About the US Economy

[rahul_parab2006]

While the US market is consumer-driven, the government controls a broad array of levers influencing the US economy.

The US economy is characterized by a mixed economic structure consisting of both US governmental organizations and private enterprise, each influencing economic and financial trends within the country.

The free enterprise system of US is greatly dependant on consumers and producers. Private sector enterprises contribute a major part of the total goods and services produced in the US economy.


Around two-thirds of the total production of the country is allocated to personal consumption products. This means that the American consumer is of huge importance in the US economy, often driving most – or all – of the production trends. Given the major role of the consumers in the economic prosperity of the country, the US economy is sometimes referred to as “consumer economy”.

Since the US economy is also the largest economy in the world, and the US consumer drives two thirds of the US economy, the US consumer is also a big driver of global economic activity.

American political philosophy is founded on the notion of personal freedom. In the economic sphere it is believed that free enterprise driven by private businesses will be more efficient that those operating under government control.

It is also believed that the forces of supply and demand directly result in the price levels of goods and services. The US Government, therefore, has no major role to play in price determinations except for some industries which it protects, such as agriculture. What to produce, and how much of it is to be produced depends on the price level fixed by the interaction of supply and demand.

The role of government in the US economy is crucial when it comes to decision-making regarding monetary and fiscal policies. The federal government takes all the necessary initiatives to ensure the growth and stability of the United States.

The US government makes full use of economic tools such as money supply, tax rates, and credit control, among other things, to adjust the rate of economic growth. For the most part, the US Federal Government also regulates the operations of private business concerns in order to prevent monopolies.

The government renders a number of direct services in the form of providing support for national defense, monetary aid for research and development programs, and funds for highway construction & infrastructure in general.
Additionally, the US Federal Government makes arrangements for low-interest loans for students who wish to pursue college or university education. In general, the US Government creates different policies and measures that ensure the free flow of goods and services across and within the country.

The recent failure in the US subprime market has resulted in a slowdown in the US economy. The US GDP-Purchasing Power Parity was estimated at $13.86 trillion in 2007, whereas the growth rate of GDP was estimated to be 2.2%. The estimated growth rate of real GDP volume for 2008 has been projected to be just 0.9%.

[rahul_parab2006]

The trend of the real GDP growth rate of the US economy is shown in the following graph..............