Government and
the Economy
Economics
Chapter 11
In class today:
• CBM #5 (Chapters 11 and 12)
• Score and graph it
• Get out your charts that you filled in last class after the
Unit II test (Chapter 11: Govt and the Economy)
• Check your answers from the power point, fill in
remaining info to complete them
• In class activity – Analyze political cartoons placards A-G,
use 1 Role of Govt from your chart for each Placard
analysis!
Economic powers of the US
Government
Article 1: US Constitution gives government
the following powers:
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To levy and collect taxes
Provide for the general welfare
Borrow money
Regulate interstate and foreign commerce
Establish bankruptcy laws
Coin money and regulate value
Fix the standards of weights and measures
Protect inventors and authors works
Exercising
these powers
is called
regulation
Protecting Property Rights

What is Private Property?
Land
 Personal possessions
 Physical Assets
 Intellectual Property
Protecting private property = key to free enterprise,
because incentives (to own and develop) matter
 Examples: Courts, Police, Patent and Trademark
Office
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Eminent Domain
• An EXCEPTION to property rights = Eminent
domain: Government right to seize property for
public use
• Must fairly compensate owner
• 5th Amendment – guarantee due process and just
compensation
• Kelso v. City of New London
– Supreme Court agreed that City of New London could
seize property for economic development
Maintaining Competition
• Government prohibits practices that:
– Restrict competition in the marketplace
• Price fixing
• Bid rigging
• Market division
– Form monopolies
• Government also monitors mergers (joining of 2 firms
into 1)
• Examples: Justice Department & Regulatory Agencies
Protecting Consumers, Savers,
and Investors
• Caveat Emptor – “Buyer beware”
• Government provides information about
products and ensures goods and services are safe
• Examples:
– Consumer Product Safety Commission
– FDIC
– FDA
Protecting Workers
• Safeguard the interests of workers
• Protect physical well-being
• Examples:
– Department of Labor
– OSHA
Addressing Externalities
• Positive or negative spillover effects from production or
consumption
• Govt can support positive externalities
– Examples
• providing for education
• Immunization programs
• Limit negative externalities
– Examples
• EPA policies to control pollution
• Incentives
• Tolls, taxes, quotas
Providing Public Goods
• Providing goods and services to the community
for free
• Examples
– National defense
– Street lights
– Highways, dams, bridges
Promoting Economic Stability
• After the stock market crash of 1929, the US government
has played an increasing role in regulating the economy
to prevent booms and busts
• Examples:
– Maintaining dollar value
– Stimulating business activity
(incentives, stimulus)
Redistributing Income
• US Census Bureau charts the distribution of income in
the US
• Also calculates the poverty rate = % of households below
poverty threshold
• Examples of income redistribution:
– Welfare payments, food stamps, public housing, school
lunches, Medicaid
Is Regulation Always Good?
• Over regulation – detail make doing business
unmanageable
• Regulation needs to balance costs & benefits
• Examples???
Deregulation
• Removes restrictions on economic activity
– Banking
– Airlines
– Cable TV
– Electricity
– Trucking
• Industry becomes more competitive
– Weaker companies fail or merge
– Strong companies survive
Class Activity
• Using your chart of Role of Government in the
Economy
• In pairs, study and rotate placards A-G
• Fill in handout “Analyzing Political Cartoons
About the Role of Government”
• Each Placard represents ONE of the 8 Roles on
your chart. Use each one only ONCE!