
Business Fluctuations (cont.)
• Civilian labor force:
– All civilians 16 or older who work or seek
work (half of all people in the U.S.)
– Unemployment rate measures those in
civilian labor force who are seeking work
– Impact of unemployment
Unemployment Rate and the Business Cycle
Business Fluctuations (cont.)
• Changes in government spending or taxes
is fiscal policy.
– Political climate affects ability to
implement policy
Business Fluctuations (cont.)
• Inflation reduces purchasing power.
– Consumer price index (CPI) measures
inflation
– Causes speculation
– Distorts pricing
How might the government best
lower inflation?
A. Raise taxes
B. Lower taxes
C. Raise the interest rate
D. Lower the interest rate
0%
A
A.
B.
C.
0%
D.
B
A
B
C
0%
D
C
0%
D
Stocks and Stock Markets
Stock markets are usually good
indicators of the health of the economy.
Stocks and Stock Markets (cont.)
• Stock markets are indicators of economic
health.
– Profits in form of dividends and capital
gains
– Stock value determined by supply and
demand
Stocks and Stock Markets (cont.)
• Stock market indexes track stock prices
over time.
– Dow-Jones Industrial Average (DJIA)
• 30 representative stocks
– Standard and Poor’s (S&P)
• 500 largest stocks
Stocks and Stock Markets (cont.)
• Stocks sold at stock exchanges
– New York Stock Exchange (NYSE)
– NASDAQ (electronic market)
Stocks and Stock Markets (cont.)
• Stock prices reveal investors’ attitudes.
– Bull market is optimistic
– Bear market is pessimistic
If you were an investor in a bull market
what would you be likely to do?
A. Buy a lot of stock
B. Sell all your stock
C. Buy and sell stock
D. Avoid the stock market
0%
A
A. A
B. B
C.0% C 0%
D. D
B
C
0%
D
Guide to Reading
Big Idea
People form governments to
establish order, provide security, and
accomplish common goals.
Guide to Reading
Content Vocabulary
• food stamps
• Women,
Infants, and
Children (WIC)
• workfare
• progressive
income tax
• Earned Income
Tax Credit
(EITC)
Academic Vocabulary
• survive
• supplement
Do you think it is fair for some people
to be extremely wealthy when other
people are impoverished?
A. Yes
B. No
A. A
B. B
0%
B
A
0%
Income Inequality
Education, family wealth, and
discrimination are reasons for income
differences.
Income Inequality (cont.)
• Income is influenced by education, family
wealth, and discrimination.
• College graduate has the potential to earn
twice the income of high school graduate.
Income Inequality (cont.)
• Women and minorities experience
discrimination on the job.
– Fewer promotions
– Lower salaries
Income Inequality (cont.)
• Laws reduce discrimination
– Equal Pay Act of 1963
– Civil Rights Act of 1964
– Americans with Disabilities Act of 1990
– Courts help enforce
What are good reasons why two
people with the same education
should receive different pay?
A. Different levels of
experience
B. Different kinds of talents
C. Different backgrounds
0%
D. All of the above
A
A.
B.
C.
0%
D.
B
A
B
C
0%
D
C
0%
D
Poverty
Poverty is a major problem in America.
Poverty (cont.)
• Government has created programs to help
poor people.
• Incentives encourage self-improvement
Poverty (cont.)
• Guidelines determine eligibility for programs
– Revised yearly
– Based on what is needed to survive
– 2006: $9,800 annual income and below
is impoverished
– Nearly 37 million people impoverished
Poverty (cont.)
• Federal welfare programs
– Food Stamp program
– Women, Infants, and Children (WIC)
– Supplemental Security Income (SSI)
– Temporary Assistance to Needy Families
(TANF)
Poverty (cont.)
• Workfare usually at state level
• Progressive income tax
– People with lower incomes taxed at a
lower rate
Poverty (cont.)
• Earned Income Tax Credit (EITC)
– Provides tax credits or cash assistance
– Helps almost 20 million people each year
What do you think is the best way to
help someone whose income is
below the poverty level?
A. Welfare
A
0%
0%
D
D. Workfare
A
B
C
0%
D
C
C. Lower taxes
A.
B.
C.
0%
D.
B
B. Job training
Government and the Economy
Government’s Role
• Government provides public
goods.
• Government regulates the
economy to ensure
competition.
Government and the Economy
Measuring the Economy
• Real GDP is GDP that has been
adjusted for inflation.
• The real gross domestic product is the most
accurate measure of an economy’s performance.
• Government must deal with unemployment,
inflation, and periods of growth and decline called
the business cycle.
• Stock markets are usually good indicators of the
health of the economy.
Government and the Economy
The Problem of Poverty
• Education, family wealth, and discrimination are
reasons for income differences.
• Government uses several different programs and
policies to combat poverty.
It is an exaggerated
claim in terms of the
number of patients
and results, so it is
probably not true.
private goods
goods that, when consumed by one
individual, cannot be consumed by
another
public goods
economic goods that are consumed
collectively, such as highways and
national defense
externality
the unintended side effect of an
action that affects someone not
involved in the action
monopoly
when the market creates a sole
provider for a good or service
antitrust law
legislation to prevent new monopolies
from forming and police those that
already exist
merger
a combination of two or more
companies to form a single business
natural monopoly
a market situation in which the costs
of production are minimized by
having a single firm produce the
product
recall
situation in which a company pulls a
product off the market or agrees to
change it to make it safe
exclude
to shut out
achieve
to accomplish or successfully gain
minimize
to make as small as possible
real GDP
GDP after adjustments for inflation
business cycle
alternating periods of growth and
decline that the economy goes
through
civilian labor force
all civilians 16 years old or older who
are either working or are looking for
work
unemployment rate
the percentage of people in the
civilian labor force who are not
working but are looking for jobs
fiscal policy
the federal government’s use of
spending and taxation policies to
affect overall business activity
inflation
sustained increase in the general
level of prices
consumer price index (CPI)
measure of change in price over
time of specific group of goods and
services
period
a length of time
implement
to put into practice
food stamps
coupons that can be used to
purchase food
Women, Infants, and
Children (WIC)
a program that provides help for
nutrition and health care to lowincome women, infants, and children
up to age 5
workfare
programs that require welfare
recipients to exchange some of their
labor in return for benefits
progressive income tax
a tax that takes a larger percentage of
higher incomes than lower incomes
Earned Income Tax
Credit (EITC)
a program that gives tax credits and
even cash payments to qualified
workers
survive
to continue to exist
supplement
something that supplies what is
needed or makes an addition
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