UNIT FOUR AMERICAN FREE ENTERPRISE. Basic Principles of American Free Enterprise System 1Profit...
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UNIT FOUR AMERICAN FREE ENTERPRISE
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Transcript of UNIT FOUR AMERICAN FREE ENTERPRISE. Basic Principles of American Free Enterprise System 1Profit...
UNIT FOURAMERICAN
FREE ENTERPRISE
Basic Principles of American Free Enterprise System
1 Profit MotiveThe desire of individuals and
business improve your situation.
2 Open OpportunityEveryone has the same opportunities to enter markets either as a consumer or producer/provider.
Thom Jensen
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Click on image
3 3 Legal EqualityLegal EqualityWe all have legal rights in the marketplace.
44 Private PropertyPrivate PropertyThe right to privateownership of property.
Basic Principles of American Free Enterprise System
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5 5 Free ContractFree Contract You can freely enter into financial agreements.
6 6 Voluntary ExchangeVoluntary ExchangeFree to sell and buy products, with limited governmentintervention.
Basic Principles of American Free Enterprise System
7 7 CompetitionCompetitionProducers struggle for consumer $$$.
Basic Principles of American Free Enterprise System
Vs.
Vs.
Vs.
Vs.
Role of Consumer in the AmericanFree Enterprise System
We have “god-like” power with our $$$$$.
We decide who lives and who dies by choosing to purchase goods or not
to purchase goods.
DOLLAR VOTES
Role of Producer in the AmericanFree Enterprise System
1) To provide the goods and services that the
consumers want and need.
2) To pay a “fair” wage to employees so they may make purchases.
3) To provide protection for the environment,
workers and consumers.
Why do we need the government in the market place?
The Role of Government in the American Free Enterprise
If men were angels, no government would be necessary.James Madison
Federalist Papers # 51
We the people of the United States, in order to form a more perfect union, 1) establish justice, 2) insure domestic tranquility, 3) provide for the common defense, 4) promote the general welfare, and 5) secure the blessings of liberty to ourselves and our posterity, do ordain and establish this Constitution for the United States of America.
1) Protecting Consumers1) Protecting ConsumersExample: Public Disclosure Laws
Business must provide information about their products to the consumer.
Example: Warning Labels
The Role of Government in the American Free Enterprise
April 28, 1988
Aloha Airlines Flight 243
2) Business operates in a 2) Business operates in a safe mannersafe mannerEnsure that workers are safe.
Protect the environment
Ensure that products are produced in safely.
The Role of Government in the American Free Enterprise
3)3) Provide Public GoodsProvide Public GoodsProvide goods and services that would be impracticalor impossible for private business to supply.
Examples: Libraries, roads, parks Fire and Police, National Defense,
Schools
The Role of Government in the American Free Enterprise
4)4) Protect against MARKET FAILURESProtect against MARKET FAILURESIf a business can not make a profit, it will not
be provided. Example:
Public Housing or Low Cost Housing
The Role of Government in the American Free Enterprise
5)5) Providing a SAFETY NETProviding a SAFETY NETThe Great Depression showed what happens when a societydid not provide “Safety Nets”.
Massive UnemploymentPoverty
The Role of Government in the American Free Enterprise
6)6) Promoting Growth and StabilityPromoting Growth and StabilityTracking Economic Indicators
Gross Domestic Product-Most importantTotal value of all products produced over a period of time.
Unemployment New Home Sales Construction Spending
The Role of Government in the American Free Enterprise
What is a RECESSION?2 Consecutive Quarters (6 months in a row) of negative growth in the
GDP. (Gross Domestic Product)
We usually don’t know we are in a recession or depression until after we are already in one!!
The Government did not officially announce we were in recession until Dec 2008. (It started in Dec 2007)
Dec 08
Dec 2007
Notice
June 2009
+5%
-5%
GD
P G
row
th
GDP- Gross Domestic ProductTotal Value of all products/services of a country during a period of time
Expansion Contraction Recession Recovery Expansion
The Business Cycle
Peak
Trough
Expansion is only after we have crossed the
previous peak.
Expansion
HOPEFULLY
RECESSIONRECESSION NOTICETHERE HAVE BEEN 11 RECESSIONS SINCE THE END OF WORLD WAR II
AVG EVERY 5-6 YEARS
THE GREAT RECESSION
The Business CycleExpansion•Economy is growing. •Jobs are being created.•Low unemployment.•GDP is increasing
Contraction•Economy slows down•Fewer jobs being created.•Increased unemployment.•GDP is still positive, but it is decreasing.
Recession• Economy is in decline•Almost no jobs being created.•Higher unemployment•GDP is negative. (must be negative for two consecutive quarters of the year.)
Recovery•Economy starts to grow•Jobs start to be added•Unemployment starts turning around.•GDP is increasing, but has not reached the previous peak.
PeakEconomy at its high point
TroughEconomy at its lowest point before turning around.
Alphabet Soup
