EQ: HOW DOES THE PUBLIC SECTOR AND THE PRIVATE SECTOR INTERACT TO MAINTAIN A

STABLE, EFFICIENT, AND GROWING ECONOMY?

Chapter 3American Free Enterprise

Chapter Objectives

- Describe the tradition of free enterprise in the US

- Explain the basic principles of the free enterprise system

- Identify the roles of the consumer and the government in the free enterprise system

- Analyze how the government promotes economic strength

- For today: only write the slides with the **

EQ: HOW DOES THE PUBLIC SECTOR AND THE PRIVATE SECTOR INTERACT TO MAINTAIN A STABLE, EFFICIENT, AND GROWING ECONOMY?

Section 1: Benefits of Enterprise

Open land, natural resources, and immigrants

Free Enterprise- the social and political commitment to giving people the freedom & flexibility to try out their business ideas and compete in the marketplace

-The U.S. Constitution safeguards these rights-private property rights (5th/14th amendments)-restricts unfair taxation, allows binding contracts

EQ: HOW DOES THE PUBLIC SECTOR AND THE PRIVATE SECTOR INTERACT TO MAINTAIN A STABLE, EFFICIENT, AND GROWING ECONOMY?

**What is American Free Enterprise?**

Profit Motive—force to improve material well-being

Competition—rivalry to attract customers & lower costs

Private Property Rights—you own your possessions

Voluntary Exchange—you may decide what & when to buy & sell

Open Opportunity—everyone can compete

Free Contract—you decide what agreements to enter into

Legal Equality—everyone has the same legal rights

Public Disclosure Laws—companies provide full information

EQ: HOW DOES THE PUBLIC SECTOR AND THE PRIVATE SECTOR INTERACT TO MAINTAIN A STABLE, EFFICIENT, AND GROWING ECONOMY?

Basic Principles of Free Enterprise

The American economy rests on a recognition of the importance of the profit motive.

Meaning business owners and managers make the choices themselves, operating in ways they believe will maximize their profits.

EQ: HOW DOES THE PUBLIC SECTOR AND THE PRIVATE SECTOR INTERACT TO MAINTAIN A STABLE, EFFICIENT, AND GROWING ECONOMY?

**Roles**

Role of the Government- Gov’t regulations- protect property rights, contracts,

and other business activities Consumer protection- example: safe drugs/food Public disclosure laws- requires companies to give

consumers info about their products Environmental Protection

Role of the Consumer- have freedom to make their own economic choices Join interests groups- persuade public officials to act

or vote according to interests of the group members

EQ: HOW DOES THE PUBLIC SECTOR AND THE PRIVATE SECTOR INTERACT TO MAINTAIN A STABLE, EFFICIENT, AND GROWING ECONOMY?

Section 2: Promoting Economic Strength

Because the market is vulnerable to business cycles, the government creates public policies that aim to stabilize the economy

3 Main Outcomes:1.High employment

2.Steady growth3.Stable prices

EQ: HOW DOES THE PUBLIC SECTOR AND THE PRIVATE SECTOR INTERACT TO MAINTAIN A STABLE, EFFICIENT, AND GROWING ECONOMY?

High Employment

Provide jobs for everyone who is able to work Keep unemployment rate between 4-6%

EQ: HOW DOES THE PUBLIC SECTOR AND THE PRIVATE SECTOR INTERACT TO MAINTAIN A STABLE, EFFICIENT, AND GROWING ECONOMY?

Steady Growth

Enjoy higher standard of living Economy must grow to provide additional goods and

services

EQ: HOW DOES THE PUBLIC SECTOR AND THE PRIVATE SECTOR INTERACT TO MAINTAIN A STABLE, EFFICIENT, AND GROWING ECONOMY?

Stable Prices

Gives people confidence in the economy Stable banks and freedom from fraud Government wants to prevent sudden, drastic shifts in

prices-If prices increase, this puts a strain on consumers,

especially people like Miss Eilers, who is on a fixed income and strict budget. How?

EQ: HOW DOES THE PUBLIC SECTOR AND THE PRIVATE SECTOR INTERACT TO MAINTAIN A STABLE, EFFICIENT, AND GROWING ECONOMY?

Regulating

Protecting health, safety & well-being Can you identify these agencies and their purpose?

FDA food, drugs, cosmetics

FTC unfair business practices

FCC radio, TV, wire, satellite, cable, phone

FAA airline safety, air-traffic

EQ: HOW DOES THE PUBLIC SECTOR AND THE PRIVATE SECTOR INTERACT TO MAINTAIN A STABLE, EFFICIENT, AND GROWING ECONOMY?

3. Government provides safety nets

Transfer payments (remember Robin Hood?) Directly as cash or “in-kind” benefits (receiving goods

and services directly such as housing, food, health care)

We will discuss 6 types of safety nets…

EQ: HOW DOES THE PUBLIC SECTOR AND THE PRIVATE SECTOR INTERACT TO MAINTAIN A STABLE, EFFICIENT, AND GROWING ECONOMY?

For poverty

What’s poverty? Who is impoverished? Poverty Thresholds for 2008 by Size of Family and Number of Related Children Under 18 Years Federal Poverty Guidelines

TANF (Temporary Assistance for Needy Families) Work requirement “workfare”--W to W (welfare to work) Time limit (5 yr. lifetime limit) Since 1996, designed to be temporary & transitional

EQ: HOW DOES THE PUBLIC SECTOR AND THE PRIVATE SECTOR INTERACT TO MAINTAIN A STABLE, EFFICIENT, AND GROWING ECONOMY?

Other programs

Section 8 housing (HUD) “subsidized”Food stampsFree/reduced school lunchLow-income home energy assistance programHead Start

EQ: HOW DOES THE PUBLIC SECTOR AND THE PRIVATE SECTOR INTERACT TO MAINTAIN A STABLE, EFFICIENT, AND GROWING ECONOMY?

For medical care

Medicaid—health insurance for low income people administered by states

Medicare—health insurance for seniors (part of Social Security Administration) Remember: “aid” to the poor, “care” for the elderly Children’s Health Insurance Program—(SCHIP) covers

children who don’t qualify under Medicaid.

EQ: HOW DOES THE PUBLIC SECTOR AND THE PRIVATE SECTOR INTERACT TO MAINTAIN A STABLE, EFFICIENT, AND GROWING ECONOMY?

For income/employment

Unemployment insurance—temporary income benefit for those laid-off or unable to find a job (26 weeks, $405/week max.)

Minimum Wage Laws (federal and state) Federal = $7.25 CA = $8.00 currently

EQ: HOW DOES THE PUBLIC SECTOR AND THE PRIVATE SECTOR INTERACT TO MAINTAIN A STABLE, EFFICIENT, AND GROWING ECONOMY?

For disability

Supplemental Security Income (SSI) Part of SSA, but not funded by payroll tax Provides income to people who cannot work due to

physical or mental disability or blindness.

EQ: HOW DOES THE PUBLIC SECTOR AND THE PRIVATE SECTOR INTERACT TO MAINTAIN A STABLE, EFFICIENT, AND GROWING ECONOMY?

For catastrophe

FEMA (Federal Emergency Management Agency) disaster relief, medical care, food, shelter, low-interest loans to individuals and businesses.

EQ: HOW DOES THE PUBLIC SECTOR AND THE PRIVATE SECTOR INTERACT TO MAINTAIN A STABLE, EFFICIENT, AND GROWING ECONOMY?

For catastrophe

FEMA (Federal Emergency Management Agency) disaster relief, medical care, food, shelter, low-interest loans to individuals and businesses.

EQ: HOW DOES THE PUBLIC SECTOR AND THE PRIVATE SECTOR INTERACT TO MAINTAIN A STABLE, EFFICIENT, AND GROWING ECONOMY?