Civics_Ch10_info

=**American Economics Background Information**=

**The Economic Systems:**
There are several economic systems that exist currently or have existed in history. __//NOTE//__: Traditional or hunting and gathering economies were the earliest known and are based on custom. __//NOTE//__: Socialism or command economy is when the government completely controls all business and property first suggested by Karl Marx. Marx wrote //The Communist Manifesto//. There have been nations that tried this system, but it led to large government spending and problems in the nations' economy since it doesn't reward hard work. Socialism is usually part of a communist style of government. In this style of economy the government controls the economy completely. The government also taxes heavily to redistribute wealth. The major part of the American economic system is capitalism, which is why the United States has become the dominant nation in terms of economics.

America enjoys various economic freedoms. __//NOTE//__: In America, citizens are free to compete, own property, buy and sell, compete for jobs, and earn a profit. In the United States, hard work and education pays off in terms of success. America's economic freedoms are directly part of the Bill of Rights, but remember the 9th amendment says any rights not listed are retained by the people. Capitalism is also described as a __//NOTE//__: market economy is one in which economic decisions are made by individuals in what is known as the free market. Individuals make such decisions looking out for their own and their families' best interests with the right to buy and sell first written about by Adam Smith. Smith wrote the //Wealth of Nations//. Businesses are owned and operated by private individuals in a market economy. In a free market, __//NOTE//__: the goal of a business is profit, or money a business has left after it has paid its expenses. Capitalism/market economies are based on the laws of supply and demand. __//NOTE//__ The law of supply says that as price increases, supply also increases. What this means is that when the price of a good goes up, people are less likely to buy that product than if the price is low. __//NOTE//__: The law of demand says that as price increases, demand decreases. Businesses look for the equilibrium price which is when supply meets demand...a.k.a. the highest price a business can charge and still keep demand. For example, think about what Goga's charges for a Pepsi. They could charge 25 cents, but wouldn't get as much of a profit. They could also charge $5 but no one would buy it.

Also in a free market, business owners may operate however they see fit with little direction or interference by government. __//NOTE//__: Businesses free to operate how they see fit is free enterprise. This idea of free enterprise goes along with capitalism or a market economy since there is economic freedom. The United States is not 100% free enterprise. Businesses in America are free to operate as they see fit with some regulations by the government. For example, businesses must pay a minimum wage, have safety codes, and there are age requirements to work. Therefore, the __//NOTE//__: U.S. is a mixed economy, which businesses are largely free to operate as they want, but there are regulations set up and monitored by the government.

Businesses are organized in three different ways in the United States. __//NOTE//__: A business owned by one person is a sole proprietorship, two or more owners is a partnership, and one that sells stock and has shareholders is a corporation. Corporations raise money by selling __//NOTE//__: stock, or shares of ownership in the company. The corporation takes this money give by shareholders and looks to expand and grow the corporation to earn more of a profit. When the corporation makes more money, the shareholders also make more money, paid in __//NOTE//__: dividends, or money paid to shareholders from buying stock that is earning a profit. Also in the U.S., there are non-profit organizations are business organizations that provides goods and services without earning a profit - charities, research, the Red Cross, boy and girl scouts are all examples.

Business decisions are made by the factors of production, which are necessary for a business to operate. There are four factors of production. The __//NOTE//__: factors of production are natural resources, capital, labor, and entrepreneurship (the one who organizes, manages, and assumes the risks of running a business). Natural resources are useful materials found in nature. Capital includes land, buildings, tools, and other goods to manufacture a product. Labor refers to workers. Entrepreneurs are those who start and run a business.

**Goods and Services:**
American production is based on the free enterprise/market/capitalist economic system. __//NOTE//__: Goods are things manufactured and sold while services are what people do for work. In socialism, the government controls all goods and services, but in capitalism individuals are free to make their own choices regarding goods and services. In the Industrial Revolution, the United States built the strongest economy in the world by making major improvements to how goods are produced by developing and improving the factory system. The Industrial Revolution brought __//NOTE//__: mass production, or the rapid production by machines. Most goods made in America are mass produced. There are several types of services. Personal services are performed directly on consumers - doctors, barbers, fitness lessons. Repair services aim to fix goods. Others include retail, entertainment, financial services, and online services. Good are distributed to the market place in a variety of ways - railroads, trucking/highways, airlines, or by boat/rivers. Good are made available for consumers to buy and are marketed. __//NOTE//__: Marketing is the process of making goods and services available to the people and convincing them to buy the product - by advertising.

A __//NOTE//__: consumer is one who buys a product. There are keys to being a wise consumer. One key is to learn when and where to buy products. Some companies make better products than others. Some buyers prefer brand names over generic products. Buying a product is obviously done by cash, but also by check in which the buyer gives the sales clerk and sign note for money to be taken from a bank account. A debit card is an electronic version of a check. A credit card is another way to purchase and is a card that agrees to pay later with interest if the buyer wants to make payments instead of buying all at once.

**Personal Finances:**
Money and credit are all part of finances. __//NOTE//__: Currency is money. It refers to our coins and paper money and must be easy to carry, durable, and made in standard form as well as being legalized tender of the nation to be considered currency. Banks exist in nations to protect money. Banks originated 1000s of years ago when goldsmiths hid gold in safes. Townspeople brought their wealth to be held in safes and eventually goldsmiths charged a fee to keep the money and later began loaning money and charged interest --- banks were born. Most people rely on banks for checking and savings accounts. Types of banks include commercial banks, which are most banks - the banks your parents use. Savings and loans banks were created to help people get home loans. Credit unions are types of banks owned and operated by its members. __//NOTE//__: The Federal Reserve System or the Fed is the central bank that regulates all of the banks.

Saving money is important especially with using a savings account to create financial stability. Many set aside a regulate amount of money from each paycheck into a savings account in which interest can be earned from the bank. Other ways to invest is to buy stocks through a broker who helps you buy shares of stock in the stock exchange. __//NOTE//__: The stock exchange is located on Wall Street in New York City were brokers trade stock. You can also purchase __//NOTE//__: mutual funds, or shares of stock in a large number of companies.

Insurance is also important to help in times of hardship. There are various types of insurance - life, auto, house, health, etc. __//NOTE//__: Insurance is a system of spreading risks over large numbers of people who pay a small amount to avoid the risk of a large loss. For example, people with car insurance pay a small amount of money each year for car insurance. If that person is in a car accident damaging another car, the insurance will pay for it. Government also provides types of insurance. __//NOTE//__: Social Security is insurance money for retired citizens. __//NOTE//__: Medicare is health care for the elderly and Medicaid is health care for those with low income.

**Economic Challenges:**
The business cycle explains the basis of hold a capitalist economy works. Shifting of the economy from good times to bad and then back to good times again is the business cycle. __//NOTE//__: Problems that may occur includes inflation (increase in prices), recession (job loss and business struggles), and depression (worse than a recession). The worst depression in American history was the Great Depression of the 1930s.

There are several causes to economic challenges. Sometimes there is a problem with the money supply. When there is too much money in circulation, there will be inflation - an increase in prices that doesn't go along with an increase in wages. Another problem is when government borrows and spends more money than it brings in because they increases the national debt. Lower productivity also leads to foreign goods being less expensive. The government tries to make the economy strong. There are two types of government policy regarding the economy. __//NOTE//__: Fiscal policy deals with taxing and spending and monetary policy, which deals with change in the money supply. The government can help the economy in several ways. One way involves government spending. Liberals believe that the government should spend more tax money hiring workers to do certain jobs while conservatives believe the government should lower taxes and spending in order to let the private market expand and hire more workers. Buying American made products will help the economy and create more jobs in America. Increasing productivity in the workplace also improves the economy. States also play a role in state economics. __//NOTE//__: The major source of PA revenue is sales tax. Other revenues include income tax, gas and cigarette tax, turnpike tolls, license fees, and lottery. __//NOTE//__: The major area of spending is education. Other areas of spending are roads, welfare, Access (state health care for low income), state police, and other state jobs.

Labor refers to workers and management refers to the bosses. Labor unions often exist in workplaces in which workers look to get the same wages and benefits. Labor unions and management negotiate contracts by what is known as collective bargaining. If management doesn't agree to the demands of the workers, workers have the right to go on strike. For the most party, liberals see unions as a good thing while conservatives see them as holding back American workers from working harder for better wages.

**U.S. Economy and the World:**
As discussed previously, there are several types of economies that exist in the world. __//NOTE//__: Traditional (hunting and gathering), Command (government control/socialism), Market (buyers and sellers control/capitalism), and Mixed economy (U.S. economy - private ownership with some government involvement). Just how much is the government involved in the American economy? Over our course of history, the government has gotten more and more involved in the economy and businesses and has much more control over businesses now than it had in the past. __//NOTE//__: Government aims to protect workers, protect consumers, limit negative effects, encourage competition, and regulate private property. One way workers are protected is from discrimination. Workers can't be treated unequally just because of their race, gender, or other aspects. Consumers are protected by the fact that the Food and Drug Administration inspects food and medicine and makes sure that all is safe for us to eat. Competition is important since it keeps prices low. For example, think of soda...there are many soda makers...they compete for your business...price matters.

In the 21st century, we live in a world economy. A country has absolute advantage when it can produce more of a given product than another country and comparative advantage when it can provide a product more efficiently at lower opportunity cost. __//NOTE//__: Opportunity cost is the value of the next best alternative that is given up when a country specializes in a product. Trade is important to nations especially living in a time of global economics. Countries have a variety of trade barriers. __//NOTE//__: Trade barriers, or limits on exchange of goods, include tariffs (taxes on imports), quotas (limit to imports), and embargos (banning trade with specific countries). Nations often get involved in trade agreements with other nations. A major trade agreement that the U.S. is in is __//NOTE//__: NAFTA, or North American Free Trade Agreement, which the U.S., Canada, and Mexico removed all trade barriers.

**Career Choices:**
It can be challenging to choose a career, but it can also be rewarding. __//NOTE//__: When choosing a career, what matters is personal values (things you feel are important - enjoyment, salary, satisfaction, benefits) as well as qualifications (skills and knowledge that must be learned). In the world of working, there are various types of jobs. __//NOTE//__: White-collar workers are professionals, technicians, managers, administrators, and sales workers. Professionals would be doctors, nurses, lawyers, architects; technicians are jobs with specialized skills; and sales workers include bookkeepers, secretaries, and salesmen. __//NOTE//__: Blue-collar workers work in trades (electrician, plumber, mechanic), operators (in factories, mills, or mines), or are laborers (construction). __//NOTE//__: The agriculture sector includes the farmers. __//NOTE//__: Service workers provide for the public such as police, firefighters, teachers, restaurants, and paramedics. There are also careers in the government such as the post office, national parks, or any of the government bureaus and agencies. The U.S. guarantees equal employment opportunities. __//NOTE//__: Equal employment opportunity means employers can't discriminate when they hire.

It's important to make yourself marketable and hirable. When employers want to hire they want to know several key aspects about you (or whoever they are hiring). They want to know your school history, health record, extracurricular activities, and special interests. Testing your skills is also important. Motor skills are the skills you have to work with your hands. Number skills refer to being strong in math. Perceptual skills allow you to visualize depth and width from a flat drawing. Language skills deal with your grammar and phonics. Special talents are things you are good at that no one else (or few other people) are good at. Interpersonal skills deal with your ability to interact with the public. Aptitude is what you're interested in. When choosing a career, it's important to look at your skills and your enjoyment.

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