The U.S. Economy: Private and Public Sectors

1. The U.S. Economy: Private and Public Sectors Chapter 5

2. Households as Income Receivers • The Functional Distribution of Income

3. Households as Income Receivers • The Personal Distribution of Income

4. Households as Spenders • Personal Taxes – U.S. Households pay an average 13% of income in taxes. • Personal Saving – U.S. Households save an average of 3% of their income.

5. Households as Spenders • Personal Consumption Expenditures • The remaining 84% of household income is spent on durable and non-durable goods, and services.

6. The Business Population • A plantis a physical establishment – a factory, farm, mine, store, or warehouse. • A firm is a business organization that owns and operates plants. • An industry is a group of firms that produce the same, or similar, products.

7. Sole Proprietorships

8. Partnership

9. Corporation

10. The Public Sector: Government’s Role • Providing the Legal Structure • Maintaining Competition • - Monopoly • Redistributing Income • - Transfer Payments • - Market Intervention • - Taxation

11. The Public Sector: Government’s Role • Reallocating Resources and Market Failure • Spillovers or Externalities • - Spillover Costs • - legislation • - specific taxes • - Spillover Benefits • - subsidize consumers • - subsidize suppliers • - provide goods via government • Public Goods and Services • - Free-rider problem

12. The Public Sector: Government’s Role • Quasi-Public Goods • The Reallocation Process • Promoting Stability • - Unemployment • - Inflation • Government’s Role: A Qualification

13. The Circular Flow Revisited

14. Federal Finance

15. Federal Finance

16. State and Local Finance • State Finances • Local Finances • - Property Taxes