The United State's Economy Situation

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Despite the threats posed by the rapidly expanding economic globe and domestic economies, the United States has the world's biggest and most progressive economy. The American economy accounts for about 20% of the entire global economy and is still larger than China's. The American economy has the world's sixth-highest per capita income. The economy is distinguished by a technologically advanced retail sector and a fully structured trading structure that includes the majority of businesses. About 80% of the Gross Domestic Product is accounted for by technologically advanced utilities. (Jorgenson and colleagues, 32) The United States economy is dominated by service companies that major in technology, healthcare, financial services, and retail. The American corporations also play major roles in the global economic perspective by contributing more companies on the Fortune 500. The US manufacturing base also contributes immensely to the economic progress with close to 15% output in the GDP. ( Inklaar, 271). The United States manufacturing companies come second in the global ranking and it is a leader in highly valued industries like aerospace, automobiles, chemicals, telecommunication and machinery. The agricultural sector is the least contributor to the economy with only 2% of the Gross Domestic Production. (Inklaar, 271).

Economic Growth

The growth in the American GDP has always been on the rise due to the increase in the number of production processes and trade links. For instance, in 2016, the economy grew by 2.1% which was an improvement from the previous estimates; the individual consumptions also recorded an increase from the previous years. The increase in the individual consumptions is coupled to the increase in the Gross Domestic Production. The United States maintains its economic growth through a combination of the characteristics. The country enjoys the access to the plenty available natural resources and the advanced infrastructure. The presence of the skillful and innovative workforce also contributes immensely to the progressive economy. The progressive growth in the GDP leads to the stronger economy and high standards of living in the United States.

The human and physical capital is fully controlled in the business-oriented and free-market environment and both the citizens and the government contribute solely towards the growth of this sophisticated economic system. Both the federal and the states governments offer political stability, regulatory structure and the functional legal system that enhance or facilities the general growth in the economy. The diversity in population creates a favorable environment and work ethics for the realization of the set economic objectives as well as the sense of innovative and entrepreneurial ideas. The growth in the US economy is facilitated by the ever increasing innovative ideas, development in research and the capital investment. For example, in the fourth quarter of 2016, the growth in the GDP was mainly facilitated by the residential fixed investments, spending from the local and state governments, private inventory investment, increase in the imports. From 1947 until 2016, the average growth rate in the US economy was 3.22 per cent; this is attributed to the increased innovation, production and government control measures.

United States_x0092_ Fiscal Policy

The US federal government normally adopts large spending that what it generates; this usually leads to the fiscal deficits. The large proportion of the US government spending is authorized by the federal laws where a large amount of income goes to the entitlement programs like Medicaid and social security. Compulsory government spending contributes close to sixty percent of the total spending. (Gilpin, n.p). The remaining proportion of the spending is sent to the discretionary spending that is included in the yearly federal budget. Almost fifty percent of the discretionary budget is allocated to the defense and military and the other fifty per cent on the public services and other government programs. The fiscal policies enable the economy to identify the sources of the economic income thereby enabling the economic experts to focus more towards controlling the flow of currency.

Close to fifty percent of the total tax received by the US government comes from the income taxes paid by the citizens. The extra 10% of the income tax comes from the corporations and businesses owned by different investors. (Ericsson. 551). About thirty-five percent of the total tax collected comes from the social security taxes and the payrolls of the working individuals. The smallest proportion of the tax comes from the excise taxes levied on goods like liquor, gasoline, and tobacco which contributes close to five per cent.

United States_x0092_ Monetary Policy

The monetary policy contributes immensely towards the growth of the US economy. It promotes the price constancy and maximum employment. The monetary policy also ensures the moderation of the interest rates that are charged on the individuals in the banking sector and the trade funds. The monetary policies recognize the salary regulations of the different employees and as a result, they also tend to regulate the rate of employment. With the growth in the economy, the rate of unemployment decreases due to the increasing number of opportunities in both the production and the corporate sectors. The monetary policies aids in the control of wage bill by regulating the taxable incomes of the workers to ensure the sustainability of the currency and the economic growth rate.

The United States economists are supposed to keep the interest rates low until there is a drop in the unemployment rate to 6.5% or until the inflation rate surpass the recommended proportion. ( Dell'Ariccia, 642). However, the policies on interest rates in relation to the rate of unemployment keep on changing from time to time depending on the state of the economy. On the other hand, the determination of the interest rates by the US central bank depends on the quantitative economic measures that reveal the actual state of the entire economy. The US central bank also controls the strength of the currency by purchasing the abundant sums of financial assets with the aim of increasing the supplies of money while holding down long-term interest rates being charged on the assets.

Access to Resources and Trade

The United States has large trading networks and access to resources; this enables it to grow the domestic production through imports and exports, a situation that enables constant growth in the Gross domestic production. The export of the materials goods represents the largest proportion of total exports from the United States. The exports include motor vehicles, airplanes, industrial machinery and other high-value capital goods. In the year 2015 for example, the total exports of the material goods amounted to 1.510 trillion US Dollars. (Akaev, et al., 28) The high exports of services including the professional and business services and other knowledge-based services contribute immensely to the growth of the overall economy and high standard of living.

Ownership of Resources

In the United States, corporations, federal, local, state, individuals and tribal governments can own different resources including the natural resources like gas, oil, minerals and coal located below the surface of the land, a scenario that is different from other economies where the ownership of these properties is solely in the hand of the government. The above state of the economy enables individuals to acquire more wealth thereby increasing the per capita income. The individual ownership of the natural resources also leads to the distribution of wealth and increased income to the entire population. The distribution of the natural resource ownership to the individuals leads to the cost and demand pull inflation; the growth of the above companies cause high demand of the trained manpower than what the country export to other economies.

Economic Impediments

There are several factors that cause hindrance to the economic growth in the United States economy. The aggregate demands for the economy sometimes outweigh the aggregate supply, a situation that greatly undermines the growth in the production. The US economy demands a high amount of energy that what they produce this is due to the high number of industrial and transportation of activities that utilize a large volume of energy products. The United State's economy is complex and requires a lot of energy to drive it; when prices of oil skyrockets, inflation may result due to the increased prices of transportation. The US economists usually tend to regulate oil prices in the international market in order to favor the progressive growth of the United States economy.


The United State_x0092_s fiscal and monetary policies are working towards the strengthening the economy. The monetary policies facilitate the regulation of currency both in the United States and the rest of the economies. The value of the dollar is recognized internationally and when the inflation occurs its value reduces, a situation that affects the global market. The fiscal policies help in the regulation of the interest rates both in the banking institution and in the trade sector, a scenario that controls the flow of cash and regulates the per capita income for the individuals across the United States. The determination of the interest rates by the US central bank depends on the quantitative economic measures that reveal the actual state of the entire economy. The US central bank also controls the strength of the currency by purchasing the abundant sums of financial assets with the aim of increasing the supplies of money while holding down long-term interest rates being charged on the assets.


Works Cited

Akaev, Askar A., and Andrey I. Rudskoi. "Economic Potential of Breakthrough Technologies and Its Social Consequences." Industry 4.0. Springer International Publishing, 2017. 13-41.

Dell'Ariccia, Giovanni, Luc Laeven, and Gustavo A. Suarez. "Bank Leverage and Monetary Policy's Risk‐Taking Channel: Evidence from the United States." The Journal of Finance 72.2 (2017): 613-654.

Ericsson, Neil R. "How biased are US government forecasts of the federal debt?." International Journal of Forecasting 33.2 (2017): 543-559.

Gilpin, Robert. The political economy of international relations. Princeton University Press, 2016.

Inklaar, Robert, and D. S. Prasada Rao. "Cross-country income levels over time: did the developing world suddenly become much richer?." American Economic Journal: Macroeconomics 9.1 (2017): 265-290.

Jorgenson, Dale, Frank M. Gollop, and Barbara Fraumeni. Productivity and US economic growth. Vol. 169. Elsevier, 2016.

November 23, 2022

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