1 / 14

Chapter 4

Chapter 4. The U.S. Economy: The Private and Public Sectors. Households – persons who occupy a housing unit. Supply the resources Receive income Demand the products Spend income. Business – economic units that seek profits by employing resources to produce products. Demands the Resources

Download Presentation

Chapter 4

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.


Presentation Transcript

  1. Chapter 4 The U.S. Economy: The Private and Public Sectors Buffland Economics

  2. Households – persons who occupy a housing unit • Supply the resources • Receive income • Demand the products • Spend income Buffland Economics

  3. Business – economic units that seek profits by employing resources to produce products • Demands the Resources • Supplies the Products • Definitions • Plant – building • Firm – organization • Industry – group of firms in a market Buffland Economics

  4. Legal forms of business • Sole Proprietorship – one owner/manager • Easy to set up, limited funds, full management, unlimited liability, limited life • Partnership – 2 or more owner/managers • Specialization, more funds available, unlimited liability • Corporation – separation of owners and managers • More funds, stability, limited liability, double taxation, unlimited life Buffland Economics

  5. Government sector • Functions • Maintains competition - Promoting competition • Antitrust laws • Deal with monopolies • Provides legal structure – Establishing and enforcing the rules of the game • safeguarding private property • Redistributes income - More equal distribution of income • Deals with market failures • Externalities – cost or benefit that falls on a third party who is not compensated or charged • Provides public goods • Promotes economic stability and growth, high employment and stable prices • Fiscal policy • Monetary policy Buffland Economics

  6. Government Finance • Spending is Government purchases and Transfer payments • Revenue is from taxation • Budgets • Deficit: Expenditures > Receipts • Surplus: Expenditures < Receipts • Balanced: Expenditures = Receipts Buffland Economics

  7. Actual Government Finance • Federal Finance • Expenditures: Income security, Defense and Health • Receipts: Income tax, Payroll tax (social security), Corporate Profit tax Buffland Economics

  8. State and Local Finance • State • Expenditures: Education, Public welfare, Health, Highways • Receipts: Sales tax, Income tax • Local • Expenditures: Education, Public safety, Housing • Receipts: Property tax, Sales tax, Federal Grants Buffland Economics

  9. Foreign Sector • International Trade • Volume: US is the leader • Dependence • Imports (foreign goods sold here): Oil, food • Exports (our goods sold there): Agriculture • Net Exports = Exports – Imports • Trading Partners • Canada, Japan, Mexico Buffland Economics

  10. Specialization and Trade • Comparative advantage – country with the lowest opportunity costs • Absolute advantage – can produce it more efficiently Buffland Economics

  11. Foreign Exchange Markets • Exchange rates – the rate at which two currencies trade • Appreciation – increase in value • Depreciation – decrease in value Buffland Economics

  12. Trade Barriers • Types • Tariffs – tax on imports • Quotas – quantity restriction • Reasons • Job protection – protect our industries • Antidumping • National Defense Buffland Economics

  13. Trade Agreements • Reciprocal Trade Agreements Act to reduce tariffs (both must do it) • GATT – reduce restrictions • WTO – settles disputes and provides legal framework • Oversees trade agreements • EU – 25 country free trade zone (trade bloc) • Euro – currency used by 11 • AFTA - Asian Free Trade Association: 10 nations • Agreement is called ASEAN • MERCOSUR – 4 South American countries • Argentina, Brazil, Paraguay and Uruguay Buffland Economics

  14. CAFTA – 5 Central American countries • Guatemala, El Salvador, Honduras, Nicaragua, and Costa Rica • NAFTA – free trade zone between U.S. Canada and Mexico (2010) • South African Customs Union (SACU) • South Africa, Botswana, Lesotho and Swaziland • FTAA – Free Trade Area of the Americas (not Cuba) • 2001 Quebec • 2003 Miami Buffland Economics

More Related