The economy of the United States is the largest national economy in the world in both nominal value and by purchasing power parity. Its nominal gross domestic product (GDP) was estimated as $14.4 trillion in 2008, which is about three times that of the world's second largest economy, Japan Its GDP by PPP is almost twice that of the second largest, China.
The U.S. economy maintains a very high level of output per person (GDP per capita, $47,422 in 2008, ranked at around number ten in the world). The U.S. 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. In 2008, consumer spending made seventy-two percent of the economic activity in the U.S.
Since the 1970s, the United States economy has absorbed savings from the rest of the world. The phenomenon is subject to discussion among economists. Like other developed countries, the United States faces retiring baby boomers who have already begun withdrawing from their Social Security accounts; however, the American population is young and growing when compared to Europe or Japan. The 2008 estimates of the United States public debt by the CIA Factbook and the International Monetary Fund were 61% of GDP, about the same as major European countries.
The United States has been one of the best-performing developed countries, consistently outperforming European countries. The American labor market has attracted immigrants from all over the world and has one of the world's highest migration rates. Americans have the highest income per hour worked. The United States is ranked second, down from first in 2008-2009 due to the economic crisis, in the Global Competitiveness Report.
History
Main article: Economic history of the United StatesThe economic history of the United States has its roots in European settlements in the 16th, 17th, and 18th centuries. The American colonies went 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. In addition, the U.S. was able to exploit these resources due to a unique set of institutions designed to encourage exploration and extraction. As a result, the U.S.'s GDP per capita converged on that of the U.K., as well as other nations that it previously trailed economically. 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, 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. In the 1970s, economic woes brought on by the costs of the Vietnam conflict, major price increases, particularly for energy, created a strong fear of inflation. As a result, government leaders came to concentrate more on controlling inflation than on combating recession by limiting spending.
Ideas about the best tools for stabilizing the economy changed substantially between the 1960s and the 1990s. In the 1960s, government had great faith in fiscal policy—manipulation of government revenues to influence the economy. 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 1970s 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. The 2001 downturn lasted just eight months.
In recent years, the primary economic concerns have centered on: high household debt ($14 trillion) including $2.5 trillion in consumer debt, 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 maintains a relatively high GDP per capita, with the caveat that it may be elevated by borrowing, a low to moderate GDP growth rate, and a low unemployment rate, making it attractive to immigrants worldwide.
The United States entered 2008 during a housing market correction, a subprime mortgage crisis and a declining dollar value. On December 1, 2008, the NBER declared that the United States entered a recession in December 2007, citing employment and production figures as well as the third quarter decline in GDP.
China, holding $801.5 billion in Treasury bonds, is the largest foreign financier of the record U.S. public debt. China owns an estimated $1.6 trillion of U.S. securities.
Overview
A central feature of the U.S. economy is the economic freedom afforded to the private sector by allowing the private sector to make the majority of economic decisions in determining the direction and scale of what the U.S. economy produces. This is enhanced by relatively low levels of regulation 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. border with Canada—provide additional shipping access. These extensive waterways have helped shape the country's economic growth over the years and helped bind America's 50 individual states together in a single economic unit.
The number of workers and, more importantly, their productivity help determine the health of the U.S. economy. Throughout its history, the United States has experienced steady growth in the labor force, a phenomenon that is 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. Beginning in the early 20th century, many Latin Americans immigrated; followed by large numbers of Asians following removal of nation-origin based immigration quotas. The promise of high wages brings many highly skilled workers from around the world to the United States.
Labor mobility has also been important to the capacity of the American economy to adapt to changing conditions. When immigrants flooded labor markets on the East Coast, many workers moved inland, often to farmland waiting to be tilled. 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. Today in the era of globalization, American investors and corporations have influence all over the world. The American government is also included among major the investors in the American economy. Government investments have been directed towards public works of scale (such as from the Hoover Dam), military-industrial contracts, and the financial industry.
While consumers and producers make most decisions that mold the economy, government has a powerful effect on the U.S. economy in at least four areas, as the government uses a capitalist system. Strong government regulation in the U.S. economy started in the early 1900s with the rise of the Progressive Movement; prior to this the government promo
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