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Chapter 3 America’s Free Enterprise System Constitutional Protection • Property Rights 5th Amendment “be deprived of life, liberty, or property without due process of law: nor shall private property be taken for public use without just • Taxation 16th Amendment in 1913 first gave Congress the right to set a tax on income. Basic Principles • Profit Motive • Open opportunity= everyone can compete • Economic Rights= legal equity, private property rights, free contract, voluntary exchange, competition The Role of the Government • Disclosure Laws= warning labels, nutrition facts • Protecting Health, Safety, Well Being, and Environment • Regulations (may hinder business but look out for consumers and workers Major Regulatory Agencies • Food and Drug Administration • Federal Trade Commission • Federal Communications Commission • Federal Aviations Administration • Equal Employment Opportunity Commission • Environmental Protection Agency • Occupational Safety and Health Administration • Consumer Product Safety Commission • Nuclear Regulatory Commission (These are ran by the Executive Branch of the Federal Government) Section 2 Promoting Growth and Stability • Macroeconomics is the study of the entire economy • Microeconomics is the study of economic behavior of small units, such as family, individual, business • Macro=Big • Micro=Small Business Cycles • The economy is always in periods of expansion followed by periods of contraction • Gross Domestic Product GDP is used to measure growth Government tries to prevent huge swings in the business cycle Employment= tries to keep unemployment between 4 and 6% Growth= Continue to increase our standard of living with new goods and services hard work technology Stability= prevent inflation and Government Success • Federal agencies fund Research and Development (R&D) • Land Grant Colleges= Federal Government gave land for the purpose of schools • NASA= satellites, tang, Velcro • Patents What is a Public Goods • It is a Public Good if it would be inefficient or impractical to • 1) to make consumers pay individually pay for a percentage of a shuttle launch or cleaning of Mount Rushmore • 2) to exclude non payers People that don’t pay for roads can’t use them • Public Sector provides public goods (government) • Private Sector are all business and individual transaction outside of the government Free Rider Problem • Someone who would choose not to pay, but would benefit from the service • Examples…..National Defense, Firefighters Externality is an economic side effect of a good or service that effects someone that did not make the decision • Positive Mrs. Garland purchases a run down home. She fixes it up. The neighbors benefit from increased property value • Negative Mr. Fowler takes up the accordion. He hold Polka Party’s every Friday. You hate Polka Music Section 4 Providing a Saftey Net Welfare Term used for any governent program designed to assist the poor. A Century of Government Programs • 1916-Workers Comp • 1933- Federal Emergency Relief Administration • 1935-Social Security • 1950- extend social securty • 1965-create Medicare • 1974-Food Stamp Program • 1996 Temporary Assistance for Needy Programs (Welfare Reform)