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| QUICK REVIEW 5-1 |
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- The functional distribution of income indicates
how income is divided among wages
rents
interest
and profits; the personal distribution
of income shows how income is apportioned among households.
- Wages and salaries are the major component of the
functional distribution of income. The personal distribution reveals considerable
inequality.
- Eighty percent of household income is consumed;
the rest is saved or paid in taxes.
- More than half of consumer spending is for
services.
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| QUICK REVIEW 5-2 |
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- A plant is a physical establishment which
contributes to the production of goods and services; a firm is a business organization
which owns and operates plants; plants may be arranged in vertical
horizontal
or
conglomerate combinations.
- The three basic legal forms of business are the
sole proprietorship
the partnership
and the corporation; while sole proprietorships make
up nearly three-fourths of all firms
corporations account for about nine-tenths of total
sales.
- The major advantages of corporations which have
led to their popularity are a superior ability to raise financial capital
the limited
liability they convey to owners
and their life beyond that of their owners and officers.
- Very large corporations dominate many U.S.
industries.
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| QUICK REVIEW 5-3 |
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- Government enhances the operation of the market
system by providing an appropriate legal foundation and promoting competition.
- Transfer payments
direct market intervention
and taxation are ways government can lessen income inequality.
- Government can correct for the overallocation of
resources associated with spillover costs through legislationor specific taxes; the
underallocation of resources associated with spillover benefits can be offset by
government subsidies.
- Government (rather than private firms) must
provide desired public goods because such goods are indivisible and the exclusion
principle does not apply to them; government also provides many quasipublic goods because
of their large spillover benefits.
- Government spending
tax revenues
and interest
rates can be manipulated to stabilize the economy.
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| QUICK REVIEW 5-4 |
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- Government purchases account for about 20 percent
of U.S. output; the addition of transfers increases government spending to almost
one-third of domestic output.
- Income security and national defense are the main
areas of Federal spending; personal income
payroll
and corporate income taxes are the
primary sources of revenue.
- States rely on sales and excise taxes for
revenue; their spending is largely for public welfare and education.
- Education is the main expenditure for local
governments
and most of their revenue comes from property taxes.
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