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In: Economics

Investment (more tools) and technological improvement (better tools) each contribute to economic growth by making labor more productive.

Investment (more tools) and technological improvement (better tools) each contribute to economic growth by making labor more productive. What percentage of the U.S. economy is allocated to investment in a normal year? Also, describe how fast the U.S. economy grows in real terms on a per capita basis in an average year?

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Expert Solution

A) U.S. economy investment in a normal year

The economy of the United States is highly developed and mixed.It is the world's largest economy by nominal GDP and net wealth and the second-largest by purchasing power parity (PPP). It also has the world's eighth-highest per capita GDP (nominal) and the tenth-highest per capita GDP (PPP) in 2019.he U.S. has the most technologically powerful economy in the world and its firms are at or near the forefront in technological advances; especially in computers, pharmaceuticals, and medical, aerospace, and military equipment.The U.S. dollar is the currency most used in international transactions and is the world's foremost reserve currency, backed by its economy, its military, the petrodollar system and its linked eurodollar and large U.S. treasuries market.Several countries use it as their official currency, and in many others, it is the de facto currency.The largest U.S. trading partners are China, Canada, Mexico, Japan, Germany, South Korea, United Kingdom, France, India, and Taiwan.The U.S. is the world's largest importer and the second-largest exporter.It has free trade agreements with several nations, including NAFTA, Australia, South Korea, Israel, and few others which are in effect or currently under negotiation

Composition of economic Investment

he U.S. produces approximately 18% of the world's manufacturing output, a share that has declined as other nations developed competitive manufacturing industries. The job loss during this continual volume growth is the result of multiple factors including increased productivity, trade, and secular economic trends. In addition, growth in telecommunications, pharmaceuticals, aircraft, heavy machinery and other industries along with declines in low end, low skill industries such as clothing, toys, and other simple manufacturing have resulted in some U.S. jobs being more highly skilled and better paying

1) Energy, transportation, and telecommunications

Transportation

Road

The U.S. economy is heavily dependent on road transport for moving people and goods. Personal transportation is dominated by automobiles, which operate on a network of 4 million miles (6.4 million km) of public roads, including one of the world's longest highway systems at 57,000 miles (91,700 km). The world's second-largest automobile market, the United States has the highest rate of per-capita vehicle ownership in the world, with 765 vehicles per 1,000 Americans.About 40% of personal vehicles are vans, SUVs, or light trucks.

Rail

Mass transit accounts for 9% of total U.S. work trips.Transport of goods by rail is extensive, though relatively low numbers of passengers (approximately 31 million annually) use intercity rail to travel, partially due to the low population density throughout much of the nation.However, ridership on Amtrak, the national intercity passenger rail system, grew by almost 37% between 2000 and 2010.Also, light rail development has increased in recent years.The state of California is currently constructing the nation's first high-speed rail system.

Airline

The civil airline industry is entirely privately owned and has been largely deregulated since 1978, while most major airports are publicly owned.The three largest airlines in the world by passengers carried are U.S.-based; American Airlines is number one after its 2013 acquisition by U.S. Airways.Of the world's 30 busiest passenger airports, 12 of them are in the United States, including the busiest, Hartsfield–Jackson Atlanta International Airport.

Energy

Countries by natural gas proven reserves (2014). The U.S. holds the world's fourth largest natural gas reserves.

The US is the second-largest energy consumer in total use.The U.S. ranks seventh in energy consumption per capita after Canada and a number of other countries.The majority of this energy is derived from fossil fuels: in 2005, it was estimated that 40% of the nation's energy came from petroleum, 23% from coal, and 23% from natural gas. Nuclear power supplied 8.4% and renewable energy supplied 6.8%, which was mainly from hydroelectric dams although other renewables are included.

American dependence on oil imports grew from 24% in 1970 to 65% by the end of 2005.Transportation has the highest consumption rates, accounting for approximately 69% of the oil used in the United States in 2006, and 55% of oil use worldwide as documented in the Hirsch report.

In 2013, the United States imported 2,808 million barrels of crude oil, compared to 3,377 million barrels in 2010.While the U.S. is the largest importer of fuel, The Wall Street Journal reported in 2011 that the country was about to become a net fuel exporter for the first time in 62 years. The paper reported expectations that this would continue until 2020. In fact, petroleum was the major export from the country in 2011.

Telecommunications

Internet was developed in the U.S. and the country hosts many of the world's largest hubs.

B) U.S. economy grows in real terms on a per capita basis in an average year

Real GDP per capita (measured in 2009 dollars) was $52,444 in 2017 and has been growing each year since 2010. It grew 3.0% per year on average

U.S. nominal GDP was $19.5 trillion in 2017. Annualized, nominal GDP reached $20.1 trillion in Q1 2018, the first time it exceeded the $20 trillion level. About 70% of U.S. GDP is personal consumption, with business investment 18%, government 17% (federal, state and local but excluding transfer payments such as Social Security, which is in consumption) and net exports a negative 3% due to the U.S. trade deficit. Real gross domestic product, a measure of both production and income, grew by 2.3% in 2017, vs. 1.5% in 2016 and 2.9% in 2015. Real GDP grew at a quarterly annualized rate of 2.2% in Q1 2018, 4.2% in Q2 2018, 3.4% in Q3 2018 and 2.2% in Q4 2018 under President Trump; the Q2 rate was the best growth rate since Q3 2014, and the overall yearly GDP growth of 2.9% in 2018 was the best performance of the economy in a decade.

As of 2014, China passed the U.S. as the largest economy in GDP terms, measured at purchasing power parity conversion rates. The U.S. was the largest economy for more than a century prior to that milestone; China has more than tripled the U.S. growth rate for each of the past 40 years. As of 2017, the European Union as an aggregate had a GDP roughly 5% larger than the U.S.

Real GDP per capita (measured in 2009 dollars) was $52,444 in 2017 and has been growing each year since 2010. It grew 3.0% per year on average in the 1960s, 2.1% in the 1970s, 2.4% in the 1980s, 2.2% in the 1990s, 0.7% in the 2000s, and 0.9% from 2010 to 2017. Reasons for slower growth since 2000 are debated by economists and may include aging demographics, slower population and growth in labor force, slower productivity growth, reduced corporate investment, greater income inequality reducing demand, lack of major innovations, and reduced labor power. The U.S. ranked 20th out of 220 countries in GDP per capita in 2017.Among the modern U.S. Presidents, Bill Clinton had the highest cumulative percent real GDP increase during his two terms, Reagan second and Obama third.


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