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The US Economy :Private and Public Sectors

The US Economy :Private and Public Sectors. Functional Distribution of Income . Apportionment of the nation’s income among the recipients of WRIP Largest source of income : Wages (70%) Proprietor’s income (self-employed business onwers ) : 10%. Personal (Household) Distribution of Income.

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The US Economy :Private and Public Sectors

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  1. The US Economy :Private and Public Sectors

  2. Functional Distribution of Income • Apportionment of the nation’s income among the recipients of WRIP • Largest source of income : Wages (70%) • Proprietor’s income (self-employed business onwers) : 10%

  3. Personal (Household) Distribution of Income • How is nation’s income divided among households? • Divide population into 5 numerically equal parts (quintiles) • Proportions of income going to each 5th are compared • If we had equal distribution of income, each quintile would receive 20% of income • The reality : in 2000, the top 5th received 50% of all income; the lowest 5th about 4%

  4. Households as spenders • Part goes to govt in taxes (about 16%) • “Saving” = part of after-tax income not spent (O%) • “dissaving” = spending more than your after-tax income • Consumption=84% of our income is spent on consumer goods and services • Durable goods : life of 3+years • Nondurable goods : food and clothing • Services: ½ of all spending

  5. Business • Plants>Firms>Industries • Plant=place where production/distribution takes place • Firm=business that owns and operates the plant • Industry: group of related firms, producing similar products • Multiplant firms Horizontally integrated: several plants perform same function Vertically integrated: different plants perform different steps in the process

  6. Conglomerates: firm owns two or more unrelated businesses • EX :RJ Reynolds Tobacco, Del Monte, Nabisco, SeaLand Shipping

  7. Stocks v. bonds • Stocks : a share of ownership in the corporation • Bonds : a form of loan to the company , which is repaid with interest

  8. Hybrids • LLC: Limited liability company ( partnership for taxes, resembles corporation for liability) • S corporation: 75 or fewer shareholders; profit passes directly to owners in order to avoid double taxation ( a disadvantage of corporations)

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