Chapter 2 - The economy - myth and reality

1、Chapter 2The Economy: Myth and RealityE pluribus unum (Out of many, one)MOTTO ON U.S. CURRENCYMOTTO ON U.S. CURRENCYAmerican Economy: A Thumbnail Sketch U.S. economyBiggest national economyPopulation: 300 millionWorking population: 150 millionVery rich countryHigh efficiency Productivity$45,000 per

2、person$90,000 per worker2American Economy: A Thumbnail Sketch Inputs / factors of productionLaborMachineryBuildingsNatural resourcesUsed to make outputs OutputsGoods and servicesConsumers & others want to acquire3American Economy: A Thumbnail Sketch Free markets Private enterprise “Land of oppor

3、tunity” Most “privatized” economy Most “marketized” economy4American Economy: A Thumbnail Sketch Gross domestic product (GDP)Measure size of economyTotal amount it producesIn a year Real GDPAdjusted GDPFor changes in purchasing powerFor inflation5Share of U.S. gross domestic product (GDP) exported a

4、nd imported, 19592007Figure 16American Economy: A Thumbnail Sketch U.S. economyRelatively closed14% of GDP: exports & imports17% of GDP: imports Relatively open economyExports & imports large share of GDP Relatively closed economyExports & imports small share of GDP7Openness of various n

5、ational economies, 2007Table 18American Economy: A Thumbnail Sketch U.S. economyGrowing2007 GDP = $14 trillion2007 GDP per capita2.8 times than in 19599Real gross domestic product (GDP) since 1959Figure 210American Economy: A Thumbnail Sketch Economic fluctuationsBusiness cycles Recession period of

6、timeTotal output falls Unemployment rateVaries11The growth rate of real gross domestic product (GDP) in the United States since 1959Figure 312The unemployment rate in United States since 1929Figure 413The Inputs: Labor and Capital American workforce composition 150 million54% men46% women4% teenager

7、s (6 million)Expanding role of women14Composition of employment by sex, 1950 and 2007Figure 515Working women as a percentage of the labor force, 1960 versus 2005Figure 616Teenage employment as a percentage of total employment, 19502006Figure 717The Inputs: Labor and Capital American workforce produc

8、tion Mostly servicesGovernmentOnly 16% - goods Shift to servicesInformation ageEducationExperience18Civilian non-farm payroll employment by sector, 2007Figure 819Growing share of service sector jobs, 1967 vs. 2005Figure 920The Inputs: Labor and Capital American workforce earningsWages: 70% of income

9、Average hourly wage: $17Average weekly paycheck: $600 Capital$30 trillionAverage rate of return: 10%21Average hourly compensation rates in manufacturing, 2006Figure 1022Outputs: What Does America Produce? Consumer spending 70% of GDP Households60% of budget on services40% of budget on goods $140 bil

10、lion phone bill Non-consumption uses 30% of GDP23The Central Role of Business Firms 25 million business firms80,000 fail / year Multinational corporations CompetitionKey to industrial efficiency24Government MarketsGoods & services: bought & sold FirmsSell goods & servicesOutputs marketsR

11、eceive receipts Use resourcesInputs marketsPay for resources25Government ConsumersBuy goods and servicesOutputs marketsExpenditures Sell resourcesInputs marketsReceive income26The circular flow of goods and moneyFigure 1127Government Role of governmentMaking & enforcing lawsRule makerRefereeArbi

12、trator Regulating businessAntitrust lawsPromote social objectives28Government Role of governmentProviding certain goods & servicesFiscal year 2008: $2.9 trillionPensions & income security programsNational defenseHealth careEducationTransportationAgricultureHousingForeign aid29The allocation

13、of government expendituresFigure 1230Government Role of governmentLevying taxesPay for these goods and servicesIncome & payroll taxesSales taxesProperty taxesGasoline taxesLiquor taxesTelephone taxes31The tax burden in selected countries, 2006Figure 1332Government Role of governmentRedistributin

14、g incomeReduce income inequalityTaxesTransfer paymentsProgressive taxationAntipoverty programs 33Government Transfer paymentsSums of moneyReceived by certain individualsOutright grants from governmentNot payments for services Progressive taxation Ratio: taxes to incomeRises as income rises34Conclusion: Its a Mixed Economy Mixed economySome public influenceOver free marketsSome public ownershipAnd private property35Group DiscussionTopic: Chinas EconomyParticpants: Stud