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Starter What is the purpose of the FED? The Role of Government Goods Private Goods- (goods for personal use) examples: soap and clothes Public Goods-(goods for citizen’s use) examples: public parks and highways Government and Economy Externality: Can have a + side effect or a – side effect Monopoly: has no competition. Public services (gas, electricity, water) are often natural monopolies Antitrust laws to control monopoly power & promote competition. Mergers: 2 or more companies combine into 1 company. Vertical Merger is companies that make related products merge into 1 company. Horizontal Merger is companies that make the same product merge into 1 company. FTC or the Justice department will prevent some mergers if they feel the merger will result in less competition & higher prices. Federal Regulatory Agencies police businesses to make sure consumers are protected & businesses are following the laws. (Example agencies: FCC, FDA, and FTC) Unemployment Rate: % of people not working, but are looking for jobs GDP: Cost of all goods & services produced in a year. Measuring the Economy Inflation Rate: rise in the general level of prices. It hurts the economy because it reduces purchasing power. Consumer Price Index (CPI) is used to keep track of inflation. Real GDP: production of all goods & services after price increases have been removed