Ch 3

Free Enterprise

• Characteristics– Profit motive– Open opportunity– Legal equality – Private Property rights– Free Contract– Voluntary Exchange– Competition

Role of the Consumer and Government

• Role of Consumer– To purchase products– To form interests groups if necessary

– Role Of Government• Carry out Constitutional Responsibilities• Public disclosure laws requiring companies to give out

important information about their product

• Negatives of Government Regulation– Highly regulated industries cause the cost of the

product to rise due to extra measures that the manufacturer must adhere to.• Airlines• Phone Companies Etc

Also, regulations can cause less competition in a certain areas of business

• Macroeconomics– Study of the behavior and decision making of the

entire spectrum of Economics

• Microeconomics• Study of small units( individuals, families, businesses) of

the economic spectrum

GDP

• Gross Domestic Product( GDP)– The total value of all final goods and services

produced in a nations economy.

– Economists follow the country’s GDP and other stats to determine the country’s Business Cycle.

Business Cycle

• A period of macroeconomics expansion followed by a period of contraction or decline. These are major fluctuations- no day to day fluctuations like the stock market. These are changes that span a larger amount of time.

http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm

• Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 3.2 percent in the fourth quarter of 2010, (that is, from the third quarter to the fourth quarter), according to the "advance" estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 2.6 percent.

• The increase in real GDP in the fourth quarter primarily reflected positive contributions from personal consumption expenditures (PCE), exports, and nonresidential fixed investment that were partly offset by a negative contribution from private inventory investment. Imports, which are a subtraction in the calculation of GDP, decreased.

• Final sales of computers added 0.31 percentage point to the fourth-quarter change in real GDP after adding 0.29 percentage point to the third-quarter change. Motor vehicle output subtracted 0.34 percentage point from the fourth-quarter change in real GDP after adding 0.49 percentage point to the third-quarter change.

• Economic Stability is a task to be dealt with in Macroeconomic. Our Government must deal with the issue of jobs. Jobs for citizens give economic stability to the country.