U.S. Economy

The Power of the U.S. Economy

Total output for the U.S. economy in 2007 was $13.86 trillion, one fifth of the world's total output. It is also the largest single country economy in the world, although the EU is larger at $14.44 trillion. China is the second largest, at $7.04 trillion and Japan at $4.3 trillion.

• The power of the U.S. economy is seen in its GDP per capita, which was $46,000 in 2007.
• Although it is the world's largest economy, the EU's GDP per capita was only $32,900
• Japan's was $33,800
• China's GDP per capita was only $5,300 (because they have four times the number of people as does the U.S.)

Think of the incredible economic power it takes to both be the largest economy in the world while producing one of the highest standards of living per person. While other countries, such as Norway and Bermuda, have higher GDP per capita, they aren't also a driver of the global economic engine that the U.S. is.

A Primer on the Role of Supply in the U.S. Economy

Input is basically everything that is used to create the goods and services in the economy, also known as output. The major components of input are

• Labor, which is the employees who work in the businesses.
• Capital, which is money used to invest in the businesses that make the output. Money includes cash, stocks, bonds, loans, grants, options. Capital also includes the equipment used to make the output.
• Natural Resources, which is the raw goods and materials used by the employees to make the output.

Output is everything that is produced. GDP is the common method of measurement of final output. The major components of output are:

• Products, which include autos, furniture and gasoline.
• Services, which include healthcare, finance, and housing.
• Business investment and government spending.

Over 70% of what the economy produces is for personal consumption. Over 40% is for services, with housing (10%) and health care (12%) being the largest components. Another 20% of the total economy output is nondurable goods, such as food (10%), clothing (2.7%) and fuel (2.4%). Durable goods for personal consumption, like autos (3.6%) and furniture (3%) make up 8% of the total economy.
The remaining 30% of the economic output goes to business investment (16%) and government (19%), of which one-third is defense.

How Supply Affects the U.S. Economy

1. Supply must equal demand.
2. To make supply equal demand, prices change.
3. When prices of output declines, businesses eventually decrease supply OR they lower the cost to the output to maintain profit margins OR they go out of business, thus decreasing the output.
4. Everything else is just very complicated interpretations of these three basic rules.

The Role of Capital in the U.S. Economy Remains Strong

The U.S. has a the world’s most sophisticated stock market and financial sector. The transparency of our stock market allows investors to gain up-to-date information about every aspect of companies in which they might invest.

• Wall Street attracts the most talented personnel and can afford the most powerful technology.
• This allows U.S. banks to control billions of dollars in transactions to take place anywhere in the world.
• It also enables these banks to provide any number of complicated derivatives to provide hedging against risk.
• This incredible competitive advantage supports a variety of complicated foreign exchange transactions at lower cost.