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CE.12 - Structure and Operation of the US Economy

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John Sheridan

on 7 January 2014

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Transcript of CE.12 - Structure and Operation of the US Economy

CE.12 - Structure and Operation
of the United States Economy

CE.12a - Business Organization
There are three basic ways that businesses organize to earn profits.
Entrepreneurs play an important role in all three types of business organizations.
What is an entrepreneur?
Is a person who takes a risk to produce
goods and services in search of profit
.
May establish a business according to any of the three types of organizational structures
What are the basic types of profit-seeking business structures?
Basic types of business ownership:
Proprietorship: A form of business organization with one owner who takes all the
risks
and all the
profits
.
Partnership: A form of business organization with
two or more
owners who share the risks and the profits.
Corporation: A form of business organization that is authorized by law to act as a legal entity regardless of the
number of owners
. Owners share the
profits
. Owner liability is
limited
to the amount of
their investment
. The shares of ownership in a corporation are called its stock, and people who by stock are called stockholders.
CE.12b - Circular Flow
Resources, goods and services, and money flow continuously among households, businesses, and markets in the
United States economy
.
Economic Flow (circular flow)
Individual and business saving and investment provide financial capital that can be borrowed for
business expansion
and increased consumption.
Individuals (households) own the resources used in production, sell the resources, and use the income to purchase products.
Businesses (producers) buy
resources
; make products that are sold to individuals, other businesses, and the government; and use the profits to buy more reources.
Governments use
tax revenue
from individuals and businesses to provide public goods and services.
CE.12c - Financial Institutions
Private financial institutions act as intermediaries between:
savers and borrowers that include households and business investors.
How do financial institutions make the deposits of savers available to borrowers?
Private financial institutions:
Include banks, savings and loans, and credit unions
Receive deposits and make loans
Encourage saving and investing by paying interest on deposits
CE.12 - Global Economy and Technology
Virginia and the United States pursue international trade in order to increase wealth.
Why do Virginia and the United States trade with other nations?
Terms to know
• global economy: Worldwide markets in which the buying and selling of goods and services by all nations takes place
Reasons that states and nations trade
To obtain goods and services they cannot produce or cannot produce efficiently themselves
To buy goods and services at a lower cost or a lower opportunity cost
To sell goods and services to other countries
• To create jobs
Virginia and the United States specialize in the production of certain goods and services, which promotes efficiency and growth.
What is the impact of technological innovation on world trade?
Impact of technological innovations
Innovations in technology (e.g., the Internet) contribute to the global flow of information, capital, goods, and services.
The use of such technology also lowers the cost of production.
Advantages:
Disadvantages:
Freedom to decide how the business is run
Keep all the
profits
Personal satisfaction
Responsible for all
debts
Difficult to
borrow money
Advantges:
Disadvantages:
Shared
responsibilities and
risks
Serious differences between partners may arise
Advantages:
Disadvantages:
It can raise large amounts of
money
Stockholders are not responsible for corporations debts
If corporation fails, a stockholder loses only the
value of their stock
Difficult/expensive to start
Limited by government
regulations
Full transcript