Question

2. What are the relative sizes of the US & global economies?

3. How is the US is able to produce so much and how has output has changed over time?

Answer 1

2.US economy is a highly developed mixed economy. In terms of nominal GDP it is the world’s largest economy and in terms of Purchasing Power Parity (PPP) it is the world’s second largest economy. The US dollar is the world’s most used currency for international transactions. It is used by many countries as its official currency and some countries use it as their de facto currency. The largest trading partners of US are UK, France, India, China, Taiwan, Canada, Mexico, South Korea, and Japan.

The United States is the largest producer and the largest consumer of goods and services in the world. The opportunity cost of producing the goods in US is low as compared to the other countries in the world..

US output roughly grows by 3% every year whereas the US population grows by only 1 % every year. This raises the per capita GDP.

US economy is backed by an abundant supply of natural resources, advanced technology, highly developed infrastructure and high productivity. Average household income is the highest in US. US is the third largest producer of natural gas and oil. It is the largest international market for trade in goods and services. 134 out of the world’s 500 largest companies are headquartered in US.

The financial market of US is one of the world’s largest and he most influential. In terms of market capitalization The New York Stock Exchange is by far the world’s largest stock exchange.

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3. The United States invests temendously in human capital.and has also accumulated a huge amount of physical capital.The high productivity of the U.S. economy is a result of using highly skilled and educated workers with avanced technology and equipments in capital-intensive production processes.The consumption rate in US is high because the production rate in US is also high.

US has got latest and highly upgraded technology because of which it can produce more output with existing resources.It is a rich capital intensive economy where capital is abundant and is available at a relatively lower cost.

Factor mobility is very high in US and it takes advantage of lower opportunity cost around the world. US is very strong at outsourcing too. Also there is an abundace of natural resources in US. The financial markets of US is one of the largest and highly influential.

All the above mentioned factors are the reasons why US is able to produce so much.

Over the last 100 years,the US econmy has tranformed from an agricultural based economy to an industry based economy and then to a services based economy. Around 80% of the output of US consists of services but still US remains one of the largest manufacturers of goods.