The U.S. economy is connected with the world economy.
There are arrows going out to businesses and households.
The connection of an economy to the world economy is represented by those arrows.
There are interrelated flows of goods and money.
The arrows connect with households and business.
It buys goods and services from both businesses and households.
With some of its tax revenue, it provides services to both businesses and households, and gives some of its tax revenue back to the state.
It redistributes income by doing that.
The government serves a second func tion.
Business and households interact in the goods and factor markets.
Government is not independent.
The United States is a democracy and households vote to determine who governs.
govern ments are limited not only by what voters want but also by their relationships with other countries They must keep up their relations with other countries in the world because they are part of an international community.
A circular-flow diagram of the economy is a good way to organize your thinking.
The three sectors--households, government, and business-- interact in many ways.
Factor market is a member of many international organizations and has signed international treaties that limit its domestic actions.
Let's take a quick look at the individual components.
It becomes a business when a house hold decides to produce something.
About 700,000 businesses are started each year.
Don't think of business as something other than people.
Businesses are made up of a group of people working together.
Although corporations account for 80% of all sales, most are one- or two-person operations.
It is easy to start a home-based business.
Say you're in business and you're good to go.
Licenses, permits, and approvals from various government agencies are required for some busi nesses.
It's always more difficult to start a business than it initially thought.
The market's ability to align is what it is.
Producing physical goods is just one of many economic tasks.
Services are provided for others.
Services don't involve making a physical good.
You buy a service when you get your hair cut.
Distribution is a cost of one of the most important services, which includes payments associated with having the good where you want it.
After a good is produced, it has to be transported to consumers either directly or indirectly.
The good can be useless if it isn't at the right place at the right time.
There are hot dogs at a baseball game.
The price of a hot dog at a game is the same as a hot dog at home, but you are willing to pay an extra $5.60 to have it when and where you want it.
The central component of a service economy is getting goods where you want them.
The service economy is important to modern technology companies.
Information and methods of handling information are provided by them.
They provide central services to our lives, but they don't have a physical product.
The relative importance of services has increased as the U.S. economy has evolved.
In 1947 services made up 20 percent of the U.S. economy, but today they make up 80 percent.
Businesses decide what to do.
Businesses that guess correctly make money.
Businesses that guess wrong tend to lose money.
The people of the United States are free to start businesses.
The invisible hand ensures that States don't ask what's the social value of your term paper assistance business.
The United States relies on the market to channel individuals' desire to make a profit into society.
There is an invisible hand at work.
People in the United States are free to start any business they want if they can get the money to finance it.
They are the easiest to start and have the least bureaucratic hassles.
They also create unlimited liability for each of the partners.
In terms of receipts, they are the largest form of business.
Control of the firm is separated from own ership in corporations.
The distinctions among businesses have blurred as laws have evolved.
There are many types of corporations and partnerships that have different degrees of limited liability.
Maine's Own Organic Milk Company has both selling milk and educating the public about the value of local family farming as explicit goals.
The L3C is a low profit limited liability company that some states have established.
L3Cs can receive grants and endowments reserved for nonprofits.
Some companies retain their for-profit corporate status but also include social welfare in their charters.
Even for partner's 2.
Financial assets are assets that acquire value from an obligation of someone else.
One example of a financial asset is stocks.
Financial assets can be traded in the New York Stock Exchange.
Financial markets can make people rich quickly.
People rich or poor can use stocks and bonds.
The accounting state ments firms provide are an important tool investors use to decide where to invest.
Individuals look at how profitable firms are and how profitable they will be in the future.
In the early 2000s, investors' trust in firms was destroyed by a series of accounting frauds, which led to increased regulatory control of business accounting practices.
In this overview of U.S. economic institutions, we'll look at households.
The other two economic institutions are under their control.
Households' votes in the political arena affect government policy, their decisions about supplying labor and capital determine what businesses will have available to work with, and their spending decisions or expenditures affect business.
We, the people, have given much of the power to representatives because the ultimate power does not reside with the people.
Corporations are only partially responsive to owners of their stocks, and much of that ownership is once-removed from individuals.
You won't get any influence over the activities of the company if you own 1,000 shares.
As a stockholder, you accept what the corporation does.
Corporations make their own decisions about what to produce.
Business spends a lot of money telling us what services we want, Consumer sovereignty reigns, but what products make us "with it," what books we want to read, and the like.
The mists believe that consumer sovereignty reigns and that we are not fooled by businesses.
It is an open question if we, the people, control business or if the business representatives control the people.
Households are passive recipients of income in many spheres of the economy because they are not active producers of output.
The income households get from labor is the largest source of household income.
Businesses and the government rely on households for labor.
The total number of people in the U.S. labor force is more than 160 million.
The workweek for men and women in the U.S. was about 41 and 36 hours, respectively.
The average weekly pay for men and women in the United States was $970 and $780, respectively.
The average hourly wage is about $25 for all workers.
The average is very variable and depends on the occupation and region of the country where one is employed.
Lawyers, physicians, and CEOs of large corporations make a lot of money.
A McDonald's employee makes about $20,000 a year.
Government is the third major U.S. economic institution.
Government plays a couple of roles in the economy.
The government is an actor.
The United States has a federal government system, which means we have various levels of government with their own powers.
They consume 18 percent of the country's total output and employ 22 mil lion individuals.
Various levels of government have a number of programs that redistribute income through taxation and social welfare.
State and local governments spend $3 trillion a year.
They spend their tax revenues on public safety, health and welfare, administration, education and transportation.
Individual income taxes make up 45 percent of the federal government's revenue, while Social Security taxes make up 36 percent.
The two largest paychecks.
The sources and uses of federal government revenue are shown in the pie charts.
When the government runs a deficit, expenditures exceed income and the difference is made up by borrowing, the size of the income and expenditure pies may not be equal.
Expenditures have exceeded income in recent years.
Government's role in economic judicial can be seen in different ways.
President Trump's initial executive order to ban entity is often used as a single example for policy.
States were declared unconstitutional by the sev structures of government.
Trump revised the das after their rulings.
This means that the question of government versus order, which was deemed constitutional by the market, misses an important part of the Supreme Court's policy.
One aspect of government that is important to integrate into one's thinking is the degree to which government is re ernment.
The United States is an example of this.
One will have different government.
The federal government is made up of views about the role of an authoritarian dictatorship and three branches of government.
Government spending would still be central to the study of economics even if it made up a small portion of total expenditure.
In a market economy, government sets the rules of interaction between house holds and businesses and acts as a referee, changing them when it sees fit.
The government decides if economic forces will be allowed to operate.
Businesses can't hire and fire whoever they want.
60 days' notice is required for many kinds of firms.
Many working conditions are subject to government regulation, such as safety rules, wage rules, overtime rules, hours-of-work rules, and the like.
Businesses can't agree on prices with other businesses.
Some businesses require workers to join a union to work at certain jobs.