Unit 9 and 10 powerpoint

Civics and Economics:Unit 9 and 10Government and the Economy

& International Economics

Unit 9: Business Organizations

Advantages Disadvantages

Easy to start Unlimited liability

Little government regulation

Limited businesslife

Owner keeps profits Difficult to raise funds

Lower taxes Risk of loss is not shared

Sole Proprietorship- Business owned and operated by a single person

Partnership- Business owned by 2 or more people who share all decisions

Business Organizations (Part 2)

Advantages Disadvantages

Easy to start Profits must be shared

Little government regulation

Limited business life

Not difficult to raise funds

Unlimited liability

Combination of skills Disagreements between owners may occur

Corporation- Business owned by many who act as a legal entity

Business Organizations (Part 3)

Advantages Disadvantages

Easy to raise funds Difficult to start

Limited liability Less direct control

Unlimited business life Double taxation

Risks are shared Limited activities

Corporations raise money in two ways:◦Bonds: Earn interest by lending money

to corporations◦Stocks: Gives stockholder partial

ownership in the corporationStocks are considered very risky because they don’t guarantee a return on investment

Corporations

Market organizations have five characteristics that differentiate each market into one of the four:

◦Perfect Competition◦Monopolistic Competition◦Oligopoly◦Monopoly

Market Organizations

Perfect Competition Monopolistic Competition

Great many sellers Many sellers

Sells homogeneous (similar) products

Sells differential product (not the same, but can be used as a substitute)

Easy to get in and out of industry

Relatively easy to enter industry

Information is complete in market

Information is reasonably complete

No price control (price taker) Some price control

Ex. Gas Stations Ex. Restaurants

Types of Markets (Part 1)

Oligopoly Monopoly

There are few and interdependent firms

1 dominant firm controls industry

Sells homogeneous and differential products

Sells unique products

It is difficult to enter and exit market

Very difficult to enter and exit market

Incomplete information Compete information

Price control varies in degree and is often considerable

Great deal of price control

Ex. Pure= American steel industryDifferential=American car industry

Ex. Electric power

Types of Markets (Part 2)

Ways of settling business disputes:◦ Strike- Employees refuse to work until demands are

met◦ Lockout- Closing workplace to put pressure on union

and workers◦ Mediation- Third neutral party works to settle disputes between employees (doesn’t have to be accepted)◦ Arbitration- Third party decides on terms of agreement and it must be accepted by both sides

American Labor: Disagreements in Businesses

Wage determination can be based on

any of the following:◦Supply and Demand◦Skilled worker vs. Unskilled worker

(Amount of experience)◦Blue collar (construction worker) vs. White collar (lawyer)

Wage Determination

The Gross Domestic Product (GDP) measures the economy’s health and how it is performing

The government uses the GDP to do the following:

1. Determine comparisons from year to year in the country

2. Determine comparisons with other countries The GDP is not the “perfect” measuring

stick because it doesn’t take into account nonmarket activities of underground economy

Unit 9: Measuring the Nation’s Economic Health

Nominal GDP- Measures the total dollar amount of final goods and services produced within the United States

Real GDP- Determines the factors in inflation

Per Capita GDP

Types of GDP

Consumer Price Index (CPI) shows how the average price of a certain group of goods changes over time

Hyperinflation- inflation out of control (money loses much of its value and leads to total economic collapse)

Inflation

There are 4 phases in a business cycle:1. Expansion- Economic growth measured by

a rise in real GDP (plenty of jobs, falling unemployment rate,

2. Peak- Height of economic expansion3. Contraction- Economic decline marked by

falling real GDP (unemployment rises)4. Trough- Economy bottoms out where real

GDP stops falling

Unit 9: Business Cycles

Contractions can be described in the following ways:1. Recession- Prolonged economic contraction

of at least 6 months2. Depression- Recession that is especially long

and severe3. Stagflation- Decline in real GDP (output) with

a rise in inflation

Contractions

The Federal Reserve, considered “the banker’s bank”, manages and monitors the country’s economy, regulating the money supply, banking system, and serving the banks

What makes up the Reserve is a board of governors who make decisions for the Fed and 12 district banks that are responsible for monitoring and reporting economic and banking conditions

Unit 9: The Federal Reserve

Monetary Policy- The actions the Federal Reserve takes to control the nation’s money supply and interest rates

Fiscal Policy- The use of government spending and taxing to achieve economic objectives

Monetary and Fiscal Policies

Types of unemployment include: Frictional- People take time to find a job (laid

off, change jobs, etc.) Seasonal- Season change causes change in

production (farmers, ski lodges, swimming pools)

Structural- Caused by mismatch between job seekers and job openings

Cyclical- Rises during economic downturns and falls when economy improves

Full Employment- When there is no cyclical unemployment

Unemployment

Countries trade to take advantage of strengths of different countries (Comparative Advantage)

Free Trade- Minimal restrictions on imports/exports to encourage international trade

Export- Good sent to another country

Import- Good sent from another country

Tariff- A tax on imported goods

Trade Surplus- When a country exports more than it imports

Trade Deficit- When a country imports more than it exports

Outsourcing- Goods/services being supplied by someone outside of the company/country

Unit 10: International Trade

The government tries to ensure fair business practices to make sure that one company won’t create a monopoly. To do this, they have created these anti-trust acts:

1. Sherman Anti-Trust Act- Outlaws mergers and monopolies that restrain trade between states (1890)

2. Clayton Anti-Trust Act- Outlaws practices that limit competition or lead to a monopoly (1914)

3. Robinson-Patman Act- Defines and outlaws several forms of price discrimination (1936)

4. Cellar-Kefauver Act- Allows government to stop mergers that hurt competition.

NAFTA- North American Free Trade Agreement- Agreement among Canada, USA, and Mexico

Anti-Trust Acts and NAFTA

Types of taxes include:1. Excise Tax- Tax on the

sale/manufacture of a good (gasoline)

2. Estate Tax- Tax on total value of money and property of a person who has died

3. Gift Tax- Tax on money or property given to another

4. Import Tax (Tariff)-

Tax on goods brought into the country

5. Income Tax- Tax on individuals or corporations

6. Sales Tax- Tax on goods

7. Property Tax- Tax on houses, boats, and cars

8. Corporate Tax- Tax on value of corporation’s profits

Taxes

1. Simplicity- Easy to understand and keep records of the tax

2. Efficiency- Must be able to pay and collect without wasting too much time

3. Certainty- Should be clear when, how much, and how it should be paid

4. Equity- No one should bear too much or too little of the burden

Good Tax Characteristics

Exchange Rate- Ratio of value between 2 different currencies

Protective Tariff- Tax on imported goods to strengthen domestic production

Specialization- Focusing of labor on a portion of a larger task to increase productivity

Competition- When multiple businesses improve quality and/or decrease prices to increase sales

Protectionism- Increasing tariffs on imports in order to encourage the purchasing of domestic products

Quota- A minimum amount set on production

Other Important Vocabulary

Macroeconomics- The study of countries’ economics, entire industries, and global interdependence

Standard of Living- Measure of productivity of a nation based on individuals’ lifestyles

Stock Market- Place where shares of corporations are bought and sold

Interest Rate- The percentage cost of borrowing money

Economic Interdependence- The economics of countries worldwide are impacted by the economic conditions in other countries

Other Important Vocabulary

Good Luck in Civics and Economics

Study hard and always follow Coach East’s directions (or else!)