U.s. Economy

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The economy of the United States is the largest national economy in the world. Its gross domestic product (GDP) was estimated as $13.8 trillion in 2007. It is a mixed economy in that private firms make the majority of the microeconomic decisions while being regulated by the government. economy maintains a high level of output per person (GDP per capita, $46,000 in 2007, ranked at around number ten in the world).

economy has maintained a stable overall GDP growth rate, a low unemployment rate, and high levels of research and capital investment funded by both national and, because of decreasing saving rates, increasingly by foreign investors. include national debt, external debt, entitlement liabilities for retiring baby boomers who have already begun withdrawing from their Social Security accounts, corporate debt, mortgage debt, a low savings rate, falling house prices, a falling currency, and a large current account deficit.

external debt was over $13 trillion, the most external debt of all countries in the world. The 2007 estimate of the United States public debt was 65% of GDP. As of September 2008, the total U.S. The American colonies progressed from marginally successful colonial economies to a small, independent farming economy, which in 1776 became the United States of America.

In 230 years the United States grew to a huge, integrated, industrialized economy that makes up over a quarter of the world economy. The main causes were a large unified market, a supportive political-legal system, vast areas of highly productive farmlands, vast natural resources (especially timber, coal and oil), and an entrepreneurial spirit and commitment to investing in material and human capital.

The economy has maintained high wages, attracting immigrants by the millions from all over the world.
After The Great Depression
For many years following the Great Depression of the 1930s, recessions—periods of slow economic growth and high unemployment—were viewed as the greatest of economic threats. When the danger of recession appeared most serious, government sought to strengthen the economy by spending heavily itself or cutting taxes so that consumers would spend more, and by fostering rapid growth in the money supply, which also encouraged more spending.

As a result, government leaders came to concentrate more on controlling inflation than on combating recession by limiting spending, resisting tax cuts, and reining in growth in the money supply.
Ideas about the best tools for stabilizing the economy changed substantially between the 1960s and the 1990s. Since spending and taxes are controlled by the president and the U.S.Congress, these elected officials played a leading role in directing the economy. A period of high inflation, high unemployment, and huge government deficits weakened confidence in fiscal policy as a tool for regulating the overall pace of economic activity.

Instead, monetary policy assumed growing prominence.
Since the stagflation of the 1970s, the U.S. economy has been characterized by somewhat slower growth.
The worst recession in recent decades, in terms of lost output, occurred in the 1973-75 period of oil shocks, when GDP fell by 3.1 percent, followed by the 1981-82 recession, when GDP dropped by 2.9 percent.

Since the 1970's the US has sustained trade deficits with other nations.
Output fell by 1.3 percent in the 1990-91 downturn, and a tiny 0.3 percent in the 2001 recession. In recent years, the primary economic concerns have centered on: high national debt ($9 trillion), high corporate debt ($9 trillion), high mortgage debt (over $10 trillion as of 2005 year-end), high unfunded Medicare liability ($30 trillion), high unfunded Social Security liability ($12 trillion), high external debt (amount owed to foreign lenders), high trade deficits, and a serious deterioration in the United States net international investment position (NIIP) (-24% of GDP). In 2006, the U.S economy had its lowest saving rate since 1933. These issues have raised concerns among economists and national politicians.
The U.S.

economy is a reliance on private decision-making ("economic freedom") in economic decision-making. This is enhanced by relatively low levels of regulation, taxation, and government involvement, as well as a court system that generally protects property rights and enforces contracts.
The United States is rich in mineral resources and fertile farm soil, and it is fortunate to have a moderate climate. It also has extensive coastlines on both the Atlantic and Pacific Oceans, as well as on the Gulf of Mexico.

Rivers flow from far within the continent, and the Great Lakes—five large, inland lakes along the U.S. Throughout its history, the United States has experienced steady growth in the labor force, a phenomenon both cause and effect of almost constant economic expansion.

Until shortly after World War I, most workers were immigrants from Europe, their immediate descendants, or African Americans who were mostly slaves taken from Africa, or slave descendants. Similarly, economic opportunities in industrial, northern cities attracted black Americans from southern farms in the first half of the 20th century.
In the United States, the corporation has emerged as an association of owners, known as stockholders, who form a business enterprise governed by a complex set of rules and customs.Brought on by the process of mass production, corporations, such as General Electric, have been instrumental in shaping the United States. Through the stock market, American banks and investors have grown their economy by investing and withdrawing capital from profitable corporations.

The American government has also been instrumental in investing in the economy, in areas such as providing cheap electricity (such as from the Hoover Dam), and military contracts in times of war.
While consumers and producers make most decisions that mold the economy, government has a powerful effect on the U.S. economy started in the early 1900s with the rise of the Progressive Movement; prior to this the government promoted economic growth through protective tariffs and subsidies to industry, built infrastructure, and established banking policies, including the gold standard, to encourage savings and investment in productive enterprises.
Government intervention
Regulation and control
The U.S.

Traditionally, the government has sought to prevent monopolies such as electric utilities from raising prices beyond the level that would ensure them reasonable profits. A number of other industries—trucking and, later, airlines—successfully sought regulation themselves to limit what they considered as harmful price cutting.
Another form of economic regulation, antitrust law, seeks to strengthen market forces so that direct regulation is unnecessary.

In the U.S., banking is regulated at both the federal and state level. A relatively independent central bank, known as the Federal Reserve, was formed in 1913 to provide a stable currency and monetary policy.

dollar has gradually depreciated in value and its reserve currency status is no longer as high as previously.
The dollar used gold standard and/or silver standard heyfrom 1785 until 1975, when it became a fiat currency.
Money supply


Components of US money supply (currency, M1, M2, and M3) since 1959

The most common measures are named M0 (narrowest), M1, M2, and M3. In the United States they are defined by the Federal Reserve as follows:
M0: The total of all physical currency, plus accounts at the central bank that can be exchanged for physical currency.
M1: M0 - those portions of M0 held as reserves or vault cash + the amount in demand accounts ("checking" or "current" accounts).
M2: M1 + most savings accounts, money market accounts, and small denomination time deposits (certificates of deposit of under $100,000).
M3: M2 + all other CDs, deposits of eurodollars and repurchase agreements.
The Federal Reserve ceased publishing M3 statistics in March 2006, explaining that it costs a lot to collect the data but does not provide significantly useful information..

For example, the Occupational Safety and Health Administration provides and enforces standards for workplace safety, and in the case of the United States Environmental Protection Agency provides standards and regulations to maintain air, water, and land resources. Beginning in the 1970s, policy makers grew increasingly concerned that economic regulation protected inefficient companies at the expense of consumers in industries such as airlines and trucking.At the same time, technological changes spawned new competitors in some industries, such as telecommunications, that once were considered natural monopolies. Both developments led to a succession of laws easing regulation.
While leaders of America's two most influential political parties generally favored economic deregulation during the 1970s, 1980s, and 1990s, there was less agreement concerning regulations designed to achieve social goals.

Social regulation had assumed growing importance in the years following the Depression and World War II, and again in the 1960s and 1970s. During the 1980s, the government relaxed labor, consumer and environmental rules based on the idea that such regulation interfered with free enterprise, increased the costs of doing business, and thus contributed to inflation.

For instance, in the 1990s, individuals, and eventually the government itself, sued tobacco companies over the health risks of cigarette smoking. The 1998 Tobacco Master Settlement Agreement provided states with long-term payments to cover medical costs to treat smoking-related illnesses.
Direct services
Each level of government provides many direct services.

State, county, or city governments play the leading role in financing and operating public schools. Local governments are primarily responsible for police and fire protection.
Overall, federal, state, and local spending accounted for almost 28% of gross domestic product in 1998.
Direct assistance
Government also provides many kinds of help to businesses and individuals.

It offers low-interest loans and technical assistance to small businesses, and it provides loans to help students attend college. Government-sponsored enterprises buy home mortgages from lenders and turn them into securities that can be bought and sold by investors, thereby encouraging home lending.

In many states, government maintains institutions for the mentally ill or people with severe disabilities. The federal government provides food stamps to help poor families obtain food, and the federal and state governments jointly provide welfare grants to support low-income parents with children.
Many of these programs, including Social Security, trace their roots to the New Deal programs of Franklin D.When the national debt is put into this perspective it appears considerably less today than in past years, particularly during World War II. Rather, the external debt is an accounting entry that largely represents US domestic assets purchased with trade dollars and owned overseas, largely by US trading partners. However, this is not the whole picture, as foreign holdings of government debt currently amount to about 27% of the total, or some 2 trillion dollars.
For countries like the United States, a large net external debt is created when the value of foreign assets (debt and equity) held by domestic residents is less than the value of domestic assets held by foreigners.

When this occurs in greater amounts than Americans buying property overseas, nations like the United States are said to be debtor nations, but this is not conventional debt like a loan obtained from a bank. However, foreigners also purchase U.S. As the trade imbalance puts extra dollars in hands outside of the US, these dollars may be used to invest in new assets (foreign direct investment, such as new plants) or be used to buy existing US assets such as stocks, real estate and bonds.

economic profile have precedents in the situations of other countries (notably government debt as a percentage of GDP), the sheer size of the US, and the integral role of the US economy in the overall global economic environment, create considerable uncertainty about the future.
This enormous inflow of capital from China is one of the root causes of the financial crisis engulfing the US as of September 2008: China has been buying huge quantities of dollar assets in order to keep its currency undervalued and its export economy humming, which has caused US interest rates and saving rates to stay artificially low for too long. government should be making these trade agreements in the first place.
Imports and exports

The United States is the most significant nation in the world when it comes to international trade.

For decades, it has led the world in imports while simultaneously remaining as one of the top three exporters of the world.
As the major epicenter of world trade, the United States enjoys leverage that many other nations do not. USA is the top export market for almost 60 trading nations worldwide.
Since it is the world's leading importer, there are many U.S.

economy and fairly sound monetary policy has led to faith in the U.S. Using radically different definitions, two major groups of advocates have claimed variously that (a) the United States has eliminated poverty over the last century; or (b) it has such a severe poverty crisis that it ought to devote significantly more resources to the problem. The debate includes how poverty should be defined.
Measures of poverty can be either absolute or relative.

The floors above the top black line represent those households with incomes of or exceeding $100,000. economy of global oil prices that have quadrupled since 2003, an increase blamed partly on the Iraq war.
Economic predictions and forecasting
Predictions about the direction of the United States economy in the short term and long term are crucial factors in determining federal government policies, business decisions, and Federal Reserve decisions.