Question

Describe the U.S economic performance during the past ten years. Please make use of time series data on employment, inflation, GDP, and trade balance (Answer should not be less than 600 words).

Answer 1

Despite facing national difficulties along with a quickly changing worldwide landscape, the U.S. economy remains the world's biggest and most significant economy. The U.S. economy accounts for about 20% of total worldwide production, and is still bigger than China's. In addition, the U.S. has the sixth largest per capita GDP (PPP), according to the IMF. The U.S. economy has a highly developed and technologically advanced service industry that accounts for about 80% of its production. In fields such as technology, economic services, health care and retail, the U.S. economy is dominated by service-oriented businesses. Large U.S. corporations also play a major role on the global stage, with more than a fifth of companies on the Fortune Global 500 coming from the United States.

Although the services industry is the economy's primary motor, the U.S. also has a significant production base that accounts for about 15 percent of production. The U.S. is the world's second-largest producer and a leader in high-value sectors such as automobiles, aerospace, equipment, telecommunications, and chemicals. In the meantime, agriculture accounts for less than 2% of production. Large quantities of arable land, sophisticated farming technology and generous public subsidies, however, make the US a net food exporter and the world's biggest agricultural exporting nation.

By a mixture of features, the U.S. economy retains its powerhouse status. The nation has access to abundant natural resources and an advanced physical infrastructure. It also has a big workforce, well-educated and productive. In addition, in a free-market and business-oriented setting, physical and human capital is fully leveraged. The government and the people of the United States both contribute to this unique economic environment. The government provides political stability, a functional legal system, and a regulatory structure that allow the economy to flourish.

The housing market crashed with several significant banks, and the U.S. economy continued to contract in what was the deepest and longest downturn since the Great Depression until the third quarter of 2009. The U.S. government intervened by purchasing distressed mortgage-related assets using USD 700 billion and supporting big floundering corporations to stabilize the financial system. It also introduced a stimulus package worth USD 831 billion to be spent across the following 10 years to boost the economy.

The U.S. current account balance has been strongly affected by international trade flows over the previous several centuries, with a continuous current account deficit resulting in the continuing trade deficit. Earnings on U.S. assets and foreign-owned investments have a very tiny share of the current account, and a surplus in that category is not nearly sufficient to offset the big trade deficit. Overall, the current account deficit means that the value of the products and services bought by the United States from overseas is greater than the value of the products and services sold to nationals.The U.S. current account deficit widened progressively since the 1990s and reached an all-time record and global high of 5.8% of GDP in 2006. The deficit has since narrowed due in part to increased domestic oil production.

The U.S. is the world's second-largest exporter of products and services and leading importer number one. The U.S. has continuously run a trade deficit, largely due to its reliance on foreign oil to satisfy its power requirements and strong national demand for foreign-produced consumer products, but the power divide is closing owing to improvements in national petroleum manufacturing. Canada, China, Mexico, and Japan are the primary trading partners of the U.S. Canada is the main U.S. export destination, whereas China is the primary import source.

Although in latest decades, the United States has lost some of its competitive edge, material goods still account for two-thirds of its total exports. The United States exports primarily high-value capital goods and manufactured goods, including industrial machinery, aircraft, motor vehicles and chemicals. In 2015, the United States exported products worth USD 1,510 trillion.

The U.S. is the world's leading service exporter. This involves economic and company professional services and other knowledge-intensive services. Also a significant export is travel, transportation and tourism services. Services account for about one-third of total exports.

The United States is typically regarded as the home of free-market economic policies. However, the U.S. government exercises a significant amount of regulation over economic, commercial and financial activities. Following the recession, the government stepped up its oversight in the financial sector. The Dodd-Frank act, passed in 2010, represents the most comprehensive reform of financial markets regulation since the Great Depression.

The U.S. government tends to spend more cash than it brings in, resulting in nearly uninterrupted fiscal deficits over the previous several decades. The only time in recent history that the government managed to balance a budget was between 1998 and 2001, when the strong economy resulted in higher than usual tax revenues. The fiscal deficit peaked at 9.8 percent of GDP since 1945 in 2009, but has since gradually improved; the deficit fell to 2.4 percent of GDP in 2015.

Nearly 50% of the U.S. government's tax comes from individual revenue taxes, with an extra 10% coming from corporate and corporate revenue taxes. Payroll and social security taxes account for another 35 percent of collections. The imposition of excise taxes on products such as liquor, tobacco and petrol is lower than 5%. Between 1970 and 2010, tax revenues averaged about 18 percent of GDP. Total tax revenues as a percentage of GDP were about 18% in 2015.

The U.S. Congress has created that the Federal Reserve's monetary policy goals are to encourage maximum employment and price stability in the so-called "dual mandate." The Federal Committee for Open Markets (FOMC) is the monetary policy organ of the Fed. The FOMC meets approximately eight times a year to discuss trends and perspective for the U.S. economy and discuss various policy alternatives, including interest rate levels. The federal funds rate, the Fed's primary interest rate, is the rate that deposit banks charge each other overnight to trade funds to preserve demands for reserve equilibrium.