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WRITE FIVE SENTENCES ABOUT HOW YOU
FEEL ABOUT YOUR PERFORMANCE IN THE
CLASS SO FAR.
Chapter 3
American Free Enterprise
EQ: HOW DOES THE PUBLIC SECTOR AND THE
PRIVATE SECTOR INTERACT TO MAINTAIN A
STABLE, EFFICIENT, AND GROWING ECONOMY?
Chapter Objectives
- Describe the tradition of free enterprise in the US
- Explain the basic principles of the free enterprise
system
- Identify the roles of the consumer and the
government in the free enterprise system
- Analyze how the government promotes economic
strength
- For today: only write the slides with the **
EQ: HOW DOES THE PUBLIC SECTOR AND THE PRIVATE SECTOR INTERACT TO MAINTAIN A STABLE, EFFICIENT, AND GROWING
ECONOMY?
Section 1: Benefits of
Enterprise
Open land, natural resources, and immigrants
Free Enterprise- the social and political commitment
to giving people the freedom & flexibility to try out
their business ideas and compete in the marketplace
-The U.S. Constitution safeguards these rights
-private property rights (5th/14th amendments)
-restricts unfair taxation, allows binding contracts
EQ: HOW DOES THE PUBLIC SECTOR AND THE PRIVATE SECTOR INTERACT TO MAINTAIN A STABLE, EFFICIENT, AND GROWING
ECONOMY?
**What is American Free Enterprise?**
Profit Motive—
force to improve
material wellbeing
Competition—
rivalry to attract
customers &
lower costs
Private Property Voluntary
Rights—you own Exchange—you
your possessions may decide what &
when to buy & sell
Open
Opportunity—
everyone can
compete
Free Contract—
you decide what
agreements to
enter into
Legal Equality— Public Disclosure
everyone has the Laws—companies
same legal rights provide full
information
EQ: HOW DOES THE PUBLIC SECTOR AND THE PRIVATE SECTOR INTERACT TO MAINTAIN A STABLE, EFFICIENT, AND GROWING
ECONOMY?
Basic Principles of Free Enterprise
 The American economy rests on a recognition of the
importance of the profit motive.
 Meaning business owners and managers make the choices
themselves, operating in ways they believe will maximize their
profits.
EQ: HOW DOES THE PUBLIC SECTOR AND THE PRIVATE SECTOR INTERACT TO MAINTAIN A STABLE, EFFICIENT, AND GROWING
ECONOMY?
**Roles**
 Role of the Government Gov’t regulations- protect property rights, contracts, and other
business activities
 Consumer protection- example: safe drugs/food
 Public disclosure laws- requires companies to give consumers
info about their products
 Environmental Protection
 Role of the Consumer have freedom to make their own economic choices -Consumers

influence producers through their buying decisions.
Consumers influence the government’s economic policies through
voting and joining interests groups which persuade public officials
to act or vote according to interests of the group members
EQ: HOW DOES THE PUBLIC SECTOR AND THE PRIVATE SECTOR INTERACT TO MAINTAIN A STABLE, EFFICIENT, AND GROWING
ECONOMY?
The Public Interest
Public interest can be described as concerns of
the public as a whole.
Government responds to public interest by enacting public
policy, or laws and standards on topics of public interest.
Consumers can influence
public policy through voting
or by joining an interest
group, which is a private
organization that tries to
persuade public officials.
Consumers are aided by
public disclosure laws,
which require companies to
give consumers full
information about their
products.
EQ: HOW DOES THE PUBLIC SECTOR AND THE PRIVATE SECTOR INTERACT TO MAINTAIN A STABLE, EFFICIENT, AND GROWING
ECONOMY?
**Section 2: Promoting Economic Strength
Because the market is vulnerable to business cycles,
the government creates public policies that aim to
stabilize the economy
3 Main Outcomes:
1. High employment
2. Steady growth
3. Stable prices
EQ: HOW DOES THE PUBLIC SECTOR AND THE PRIVATE SECTOR INTERACT TO MAINTAIN A STABLE, EFFICIENT, AND GROWING
ECONOMY?
Promoting Economic Strength
Policymakers pursue three main outcomes as
they seek to stabilize the economy.
1. Employment
One aim of federal economic policy
is to provide jobs for everyone who
is able to work.
2. Growth
For each generation of Americans to
do better than previous ones, the
economy must grow to provide
additional goods and services.
3. Stability
Stability gives consumers, producers, and investors confidence in the
economy and in our financial institutions, promoting economic freedom and
growth.
EQ: HOW DOES THE PUBLIC SECTOR AND THE PRIVATE SECTOR INTERACT TO MAINTAIN A STABLE, EFFICIENT, AND GROWING
ECONOMY?
High Employment


Provide jobs for everyone who is able to work
Keep unemployment rate between 4-6%
EQ: HOW DOES THE PUBLIC SECTOR AND THE PRIVATE SECTOR INTERACT TO MAINTAIN A STABLE, EFFICIENT, AND GROWING
ECONOMY?
Steady Growth


Enjoy higher standard of living
Economy must grow to provide additional goods and services
EQ: HOW DOES THE PUBLIC SECTOR AND THE PRIVATE SECTOR INTERACT TO MAINTAIN A STABLE, EFFICIENT, AND GROWING
ECONOMY?
Stable Prices



Gives people confidence in the economy
Stable banks and freedom from fraud
Government wants to prevent sudden, drastic shifts in prices
-If prices increase, this puts a strain on consumers, especially people
like Miss Eilers, who is on a fixed income and strict budget. How?
EQ: HOW DOES THE PUBLIC SECTOR AND THE PRIVATE SECTOR INTERACT TO MAINTAIN A STABLE, EFFICIENT, AND GROWING
ECONOMY?
Regulating
 Protecting health, safety & well-being

Can you identify these agencies and their purpose?

FDA


FTC


unfair business practices
FCC


food, drugs, cosmetics
radio, TV, wire, satellite, cable, phone
FAA

airline safety, air-traffic
EQ: HOW DOES THE PUBLIC SECTOR AND THE PRIVATE SECTOR INTERACT TO MAINTAIN A STABLE, EFFICIENT, AND GROWING
ECONOMY?
Encouraging Innovation
The government encourages the development of new
technologies in several ways. Technology is the
process used to produce a good or service.
 Federal agencies fund
many research and
development projects.
Also, new technology
often evolves out of
government research.
 A patent gives the inventor
of a new product the
exclusive right to produce
and sell it for 20 years.
EQ: HOW DOES THE PUBLIC SECTOR AND THE PRIVATE SECTOR INTERACT TO MAINTAIN A STABLE, EFFICIENT, AND GROWING
ECONOMY?
Section Review
1. Policymakers encourage all of the following
EXCEPT




(a) stable productivity.
(b) high employment.
(c) stable prices.
(d) steady growth.
2. The government encourages advances in technology
and improvements in productivity by




(a) maintaining steady price controls.
(b) funding research and development projects at many levels.
(c) hiring more workers to reduce unemployment.
(d) regulating banks and other financial institutions.
EQ: HOW DOES THE PUBLIC SECTOR AND THE PRIVATE SECTOR INTERACT TO MAINTAIN A STABLE, EFFICIENT, AND GROWING
ECONOMY?
Assignment
 Page 55 #1-5