2023Ch4SumMcBr - The U.S. Economy: Private and Public...

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The U.S. Economy: Private and Public Sectors Chapter 4
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Outline Economic sectors Households and income distribution Household spending Businesses The role of government in a market economy Federal, state and local finance Progressive, regressive and proportional taxes
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Economic sectors Economists divide market systems into the private sector and the public sector. The private sector includes households (consumers) and businesses. Exports and imports of goods and services are under a separate sector, the international sector. The public sector involves government at all levels: federal, state and local. Of all the goods and services produced in the United States today, roughly 80% are in the private sector and 20% are in the public sector.
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A household consists of one or more persons who occupy a unit of housing. Most households are two- member households, not the stereotypical four. Households may receive income in many forms. The functional distribution of income looks at the way national income is distributed among wages, rent, interest and profit. Most of national income (over 70%) is received in the form of wages (and salaries). Another way to look at the distribution of income is called the personal distribution of income. The personal distribution of income is a comparison of rich to poor to the middle class. Currently, the top 20% of income earners (the richest group) receives about 50% of the total income received by everyone. Households and income distribution
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Households divide their income among consumption, taxes and saving (in that order) with roughly 80% for consumption. Consumers buy durables, non-durables and services. Roughly 60% of consumption is for services, 30% for non-durables, and 10% for durables. Overall spending includes four groups: consumption, business spending, government purchases and spending related to trade. The largest component of these (by far) is consumption, followed by government spending on goods and services, then investment and the least for net exports (being negative with imports greater than exports). Household spending
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Business firms are organized as proprietorships, partnerships or corporations. A sole proprietorship is owned by one person; partnerships, two or more; and a corporation is a legal entity with shareholders. Sole proprietorships are about 72% of all business
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This note was uploaded on 02/22/2011 for the course ECON 2023 taught by Professor Meier during the Spring '11 term at St. Petersburg College.

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2023Ch4SumMcBr - The U.S. Economy: Private and Public...

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