Transcript American Free Enterprise

Ch 3 Part 1
American Free Enterprise
AN ECONOMIC SYSTEM CHARACTERIZED BY…
1. PRIVATE OR CORPORATE OWNERSHIP OF
CAPITAL GOODS;
2. INVESTMENTS THAT ARE DETERMINED BY
PRIVATE DECISION RATHER THAN BY STATE
CONTROL;
3. AND DETERMINED IN A FREE MARKET
1st what are we looking at??
Macro Economics vs
Micro Economics
1.
2.
3.
4.
Macroeconomics: the study of entire
economies
Microeconomics: the study of individual
people, groups or businesses
Gross Domestic Product (GDP): the total
of all goods produced in a country in one
year
Business Cycle: period of economic
expansion followed by a period of
contraction (growth then fall)
Business Cycle
1.
Peak: height of
economic expansion
2.
Contraction: an
economic decline
marked by a fall in
the real GDP; causes
unemployment to
rise
3.
Trough: economy
has “bottomed out”;
lowest point in
contraction when
real GDP stops
falling
4.
Expansion:
economic growth
with a rise in the real
GDP
What Constitutional Protections are in place in a
Free Enterprise system?
Property Rights
1.
a.
b.
5th Amendment – 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.”
14th Amendment – Extends this restriction to
states
Taxation –
2.
a.
b.
Constitution provides for taxation, but limits it
according to population
16th Amendment provides for an income tax
2 Basic Principles of Free Enterprise
1.
2.
Profit Motive – the
idea that by
innovating and
improving you can
increase your wellbeing
Open Opportunity –
the Marketplace is
open to all
5 Economic Rights in Free Enterprise
1. Legal Equality – everyone is equal under
2.
3.
4.
5.
the law
Private Property Rights – you (and only
you) control your property
Free Contract – you decide what contracts
you want to enter into
Voluntary Exchange – you decide what and
when to buy and sell
Competition – rivalry amongst seller
What is the Role of the Consumer (you!)
in a Free Enterprise?
By purchasing some things and not purchasing others,
the consumer influences the market.
Interest Groups – Private organizations
that try to influence the market
How does the Govt. Protect People in a free
enterprise?
Public Disclosure
Laws- Government
requires that
companies give you
some information.
II. Environmental Laws
restricting pollution
I.
What are the Negative Effects of Government
Involvement?
Adds to costs
of business
2. Restrictions
sometimes
unnecessary
p.55 chart of
regulations
1.
How does Govt. try to strengthen the economy?
1.
2.
3.
Employment: tries to keep
unemployment low
(Unemployment between 4% and
6% in “normal”)
Growth: tries to keep GDP going up
Stability: tries to keep things from
fluctuating too fast
How does Technology and Productivity impact
the economy?
Work ethic: a
commitment to
the value of work
2. Technological
Progress: creates
growth and
innovation
1.
What Government Protections (regulations) are
in place to aid the economy?
Patents

A. Limited
years of
exclusivity
2. Copyrights:

Exclusive right
to publish and
sell your own
works
1.
Review
 What are the benefits of free enterprise or a market




economy?
What are problems with a free market?
How does the government hurt the free market?
What protections does the government provide for
Americans?
What is micro economics? Macro economics?
Video Review…
 Market Economy: The Government's Role