Chapter 4 Notes

Chapter 4 Notes - Industry – a group of firms that...

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Chapter 4 Notes Functional distribution of income – how the nation’s earned income is apportioned among wages. Rents, and profits, that is, according to the function performed by the income receiver. Wages are paid to labor; rents and interests are paid to owners of property resources; and profits are paid to the owners of corporations and unincorporated businesses. Personal distribution of income – how the nation’s money is divided among individual households, based on wealth brackets. Obviously, the higher the income bracket, the greater amount of money allotted to it. BREAKDOWN OF SPENDING BY HOUSEHOLDS -personal taxes – 12% of their income -personal savings - 3% of income -personal consumption expenditures – 29% services – 59% Plant – physical establishment where goods are produced Firm – business that owns and operates plants
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Unformatted text preview: Industry – a group of firms that produces similar products 3 FORMS OF BUSINESSES Sole proprietorship – business owned by 1 person Partnership – 2 or more people that own and operate a business together Corporation – legal creation that acquires resources, own assets, produces and sells products, etc. Corporation is distinct from the investors that own it. • Can issue stocks o 2 types: Common stock – owning part of company and being distributed share of profits o Corporate stock – simply lends money to company to be paid back with interest • Corporation provides limited liability – if you sue the company the individuals who own it are not personally responsible Principle – agent problem – competing interests between stockholders and the people who work in the company competing interests...
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