1. Households
The household, one of the basic units in economics, consists of persons of any relationship who share a unit of housing.

1. Number of households and household income
   
   Teaching Strategy: A family like the Cleavers (of Leave It to Beaver) is not representative of the norm in the U.S. economy. Only 16 percent of all households have a husband, a wife, and two children.
   
   
2. Household spending, known as consumption, accounts for about two-thirds of total spending in the U.S. economy.
   
   

2. Business Firms

1. The forms of business organizations are sole proprietorships, partnerships, or corporations.
   
   Teaching Strategy: Students are often not familiar with the concept of limited liability. Use the Enron case, the tobacco settlement, or the Microsoft case to discuss when a company is protected by limited liability.
   
   
2. Business statistics show the United States has far more proprietorships than partnerships or corporations.
   
   
3. There are big business firms around the world; big business is not just a U.S. phenomenon.
   
   
4. Business spending on plant and equipment is referred to as investment.
   
   

3. The International Sector

1. Types of countries
   
   

• Industrial countries
  
  
• Developing countries
  
  

Teaching Strategy: Ask your students whether they think industrial or developing countries are more likely to have a larger impact on the U.S. economy. The 1998 Asian crisis is a useful example to motivate the discussion of how developments in the rest of the world might affect the U.S. economy and the rest of the world.

1. International sector spending: The United States has run a trade deficit since 1983.
   
   Teaching Strategy: You will surely surprise many of your students by pointing out the large volume of U.S. exports to Japan. Furthermore, you can point out that, according to the National Trade Bank, STAT-USA, Japan was the largest importer of U.S. manufactured baseball equipment in 1997, making up 40 percent of the total U.S. exports in this category. Ask your students if they believe that these data are consistent with all the media stories about strong Japanese trade barriers.
   
   

4. Overview of the U.S. Government

1. Government policy has several roles in the economy. They include regulation, promotion of competition, and the creation of monetary and fiscal policies.
   
   Teaching Strategy: Table 1 provides an excellent summary of the functions of the U.S. government. You can ask the students to rank the institutions in this table by their importance in terms of how each might affect U.S. consumers or businesses. At the end of the discussion, make sure to emphasize the importance of two key institutions: the Fed, which conducts monetary policy; and Congress and the president, who formulate fiscal policy.
   
   
2. Government spending
   
   Teaching Strategy: Figure 10 provides a discussion on the changing role of federal government in making expenditures. Data, in this figure, indicate that federal spending has remained below state and local expenditures. Ask the students the implications of this trend for the size of local and state governments for the future compared to that of federal government.
   
   

5. Linking the Sectors

1. The private sector
   
   Households own all the basic resources in the economy.
   
   Teaching Strategy: Make it clear that a business firm is a legal construct and thus cannot own anything. Only people own things.
   
   Teaching Strategy: Take some time to present the circular flow model as fully as possible. Work through the effects of changes in spending from various sectors. This will pay off when you present the components of aggregate expenditures.
   
   The international sector is an important source of both spending and production. Spending may be for foreign as well as domestic goods; production may be for foreign as well as domestic consumption.
   
   
2. The public sector