Download Chapter 3: American Free Enterprise

Chapter 3: American Free Enterprise
3-1 Summary: Fill in the missing words.
There is a tradition of ________________________ in the United States-a tradition that encourages people to
try out their business ideas and compete in the public market. Both Mr. Scappoose, the immigrant who opened
a barber shop, and Bill Gates, the young man who founded Microsoft, are part of this tradition, and both are
____________________ with a desire to succeed and profit. In the free enterprise economy,
__________________, acting on their own, decided to buy products. Their individual choices signal the
producers what to produce and how much to make. The result is a variety of products at reasonable prices.
We expect government to protect consumers by assuring that they have the information they need to make
informed decisions. Government laws, such as those protecting the right to private __________________ and
enforcing ______________________, help Americans benefit from free enterprise. The
____________________ also specifies how government can tax and it prohibits government from interfering in
business contracts. Finally, federal and state agencies regulate industries whose goods and services affect the
well-being of the public.
The basic features of free enterprise are so similar to us that we tend to take them for granted. FILL
IN FEATURES OF AMERICAN FREE ENTERPRISE.
American
Free
Enterprise
Chapter 3: American Free Enterprise
Supply in the missing information about the American market system in the spaces provided.
1. Describe the feature of American Free Enterprise which is the action taken by the consumer
who buys a book from the bookstore?
2. Consumer Basic Roles::
(a)____________________________________________________________________________
(b)____________________________________________________________________________
3. Government Basic Roles:
(a)____________________________________________________________________________
(b)____________________________________________________________________________
(c)____________________________________________________________________________
(d)____________________________________________________________________________
(e)____________________________________________________________________________
Chapter 3: American Free Enterprise
3-2 Summary: Fill in the missing words.
To keep the huge American economy on course, government economists follow economic trends.
___________________ is the study of the behavior and decision making of entire economies. By
contrast, _________________________ is the study of economic behavior of individuals, families, and
businesses. Macroeconomic progress is measured by calculating a nation’s
_________________________. This is the total value of all goods and services produced in a year.
Measuring the change in GDP from one year to the next is a way of measuring growth or decline in an
economy.
Free enterprise systems are subject to sudden swings in ______________________, periods of
macroeconomic growth followed by slowing or decline. To stabilize the economy and prevent wide
swings, the government has three main goals: high employment, steady economic growth, and stable
prices. Government policymakers use different policies and tools in their attempts to achieve these
goals. On way Americans maintain their high standard of living is by constantly improving
__________________. __________________ is the process used to produce a good or service.
Progress in technology helps the economy to be more efficient and productive. For example, Thomas
Edison’s invention of the light bulb in 1879 made possible a longer work day. To advance technological
progress, government policies encourage ____________________. Federal agencies fund research and
development projects at universities and private companies. The government also provides
______________ and copyrights. This encourages inventors by protecting their ideas.
Government economists use a variety of policies in their attempt to achieve their three major goals.
PROPERLY FILL IN THE GOVERNMENT’S MACROECONOMIC GOALS.
THREE MAJOR ECONOMIC GOALS
Goal 1:
Goal 2:
Goal 3:
Definition:
Definition:
Definition:
Chapter 3: American Free Enterprise
Supply in the requested information in the spaces provided.
1. Usual length of the business cycle: ___________________________________________
________________________________________________________________________
________________________________________________________________________
2. Three main outcomes of public policy aimed at economic stability: _________________
________________________________________________________________________
________________________________________________________________________
3. Requirement for raising living standards for new generations: _____________________
________________________________________________________________________
________________________________________________________________________
4. Two indictors of economic stability: __________________________________________
________________________________________________________________________
________________________________________________________________________
5. Government-provided incentives for innovation: ________________________________
________________________________________________________________________
________________________________________________________________________
Chapter 3: American Free Enterprise
3-3 Summary: Fill in the missing words.
People depend on the government to provide goods. A __________________ is a shared good or
service for which it would be inefficient or impractical to make consumers pay individually. Examples of
public goods are roads, dams, and national defense. If the government did not provide these things,
individuals or companies would have to themselves. But for an individual person or company, the cost
of building a highway outweighs the benefits. Another characteristic of public good is that it is difficult
to exclude non-payers. Once a road is built, it is difficult to keep some drivers from using it. Situations
such as road-building, in which the free market does not efficiently provide resources to solve a
problem, are known as ____________________.
Public goods are paid for by the _______________________, which is the part of the economy that
involves government transactions. The _____________________ involves transactions of individuals
and businesses. Outside factors can affect the public and private sector. An ______________________
is an economic side effect of a good or service. The government encourages the creation of
__________________ externalities. Education, for example, benefits students, yet society as a whole
benefits from an educated population. The government also works to limit ____________________
externalities, such as automobile pollution.
Chapter 3: American Free Enterprise
A market failure occurs when farmers need a dam. The dam becomes a public good when the
government decides to build it. FROM YOUR TEXTBOOK, COMPLETE THE CHART TO SHOW A DAM AS
A PUBLIC GOOD.
Example A: Market Failure Occurs
Proposal
Farmers want a local river to be dammed.
Benefit
Cost
Decision
Example B: Public Good is Created
Proposal
The government considers funding the dam.
Cost
Benefit
Decision
Result
Chapter 3: American Free Enterprise
Fill in two supporting facts or details under each main idea by answering each question.
Main Idea: In some situations, the free market does not efficiently distribute resources.
1. What is an example of something that self-interest would not motivate consumers to provide?
______________________________________________________________________________
______________________________________________________________________________
2. Why might this public good be unreasonable to expect from private providers?
______________________________________________________________________________
______________________________________________________________________________
Main Idea: Cost is an important factor in determining whether a good or service is produced as a public
good.
3. How does this factor relate to the individual? _________________________________________
______________________________________________________________________________
4. How does this factor relate to society? ______________________________________________
______________________________________________________________________________
Main Idea: A good or service can generate positive or negative side effects for people who do not pay
for or produce them.
5. What is an example of a positive side effect? _________________________________________
______________________________________________________________________________
6. What is an example of a negative side effect? _________________________________________
______________________________________________________________________________
Chapter 3: American Free Enterprise
3-4 Summary: Fill in the missing words
Free markets tend to spend wealth unevenly. This leaves some people in poverty. The
_______________________ is the minimum level of income, as determined by the government that is
needed to support a household. To help ease poverty, the government collects tax money and
redistributes it to people who are poor or otherwise in need. This kind of aid is known as
___________________.
In the 1990s, welfare programs became subject to much debate. Critics charged that people were
becoming dependent on their welfare payments and were not doing enough to help themselves.
Despite these debates, welfare programs continue to function in the United States. One major program
is ____________________________ (TANF). It uses _______________________, direct payments of
money, to help poor people. Money provided by the federal government goes to the states, which
design their own welfare programs. Another major program is _____________________, which
provides cash transfers to the elderly retired and to people who are disabled. It is funded from taxes on
people’s wages. The government also provides __________________________ -goods and services
provided for free or at very low prices. Examples of in-kind benefits include food stamps and subsidized
housing. Another important social service that government provides is health insurance.
__________________, which provides aid to the elderly, and _________________________, which
assists the poor, are two health insurance programs.
Chapter 3: American Free Enterprise
The costs of both Medicare and Medicaid have increased substantially since they were created.
FROM YOUR TEXTBOOK, GRAPH SPENDING ON THESE TWO GOVERNMENT PROGRAMS.
300
Dollares ( In Billions)
250
200
150
Medicare Spending
Medicaid Spending
100
50
0
1965
1970
1975
1980
1985
Year
1990
1995
2000
2005
1. Infer why the government spends more money on Medicare than Medicaid?
Chapter 3: American Free Enterprise
Supply the missing information in the chart below.
TAX-SUPPORTED SAFETY NETS
Program or Program Area
Form of Aid
Recipients
1. TANF
2. Social Security
Workers
3.
4. Worker’s
Compensation
5.
6. Education
Health Insurance
Chapter 3: American Free Enterprise
Rewrite each statement below to make it agree with the italicized key term
1. The most common in-kind benefits include food giveaways, food stamps, subsidized
housing, and farm aid. ________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
2. The government institutes welfare programs to improve transportation routes. __________
___________________________________________________________________________
__________________________________________________________________________
3. A nation’s standard of living indicates its level of income distribution. _________________
___________________________________________________________________________
___________________________________________________________________________
4. The poverty threshold is the income level below that which is needed to provide the needs
and wants of families or households. ____________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________