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Chapter 4 Overview. Important facts about the U.S. households and U.S. businessesWhy do corporations dominant American business?Principal-agent problem?The economic functions of our governmentHow the various types of government in the U.S. receive income and spend income. 4.1 Households as Incom
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1. The U.S. Economy: Private and Public Sectors Chapter 4
2. Chapter 4 Overview Important facts about the U.S. households and U.S. businesses
Why do corporations dominant American business?
Principal-agent problem?
The economic functions of our government
How the various types of government in the U.S. receive income and spend income
3. 4.1 Households as Income Receivers Approx. 111 million households in the U.S.
Revisit your circular flow diagram to see the significance of the household
Remember households represent the 4 factors of production and also the major category of consumers in our market
4. 4.1 Households as Income Receivers Functional Distribution of Income
See Figure 4.1 for the proportions of income earned by the various factors of production
Which factor gets the biggest share? Why?
Which factor gets the smallest? Why?
Personal Distribution of Income
See Figure 4.2
Why is income not equally divided among the income earners?
7. 4.2 Households as Spenders See Figure 4.3
How do households spend their income?
What portion goes to consumption?
What portion of income goes to taxes?
Why is savings negative?
See Figure 4.4
What are durable, nondurable goods, services?
10. 4.3 The Business Population Revisit your Circular Flow Chart
Businesses come in different definitions, what is a plant, a firm, an industry?
What is a horizontally organized firm?
What is a vertically organized firm?
What is a conglomerate?
11. 4.4 Legal Forms of Business See Figure 4.5
Define sole proprietorship
Advantages and Disadvantages
Define partnership
Advantages and Disadvantages
Define corporation
Advantages and Disadvantages
13. 4.4 Legal Forms of Business Under a corporation what is a stock and what is bond?
What does the concept limited liability refer to and why is it important?
How does the Principal-Agent problem apply seemingly more to corporations than to sole proprietorships and/or partnerships?
What are Business Ethics? Do you have them?
14. 4.5 Public Sector: Governments Role
Revisit your Circular Flow Chart
Referring to the Public Sector includes: local, state and federal government activities (expenditures and finances)
15. 4.5 Public Sector: Governments Role The Economic Functions of Government are:
Providing the Legal Structure
Maintaining Competition
Redistributing Income
Reallocating Resources (externalities +/-)
Promoting Stability
Should governments role be expanded?
16. 4.6 Government Finance
What does government buy? Spend on?
See Figures 4.7 & 4.8
18. 4.7 Federal Finance Federal Expenditures include 4 main areas:
Pensions & income security
National defense
Health
Interest on the public debt
Check out the latest figures on these amounts: www.federalbudget.com and www.whitehouse.gov/omb/budget and www.treasurydirect.gov
19. 4.7 Federal Finance Federal Tax Revenues
What are the primary sources of the federal tax revenues?
What are the 3 major types of taxing?
How is marginal tax rate different from average tax rate?
20. 4.8 State and Local Finances What are the major forms of state revenues?
What are the major expenditures for state government?
What are the major forms of local revenues?
What are the major expenditures for local government?
21. Chapter 4 Review What are the important facts about the U.S. households and U.S. businesses
Why do corporations dominant American business?
What is Principal-agent problem? How important is it to our corporations?
Describe the economic functions of our government
How do the various types of government in the U.S. receive income and spend income?