unit 9 and 10 powerpoint
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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!)
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