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  • 1. 4 The U.S. Economy: Public and Private Sectors
  • 2. Chapter Objectives
    • Important Facts About U.S. Households and U.S. Businesses
    • Corporate Form Domination in Sales and Profits
    • Principle and Agent Issues
    • Economic Role of Government in the Economy
    • Categories of Government Spending and the Sources of Government Revenues
  • 3. Households as Income Receivers Functional Distribution of Income Source: Bureau of Economic Analysis Indicates how nation’s earned income is divided among wages, rents, interest, and profit.
  • 4. Households as Income Receivers Functional Distribution of Income-2005 Wages & Salaries Rents Interest Proprietor’s Income Corporate Profits Income By Function Performed National Income Received (Percent) 0 10 20 30 40 50 60 70 71% 1% 5% 9% 14% Source: Bureau of Economic Analysis
  • 5. Households as Income Receivers Personal Distribution of Income Source: Bureau of Economic Analysis Indicates how nation’s income is divided among individual households.
  • 6. Households as Income Receivers Personal Distribution of Income-2004 Lowest 20% Second 20% Middle 20% Fourth 20% Highest 20% Income Group (Households) Personal Income Received (Percent) 0 10 20 30 40 50 60 3.4% 8.7% 14.7% 23.2% 50.1% Source: Bureau of the Census
  • 7. The Business Population
    • Plant
    • Firm
    • Multiplant Firms
      • Vertically Integrated
      • Horizontally Integrated
      • Conglomerates
    • Industry
  • 8. Legal Forms of Business
    • Sole Proprietorship
    • Partnership
    • Corporation
    Source: U. S. Census Bureau
  • 9. Legal Forms of Business
    • Corporate Securities
      • Stock
      • Bond
    • Limited Liability
    • Hiring of Specialists
    • Unlimited Lifetime
    • Principal-Agent Problem (disadvantage)
    Advantages of Corporations 4.1
  • 10. The Public Sector: Government’s Role
    • Providing the Legal Structure
    • Maintaining Competition
      • Monopoly
      • Regulation
      • Regulated Monopolies
      • Antitrust Laws
      • Sherman Act 1890
  • 11. The Public Sector: Government’s Role
    • Redistributing Income
      • Transfer Payments
      • Market Intervention
      • Taxation
  • 12. The Public Sector: Government’s Role
    • Correcting for Negative Externalities
      • Legislation
      • Specific Taxes
    • Correcting for Positive Externalities
      • Subsidize Consumers
      • Subsidize Suppliers
      • Provide Goods Via Government
  • 13. The Public Sector: Government’s Role
    • Public Goods and Services
    • Private Goods
      • Rivalry
      • Excludability
    • Public Goods
      • Nonrivalry
      • Nonexcludability
      • Free-Rider Problem
    • Quasi-Public Goods
    • The Reallocation Process
  • 14. The Public Sector: Government’s Role
    • Promoting Stability
      • Unemployment
      • Inflation
  • 15. Government Finance Total Tax Revenue – Selected Nations Percent of Total Output-2004 Sweden Denmark Norway Finland France Italy United Kingdom Germany Canada Australia United States Japan South Korea 10 20 30 40 50 Source: Organization for Economic Cooperation and Development 50.7 49.6 44.9 44.3 43.7 42.2 36.1 34.6 33.0 31.6 25.4 25.3 24.6 GLOBAL PERSPECTIVE
  • 16. Federal Finance
    • Progressive Tax Rates
      • Brackets of Income
    • Marginal Tax Rate
    • Average Tax Rate
    Federal Tax Revenues-2005
  • 17. Federal Finance Federal Tax Revenues-2005 0 10 20 30 40 50 Personal Income Tax Payroll Taxes Corporate Income Taxes Excise Taxes Source: U. S. Office of Management and Budget 43% 37% 3% 4% All Other 13% Basic Revenue Sources
  • 18. State Finance
    • Primary Revenues
      • Sales & Excise Taxes - 48%
      • Personal Income Taxes - 34%
      • Corporate Income Taxes & License Fees – Most of Balance
    • Primary Expenditures
      • Education – 35%
      • Public Welfare – 28%
      • Health & Hospitals – 7%
      • Highways – 7%
      • Public Safety – 4%
      • Other – 19%
    State Finances
  • 19. Local Finance
    • Primary Revenues
      • Property Taxes – 73%
      • Sales & Excise Taxes – 17%
    • Primary Expenditures
      • Education – 44%
      • Welfare, Health & Hospitals – 12%
      • Public Safety – 11%
      • Housing, Parks, & Sewers – 8%
      • Streets & Highways – 5%
    Local Finances