HOLT American Civics Chapter 21 The U.S. Economy and the World Section 1: Overview of the U.S.
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HOLT American Civics Chapter 21 The U.S. Economy and the World Section 1: Overview of the U.S. Economy Section 2: Factors Affecting the U.S. Economy Section 3: Government’s Role in the U.S. Economy Section 4: Living in a World Economy Section 5: States and International Trade ‹#› HOLT, RINEHART AND WINSTON HOLT Chapter 21 American Civics Section 1: Overview of the U.S. Economy OBJECTIVES How do goods and services flow through the U.S. economy? How does the marketplace affect the price of a good? How do investments affect the economy? ‹#› HOLT, RINEHART AND WINSTON HOLT Chapter 21 American Civics Section 1: Overview of the U.S. Economy How goods and services flow through the U.S. economy: Consumers, producers, and the government exchange resources. Households supply resources to the government and businesses. Businesses supply resources to the government. ‹#› HOLT, RINEHART AND WINSTON HOLT Chapter 21 American Civics Section 1: Overview of the U.S. Economy How goods and services flow through the U.S. economy: (continued) Businesses make products and sell to households and the government. The government produces goods and services to benefit businesses and households. Employees earn wages, buy goods, and pay taxes. ‹#› HOLT, RINEHART AND WINSTON HOLT Chapter 21 American Civics Section 1: Overview of the U.S. Economy The marketplace affects the price of goods: Supply and demand—the demand and supply of a good is related to its price Competition—competitors may lower prices to attract consumers Effect of competition on output—competition increases selection and supply Surpluses and shortages—prices lowered with surpluses, raised with shortages ‹#› HOLT, RINEHART AND WINSTON HOLT Chapter 21 American Civics Section 1: Overview of the U.S. Economy How investments affect the economy: Entrepreneurship encourages economic growth and new product development. Venture capital is used to develop products, improve facilities, and pay for distribution. Business investments—money raised to hire workers and improve facilities; profits generate money for shareholders and bondholders ‹#› HOLT, RINEHART AND WINSTON HOLT Chapter 21 American Civics Section 1: Overview of the U.S. Economy How investments affect the economy: (continued) Investment and technology—research and development investments lead to new technology products in the marketplace; new technology aids other businesses ‹#› HOLT, RINEHART AND WINSTON HOLT Chapter 21 American Civics Section 2: Factors Affecting the U.S. Economy OBJECTIVES What factors influence the business cycle? What tools do economists use to predict the business cycle? How do the movement and location of resources affect economic growth? ‹#› HOLT, RINEHART AND WINSTON HOLT Chapter 21 American Civics Section 2: Factors Affecting the U.S. Economy Factors influencing the business cycle: Business investment—creates demand and encourages competition; improves efficiency and lowers cost of production; leads to research and development Money and credit—when borrowing declines, business investment declines Public opinion—consumers spend more when economic future looks good, and thus businesses invest more ‹#› HOLT, RINEHART AND WINSTON HOLT Chapter 21 American Civics Section 2: Factors Affecting the U.S. Economy Factors influencing the business cycle: (continued) Changes in the global economy—for example, oil prices have triggered recessions and expansions War—leads to government spending, new jobs, and increased production ‹#› HOLT, RINEHART AND WINSTON HOLT Chapter 21 American Civics Section 2: Factors Affecting the U.S. Economy Tools used to predict the business cycle: Leading indicators—used to predict about future economic growth; example: number of building permits issued Coincident indicators—used to understand the economy at the present time; example: personal incomes ‹#› HOLT, RINEHART AND WINSTON HOLT Chapter 21 American Civics Section 2: Factors Affecting the U.S. Economy Tools used to predict the business cycle: (continued) Lagging indicators—used to predict how long the current phase might last; example: appearance of new businesses during an upturn ‹#› HOLT, RINEHART AND WINSTON HOLT Chapter 21 American Civics Section 2: Factors Affecting the U.S. Economy The movement and location of resources affects economic growth: New companies seek locations with quality workers at the lowest wages. Low cost of foreign workers has caused many businesses to move factories and jobs out of the country. Many foreign workers immigrate seeking higher wages in the United States. More green cards are issued to skilled and educated immigrants. ‹#› HOLT, RINEHART AND WINSTON HOLT Chapter 21 American Civics Section 3: Government’s Role in the U.S Economy OBJECTIVES What are the goals of government regulation? How is fiscal policy used to influence the economy? How does the Federal Reserve use monetary policy to influence the economy? ‹#› HOLT, RINEHART AND WINSTON HOLT Chapter 21 American Civics Section 3: Government’s Role in the U.S Economy Goals of government regulation: Protect workers—Equal Employment Opportunity Commission, Occupational Safety and Health Administration Protect consumers—Food and Drug Administration, Consumer Product Safety Commission Limit negative effects—Environmental Protection Agency Encourage competition—regulations to ensure fair competition ‹#› HOLT, RINEHART AND WINSTON HOLT Chapter 21 American Civics Section 3: Government’s Role in the U.S Economy Fiscal policy is used to influence the economy. Taxes—lowering taxes creates spending money, aids business, and leads to new jobs; raising taxes slows growth and lowers prices; tax incentives encourage business investments Government spending—increased spending raises demand and creates jobs; decreased spending reverses effects ‹#› HOLT, RINEHART AND WINSTON HOLT Chapter 21 American Civics Section 3: Government’s Role in the U.S Economy Fiscal policy is used to influence the economy. (continued) Public transfer payments—government funds enable poor and unemployed to continue spending Timing—economic forecasts used to time fiscal policy changes ‹#› HOLT, RINEHART AND WINSTON HOLT Chapter 21 American Civics Section 3: Government’s Role in the U.S Economy The Fed influences the economy: Monetary policy determines the amount of money available in the economy. Open-market operations—securities are bought or sold to contract or expand money supply Discount rate—interest rate charged to banks is lowered to expand the economy, raised to slow growth; banks borrow more when rate is low ‹#› HOLT, RINEHART AND WINSTON HOLT Chapter 21 American Civics Section 3: Government’s Role in the U.S Economy The Fed influences the economy: (continued) Reserve requirement—lowered to expand the economy, raised to slow growth; banks lend more when reserve is low Timing and monetary policy—changes take time to affect economy ‹#› HOLT, RINEHART AND WINSTON HOLT Chapter 21 American Civics Section 4: Living in a World Economy OBJECTIVES Why do nations trade with one another? How do free trade and protectionism differ? What effects does international trade have on jobs and consumers? ‹#› HOLT, RINEHART AND WINSTON HOLT Chapter 21 American Civics Section 4: Living in a World Economy Nations trade with one another. Specialization—resources determine types of goods nations produce; countries specialize in certain goods and services Trade increases a country’s supply of goods, services, and resources. Trade barriers are used to protect a country’s industries from foreign competition. ‹#› HOLT, RINEHART AND WINSTON HOLT Chapter 21 American Civics Section 4: Living in a World Economy Nations trade with one another. (continued) Reciprocal trade agreements, regional trade organizations, and international trade agreements work to improve trade. ‹#› HOLT, RINEHART AND WINSTON HOLT Chapter 21 American Civics Section 4: Living in a World Economy Free trade versus protectionism: Free trade—Supporters believe exports and imports should flow freely between countries; free trade promotes competition and efficient businesses; trade barriers result in business and job losses; removing trade barriers promotes economic growth. ‹#› HOLT, RINEHART AND WINSTON HOLT Chapter 21 American Civics Section 4: Living in a World Economy Free trade versus protectionism: (continued) Protectionism—Supporters believe that tariffs will protect domestic industries; reducing foreign competition creates more jobs at home; “infant industries” are vulnerable to foreign competition; businesses overspecialize; other nations do not promote free trade. ‹#› HOLT, RINEHART AND WINSTON HOLT Chapter 21 American Civics Section 4: Living in a World Economy Effects of international trade on jobs and consumers: Impact on jobs—new markets can increase demand and create more jobs; however, lower wages in foreign countries results in job losses Impact on consumers—trade allows consumers access to goods scarce in their countries; increases competition and lowers prices; consumers have more choices ‹#› HOLT, RINEHART AND WINSTON