The American Economy The American Economy The US

The American Economy

The American Economy • The US is a Mixed Economy who follows the principles of Capitalism • Capitalism- belief that competition can flourish with minimal government interference because private citizens own and use the factors of production for profit • Developed by Adam Smith in his 1776 book Wealth of Nations

Types of Competition • Monopoly- 1 seller with complete control of prices • Ex. De. Beers diamonds, only mechanic in a small town • Oligopoly- Few sellers with some control of prices • Ex. Airline companies, cell phone companies, cable companies • Monopolistic Competition- Many sellers with no control of prices • Ex. Restaurants and clothing lines

Types of Businesses • Sole Proprietorship- Business owned and operated by one person who gets all the profits but has unlimited liability (legal responsibility if something goes wrong) • Partnership- Business owned and operated by two or more people but has unlimited liability • Corporation- Business organized by law which stockholders own which can grow huge and has limited liability (only the corporation, not owners, are responsible)

• Non-Profit Businesses: Businesses that operate without making a profit • Ex. churches and schools • Labor Unions: group of workers who negotiate with employers • Ex. strike, boycott, want better pay and working conditions, less hours

US Stock Market • http: //www. youtube. com/watch? v=1 Mdh. ZT 6 l. EIA&safe=active • When people buy stocks they become part owners in a corporation • You can make money or lose money, depending on how well the corporation does • Dividends- part of the corporations profits that are given to shareholders – Ex. Get money every few months as the corporation grows • Capital Gains- money a stockholder makes when selling stock – Ex. Bought for $10, selling it for $20, made $10 profit • Capital Losses- money a stockholder loses when selling stock – Ex. Bought for $10, selling it for $5, loss $5

Why Stock Prices Change • The price of a company’s stock is determined by supply and demand for the company’s goods/services • Things like price of goods, changes in demand, rumors of company problems, or a technological breakthrough can change the demand for a company’s stock and therefore the stock price

How are Stocks Measured? • Stock indexes track stock prices over time and give an idea of the wellbeing of the company • Bull Market- stock market and economy are growing • Bear Market- stock market and economy are stagnate or falling • Dow Jones Industrial Average (DJIA)stock index which tracks the prices of 30 stocks (stocks from various types of companies) • Standard and Poor’s 500 (S&P 500)stock index which tracks the prices of 500 large stocks

How Stocks are Bought and Sold • Stock Market/Stock Exchange- a specific location where stocks are bought and sold • You do not have to travel to the stock exchange to buy stock- instead you can call a stock broker or buy and sell stock online • New York Stock Exchange (NYSE)- most popular US stock market located on Wall Street in New York City • NASDAQ Stock Market- largest electronic stock

The Federal Reserve • https: //informationstation. org/video/whatis-the-federal-reserve/ • Federal Reserve System (The Fed)central bank for the US • What The Fed does: Jerome Powell Chairman of the Federal Reserve – Regulates banks (ex. Wells Fargo) – Regulates between American and foreign banks – Sells US bonds – Manages the nation’s currency (makes money, destroys damaged money, etc) • 12 Federal Reserve Districts & each has 1 main Federal Reserve Bank along with branch banks (NC District 5)

US Budget • Budget- plan for managing and spending money • Revenues- money coming in (from taxes) • Expenditures- money going out (spending) • Balanced Budget- expenditures equal revenue • Budget Surplus- revenue exceed expenditures (extra money) • Budget Shortage- expenditures exceed revenues (not enough money)

National Budget • The President proposes the budget to Congress, then they can change it and must pass it • National Government Revenues: • Most comes from income taxes on paychecks • National Government Expenditures: • Social Security- $ monthly for retired citizens over 65, unemployment for those out of work, welfare programs for low income citizens including food stamps, Medicare health insurance for citizens over 65, Medicaid health insurance for low in come citizens • Also spend money on the military, environment, research, etc.

State Budget • The Governor proposes the budget to the General Assembly, then they can change it and must pass it • State Government Revenues: • Intergovernmental revenue- money that one level of government gets from a higher level of government • Also from sales taxes on purchases and income taxes • State Government Expenditures: • Education- public schools and universities • Health and Human Services- disability, welfare, unemployment • Public Safety- law enforcement and fire protection, courts, prisons • State Employees- salaries and retirement

Local Budget • Each NC municipality and county must propose and pass a budget each year • Local Government Revenues: • Most comes from the state and national government with intergovernmental revenue (money that one level of government gets from another level of government) • Also from property taxes on property owned and a portion of sales and income taxes • Local Government Expenditures: • Education- local public schools • Health and Human Services- disability, welfare, unemployment • Public Safety- police, sheriff and fire protection • Services- roads, libraries, parks, garbage, water

REALITY (PAY)CHECK Interpreting Your Pay Stub

REALITY (PAY)CHECK Your paycheck comes with a pay stub. The pay stub gives details about how much you earn and the taxes you pay. Check out the parts of Wanda Worker’s pay stub.

REALITY (PAY)CHECK How much does Wanda earn per hour? $12. 75

REALITY (PAY)CHECK What are Wanda’s total earnings for the current pay period? $1, 020. 00

REALITY (PAY)CHECK Which tax had the least taken out? The most? Least: Medicare tax Most: Federal income tax

REALITY (PAY)CHECK How much did Wanda pay in taxes this pay period? $188. 64

REALITY (PAY)CHECK How much has Wanda paid in total taxes this year? $1, 116. 00

REALITY (PAY)CHECK How much federal tax has Wanda paid so far this year? $1, 112. 40

REALITY (PAY)CHECK What was Wanda’s gross pay during the current pay period? $1, 020. 00

REALITY (PAY)CHECK Was Wanda’s entire gross pay taxable? Yes No

REALITY (PAY)CHECK Wanda receives a check for which amount? Gross pay Net pay Taxable amount

REALITY (PAY)CHECK What are the two pre-tax deductions that are taken out of Wanda’s check? Health insurance 401 k Retirement

REALITY (PAY)CHECK Wanda paid $93 toward health insurance and retirement. Did she pay taxes on that $93? Yes No

REALITY (PAY)CHECK If Wanda’s state did not have an income tax, how much extra money would she have kept so far this year? $300. 36

HOW MUCH WILL A Look at Sales Tax IT COST?

HOW MUCH WILL IT COST? If. State To people City County find sales the insales tax this total taxapplies county only tax sales If. Here There you isare an inimaginary 2 B-Town, cities in Now find the 3 biggest want applies tax everywhere rate everywhere buy inside you ahow will car, in a=city’s the pay, they in 5% Let’s +to 2% + 3% 10% to What islearn A-Town’s tax county what this will in an beimaginary the total stores incounty. the state. boundaries. add county. have What therate? 2 tax choices. What is. What rates thetax. isstate isof the Bcalculate sales Name state. taxthem. rate? everywhere Town’s county What taxare rate? taxthey? you rate? are.

HOW MUCH WILL IT COST? Example: How much will you pay for a $50 shirt at Bigmart in A-Town? 1) ADD to find the tax rate: State tax County tax City tax + Total Tax 5 % 2 % 9 %

HOW MUCH WILL IT COST? Example: How much will you pay for a $50 shirt at Bigmart in A-Town? 2) MULTIPLY the tax by the price: $ 50 x 9 450 price tax rate

HOW MUCH WILL IT COST? Example: How much will you pay for a $50 shirt at Bigmart in A-Town? 3) MOVE the decimal point 2 places to the left. This is the amount of tax you will pay: $ 50 x 9 450 The tax on this shirt will be $4. 50.

HOW MUCH WILL IT COST? Example: How much will you pay for a $50 shirt at Bigmart in A-Town? 4) ADD the tax and the price to see the final cost: $ 50. 00 + 4. 50 54. 50 The shirt will cost $54. 50 at Bigmart in A-Town.

HOW MUCH WILL IT COST? You try it: 1) A pair of headphones costs $10 at both Bigmart in A-Town and Hugemart in B-Town. What would you actually pay for the headphones at each store? In A-Town: Tax rate = 9% $10 x 9 = 90 Tax = $0. 90 The headphones will cost $10. 90 in ATown and $11. 00 in B-Town. In B-Town: Tax rate = 10% $10 x 10 = 100 Tax = $1. 00

HOW MUCH WILL IT COST? You try it: 2) Lisa is going to buy a new car! It costs $15, 000 at both A-Town Dealership and at Bob’s County Dealership. What would she actually pay for the car at each place? In A-Town: At Bob’s: Tax rate = 9% $15, 000 x 9 = 135000 Tax = $1, 350. 00 Tax rate = 7% $15, 000 x 7 = 105000 Tax = $1, 050. 00 The new car will cost $16, 350 in ATown and $16, 050 at Bob’s.

HOW MUCH WILL IT COST? You try it: 3) A stereo costs $257 at the County Store and $250 at Hugemart in BTown. With taxes, what would you actually pay at each store? The stereo will cost $275 in B -Town Theand County $274. 99 Store. at the County Store. In B-Town: At the County Store: Tax rate = 10% $250 x 10 = 2500 Tax = $25. 00 250 + 25 = 275 Tax rate = 7% $257 x 7 = 1799 Tax = $17. 99 257 + 17. 99 = 274. 99 If it costs you $10 in gas to drive to Hugemart, at which store will the stereo end up costing you the least?

HOW MUCH WILL IT COST? You try it: 4) The state is tired of people putting gum under tables and chairs. It just put a $1 excise tax on each pack of gum! Gum used to cost $0. 75 at both Bigmart and Hugemart. Big art gem 5 Hu. 7 $1. 75 $0 The price goes up $1 per pack everywhere, so the new price will be $1. 75. $1. mart $0. 75 75 What will the new price tags say?

Taxes Poem • Tax his land, tax his wage, Tax his bed in which he lays. Tax his tractor, tax his mule, Teach him taxes is the rule. • Tax his cow, tax his goat, Tax his pants, tax his coat. Tax his ties, tax his shirts, Tax his work, tax his dirt. • Tax his chew, tax his smoke, Teach him taxes are no joke. Tax his car, tax his grass, Tax the roads he must pass. • Tax his food, tax his drink, Tax him if he tries to think. Tax his sodas, tax his beers, If he cries, tax his tears. • Tax his bills, tax his gas, Tax his notes, tax his cash. Tax him good and let him know That after taxes, he has no dough. • If he hollers, tax him more, Tax him until he's good and sore. Tax his coffin, tax his grave, Tax the sod in which he lays. • Put these words upon his tomb, "Taxes drove me to my doom!" And when he's gone, we won't relax, We'll still be after the inheritance tax.