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Free Enterprise The United States economic system is based on the free enterprise system and is characterized by competition and private ownership of resources Standard Correlation SSEF5 The student will describe the roles of government in a market economy. a. Explain why government provides public goods and services, redistributes income, protects property rights, and resolves market failures. Characteristics of Free Enterprise Economic Freedom Voluntary Exchange Private Property Rights Profit motive Competition Role of Consumers Decide WHAT is produced By how they spend their money Spur new developments by changing wants Role of Entrepreneurs Organize productive resources to make profit Accept risk of loss Decide HOW to Produce Role of Government Protector – provide and enforce laws, protect against false advertising, environ. Hazards, employee discrimination Provider – public goods and services education, highways, public welfare, parks, defense Regulator – preserve competition in market – prevent mergers if necessary, regulate communications and interstate commerce Consumer – consume goods and services Personal distribution of income – income received before taxes Transfer payments – can be cash in in-kind (non-cash) benefits such as food stamps, housing subsidies, or gifts between family and friends. Discuss these questions with your vocabulary partner. Name some cash transfer payments you have heard about. Name some in-kind transfer payments you have heard about. Why do you think the federal government distributes monetary and non-monetary payments? Which adjustments made on the class quizzes would parallel cash transfer payments? People’s incomes differ. Why? – discuss these with the same person Why were some student scores higher than others? Does level of education make a difference in people’s incomes? Do people who perform unpleasant or dangerous jobs earn more income? Is all income earned from work? Are some people rich or poor because they are lucky or unlucky? Back to the point of the quiz What was I demonstrating when I said for you to add a point if you were taller than 5’4.? What about age? What about when I gave points to the F’s and took points from the A’s and B’s? Progressive Tax System Transfer payments redistribute income from the rich to the poor. Our income taxes also redistribute income from the rich to the poor. People with higher incomes pay a larger percentage in income taxes than people with lower incomes. Low income taxpayers receive tax credits (they are taxed less) as well as government transfer payments.