the american economy today, you will need notebook paper
TRANSCRIPT
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The American Economy
Today, you will need notebook paper
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Goods: tangible products that satisfy our wants and needs.
• 4 FACTORS OF PRODUCTION- resources necessary to produce goods and services.
1. Natural resources
2. Labor
3. Capital
4. Entrepreneurs
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NATURAL RESOURCES
– Gifts of nature that make production possible.• Fertile farmland• Abundant
rainfall• Forests• minerals
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LABORLABOR
• Nation’s labor/WORK force
• A.k.a. human resources
• Physical and mental efforts that people contribute to the production of goods and services
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CAPITAL Goods• Capital goods!• Tools and machinery
and buildings used to make other products
• THEY ARE THE RESULT OF PRODUCTION
• OR MONEY NEEDED TO DEVELOP GOODS
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ENTREPRENEURS
• Individuals who start new business, introduce new products and improve management techniques
• Willing to take risks• Use f.o.p. to produce
new products
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THE GDP: GROSS DOMESTIC PRODUCT
• WE can measure our economic success by our income and ability to provide for ourselves and our families
• The success of the OVERALL economy is measured in a similar way.
• MEASURE OF Economy's SIZE IS THE GDP!
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GDP: Gross Domestic Product
• Total value in DOLLARS, of all the FINAL goods and services produced in a country during a SINGLE year.
• FINAL good- ex: loaf of bread sold to you.
• INTERMEDIATE good- goes into making a loaf of bread:– Wheat
– Sugar
– Honey….
• ARE NOT COUNTED IN GDP!
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• Standard of living-– Quality of life based on
the possession of necessities and luxuries that make life easier.
– IF GDP grows faster than the population, there are more goods and services for EACH of us to enjoy!
GDP is an important way to measure the STANDARD of LIVING
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QUANTITY vs. QUALITYGDP measures: QUANTITY
• Quantity-GDP does not reflect improvements in the quality of products.
• DIFFERNECE b/w a $1500 computer purchased today, than a computer costing
the same amount a few years ago.
• FOCUS ON THE QUALITY OF IMPROVMENT!
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REVIEW: 4 FACTORS OF PRODUCTION:
1. natural resources2. labor
– Physical and mental
3. Capital4. Entrepreneurs GDP based on __________?
QUANTITY
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Section 2: Economic Activity and Productivity
• GET A BOOK… look @
• Circular Flow Model: pg 429
• The flow of resources, goods and services and $$ in a market system is CIRCULAR!
• Called a circular flow diagram.
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Circular Flow: WHY IS IT CIRCULAR?
1. Consumers earn income in FACTOR MARKET: the market where productive resources are bought and sold. •Here we earn salaries in exchange for
labor.•People who own land can loan it out:
RENT!•People who own capital exchange it for
interest2. When those people get their income,
they spend it in the PRODUCT MARKET: the market where producers offer goods and services for sale.
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Government Sector:
• Made up of all 3 levels of government:
1. Federal2. State3. local.– It also can produce goods and
services (ntl.defense, education, housing, transportation)
– Public universities charge tuition, hospitals charge fees, buses charge fares.
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Foreign Sector• Represents all the countries in the world• Arrow at both ends b/c we SELL
products to and BUY products from other countries.
_________________________________Define the following: pgs 430-432.
(7 minutes)Productivity, specialization, division of
labor, human capital and economic interdependence.
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Section 3: Capitalism and Free Enterprise
•Capitalism- where WE own most, if not all means of production
•Free enterprise- businesses can compete for profit with LITTLE gov’t inference
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3 Terms used to describe the AMERICAN economy:
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CONSUMER SOVEREIGNTY• WE ARE IMPORTANT B/C BUSINESS
WANT TO TRY TO PRODUCE THE PRODUCTS THAT WE WANT
• CONSUMER IS KING or ruler of the market.
• ANOTHER FEATURE OF CAPITALISM: – Private property rights- freedom to
own and use or dispose of own property as we choose
– Competition- struggle b/w buyers and sellers to get best products at the LOWEST prices
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SPREAD OF CAPITALISM
• Grew from medieval and early Europe.
1. People should work for economic gain
2. Gov’t should have a limited role in economy
• ADAM SMITH- Scottish economist and philosopher.
•
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• Wealth of Nations (1776)
• Described basic principles of economics for the 1st time.
• From this we get:
– LAISSEZ-FAIRE economics: “to let alone” gov’t should not interfere in marketplace.
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Section 4: THE ECONOMY & YOU
• CONSUMER BILL OF RIGHTS:– Right to a safe product– Right to be informed– Right to choose– Right to be heard– Right to redress (get $ from
manufactures if product causes physical or financial harm)
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QUIZ TOMORROW-• Goods• Services• Factors of
production• 4 factors of
production• GDP• Standard of living• Circular flow model• Consumer
sovereignty
• Private property rights
• Competition • Productivity• Specialization• division of labor• human capital• economic
interdependence.