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The U.S. Economy: Private and Public Sectors

The U.S. Economy: Private and Public Sectors. Chapter 5. Households as Income Receivers. The Functional Distribution of Income. Households as Income Receivers. The Personal Distribution of Income. Households as Spenders.

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The U.S. Economy: Private and Public Sectors

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  1. The U.S. Economy: Private and Public Sectors Chapter 5

  2. Households as Income Receivers • The Functional Distribution of Income

  3. Households as Income Receivers • The Personal Distribution of Income

  4. Households as Spenders • Personal Taxes – U.S. Households pay an average 13% of income in taxes. • Personal Saving – U.S. Households save an average of 3% of their income.

  5. Households as Spenders • Personal Consumption Expenditures • The remaining 84% of household income is spent on durable and non-durable goods, and services.

  6. The Business Population • A plantis a physical establishment – a factory, farm, mine, store, or warehouse. • A firm is a business organization that owns and operates plants. • An industry is a group of firms that produce the same, or similar, products.

  7. Sole Proprietorships

  8. Partnership

  9. Corporation

  10. The Public Sector: Government’s Role • Providing the Legal Structure • Maintaining Competition • - Monopoly • Redistributing Income • - Transfer Payments • - Market Intervention • - Taxation

  11. The Public Sector: Government’s Role • Reallocating Resources and Market Failure • Spillovers or Externalities • - Spillover Costs • - legislation • - specific taxes • - Spillover Benefits • - subsidize consumers • - subsidize suppliers • - provide goods via government • Public Goods and Services • - Free-rider problem

  12. The Public Sector: Government’s Role • Quasi-Public Goods • The Reallocation Process • Promoting Stability • - Unemployment • - Inflation • Government’s Role: A Qualification

  13. The Circular Flow Revisited

  14. Federal Finance

  15. Federal Finance

  16. State and Local Finance • State Finances • Local Finances • - Property Taxes

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