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THE UNITED STATES OF THE UNITED STATES OF AMERICA AMERICA ECONOMYECONOMY

PRESENTED BY:PRESENTED BY:RAHULRAHULROHITROHIT

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What is an What is an

Economic System?Economic System?

An Economic system is a long-term An Economic system is a long-term

arrangement by which various units with in a arrangement by which various units with in a

society are induced to cooperate in production, society are induced to cooperate in production,

distribution and the use of aggregated product, distribution and the use of aggregated product,

including the means of control over productive including the means of control over productive

factors and freedom or constraints on individual factors and freedom or constraints on individual

units in the existing factor or goods market.units in the existing factor or goods market.

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Currency Currency United States Dollar (USD)United States Dollar (USD)

Fiscal year Fiscal year 1 October - 30 September 1 October - 30 September

Trade organizations Trade organizations NAFTA (North American Free NAFTA (North American Free

Trade Agreement), WTO( World Trade Organization),Trade Agreement), WTO( World Trade Organization),

OECD (Organization for Economic Corporation and OECD (Organization for Economic Corporation and

Development) and others Development) and others StatisticsStatistics

GDP GDP (PPP)$13.84 trillion (2007 est.) (PPP)$13.84 trillion (2007 est.)

GDP growth GDP growth 2.2% (2007 est.)2.2% (2007 est.)

GDP per capita GDP per capita $46,000 (2007 est.)$46,000 (2007 est.)

GDP by sectorGDP by sector

Agriculture Agriculture (0.9%) (0.9%)

IndustryIndustry (20.6%) (20.6%)

Services Services (78.5%)(78.5%)

InflationInflation (CPI) 5.0% (Jun 2007 to Jun 2008) (CPI) 5.0% (Jun 2007 to Jun 2008)

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Labor force Labor force 154.5 million (includes unemployed) (May 154.5 million (includes unemployed) (May

2008)2008)

Labor force by occupation Labor force by occupation

managerial and professional managerial and professional (35.5%) (35.5%)

Technical, sales and administrative supportTechnical, sales and administrative support

(24.8%),(24.8%),

ServicesServices (16.5%), (16.5%),

Manufacturing, mining, transportation, and craftsManufacturing, mining, transportation, and crafts

(24%),(24%),

Farming, forestry, and fishingFarming, forestry, and fishing (0.6%) (excludes (0.6%) (excludes

unemployed) unemployed)

Unemployment Unemployment 5.5% (May 2008) 5.5% (May 2008)

Main industries: Main industries: Petroleum, Steel, Motor vehicles, Petroleum, Steel, Motor vehicles,

Aerospace, Telecommunications, Chemicals, electronics, Aerospace, Telecommunications, Chemicals, electronics,

Food processing, Consumer goods, Lumber, Mining, Food processing, Consumer goods, Lumber, Mining,

DefenseDefense

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Industrial production growth rate: 3.2% (2005 Industrial production growth rate: 3.2% (2005

est.)est.)

Electricity:Electricity:

Production: Production: 3.979 trillion kWh (2004) 3.979 trillion kWh (2004)

Consumption: Consumption: 3.717 trillion kWh (2004) 3.717 trillion kWh (2004)

Exports: Exports: 22.9 billion kWh (2004) 22.9 billion kWh (2004)

Imports: Imports: 34.21 billion kWh (2004) 34.21 billion kWh (2004)

Electricity - production by source:Electricity - production by source:

Fossil fuel: Fossil fuel: 71.6% 71.6%

Hydro: Hydro: 5.6% 5.6%

Nuclear: Nuclear: 20.6% 20.6%

Other: Other: 2.3% (2001) 2.3% (2001)

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OilOil

production: production: 7.61 million barrel/day (2005 est.) 7.61 million barrel/day (2005 est.)

consumption: consumption: 20.03 million barrel/day (2003 est.) 20.03 million barrel/day (2003 est.)

exports: exports: 1.048 million barrel/day (2004 est.) 1.048 million barrel/day (2004 est.)

imports: imports: 13.15 million barrel/day (2004 est.) 13.15 million barrel/day (2004 est.)

net imports: net imports: 12.097 million barrel/day (2004 est.) 12.097 million barrel/day (2004 est.)

proved reserves: proved reserves: 22.45 billion barrel (1 January 2002) 22.45 billion barrel (1 January 2002)

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History History of US Economy of US Economy

In 1933, Congress created the Federal In 1933, Congress created the Federal Deposit Insurance Corporation (FDIC) Deposit Insurance Corporation (FDIC) which presently guarantees checking and which presently guarantees checking and savings deposits in member banks up to savings deposits in member banks up to $100,000 per depositor to prevent bank $100,000 per depositor to prevent bank failures. This was in response to the failures. This was in response to the widespread bank runs of the early 1930s widespread bank runs of the early 1930s during the Great Depression.during the Great Depression. The The economic history of the United States has economic history of the United States has its roots in European settlements in the its roots in European settlements in the 16th, 17th, and 18th centuries. 16th, 17th, and 18th centuries.

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CONTD….CONTD…. The American colonies progressed from The American colonies progressed from marginally successful colonial economies marginally successful colonial economies to a small, independent farming economy, to a small, independent farming economy, which in 1776 became the United States of which in 1776 became the United States of America. In 230 years the United States America. In 230 years the United States grew to a huge, integrated, industrialized grew to a huge, integrated, industrialized economy that makes up over a quarter of economy that makes up over a quarter of the world economy. The main causes were the world economy. The main causes were a large unified market, a supportive a large unified market, a supportive political-legal system, vast areas of highly political-legal system, vast areas of highly productive farmlands, vast natural productive farmlands, vast natural resources (especially timber, coal and oil), resources (especially timber, coal and oil), and an entrepreneurial spirit and and an entrepreneurial spirit and commitment to investing in material and commitment to investing in material and human capital. The economy has human capital. The economy has maintained high wages, attracting maintained high wages, attracting immigrants by the millions from all over immigrants by the millions from all over the world.the world.

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For many years following the Great For many years following the Great Depression of the 1930s, recessions—Depression of the 1930s, recessions—periods of slow economic growth and high periods of slow economic growth and high unemployment—were viewed as the unemployment—were viewed as the greatest of economic threats. When the greatest of economic threats. When the danger of recession appeared most danger of recession appeared most serious, government sought to strengthen serious, government sought to strengthen the economy by spending heavily itself or the economy by spending heavily itself or cutting taxes so that consumers would cutting taxes so that consumers would spend more, and by fostering rapid growth spend more, and by fostering rapid growth in the money supply, which also in the money supply, which also encouraged more spending. In the 1970s, encouraged more spending. In the 1970s, economic woes brought on by the costs of economic woes brought on by the costs of the Vietnam conflict, major price the Vietnam conflict, major price increases, particularly for energy, created increases, particularly for energy, created a strong fear of inflation. As a result, a strong fear of inflation. As a result, government leaders came to concentrate government leaders came to concentrate more on controlling inflation than on more on controlling inflation than on combating recession by limiting spending, combating recession by limiting spending, resisting tax cuts, and reining in growth in resisting tax cuts, and reining in growth in the money supply.the money supply.

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CONTD..CONTD..

Ideas about the best tools for stabilizing Ideas about the best tools for stabilizing the economy changed substantially the economy changed substantially between the 1960s and the 1990s. In the between the 1960s and the 1990s. In the 1960s, government had great faith in fiscal 1960s, government had great faith in fiscal policy—manipulation of government policy—manipulation of government revenues to influence the economy. Since revenues to influence the economy. Since spending and taxes are controlled by the spending and taxes are controlled by the president and the U.S. Congress, these president and the U.S. Congress, these elected officials played a leading role in elected officials played a leading role in directing the economy. A period of high directing the economy. A period of high inflation, high unemployment, and huge inflation, high unemployment, and huge government deficits weakened confidence government deficits weakened confidence in fiscal policy as a tool for regulating the in fiscal policy as a tool for regulating the overall pace of economic activity. Instead, overall pace of economic activity. Instead, monetary policy assumed growing monetary policy assumed growing prominence. prominence. Since the stagflation of the 1970s, the U.S. Since the stagflation of the 1970s, the U.S. economy has been characterized by economy has been characterized by somewhat slower growth. somewhat slower growth.

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Government Intervention Government Intervention

Some efforts seek, either directly or Some efforts seek, either directly or indirectly, to control prices. Traditionally, indirectly, to control prices. Traditionally, the government has sought to prevent the government has sought to prevent monopolies such as electric utilities from monopolies such as electric utilities from raising prices beyond the level that would raising prices beyond the level that would ensure them reasonable profits. At times, ensure them reasonable profits. At times, the government has extended economic the government has extended economic control to other kinds of industries as well. control to other kinds of industries as well. In the years following the Great In the years following the Great Depression, it devised a complex system to Depression, it devised a complex system to stabilize prices for agricultural goods, stabilize prices for agricultural goods, which tend to fluctuate wildly in response which tend to fluctuate wildly in response to rapidly changing supply and demand. to rapidly changing supply and demand.

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CONTD…CONTD… A number of other industries—trucking A number of other industries—trucking and, later, airlines—successfully sought and, later, airlines—successfully sought regulation themselves to limit what they regulation themselves to limit what they considered as harmful price cutting.considered as harmful price cutting.Another form of economic regulation, Another form of economic regulation, antitrust law, seeks to strengthen market antitrust law, seeks to strengthen market forces so that direct regulation is forces so that direct regulation is unnecessary. The government—and, unnecessary. The government—and, sometimes, private parties—have used sometimes, private parties—have used antitrust law to prohibit practices or antitrust law to prohibit practices or mergers that would unduly limit mergers that would unduly limit competition.competition.

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Monetary PolicyMonetary Policy

The federal government attempts to use The federal government attempts to use both monetary policy (control of the both monetary policy (control of the money supply through mechanisms such money supply through mechanisms such as changes in interest rates) and fiscal as changes in interest rates) and fiscal policy (taxes and spending) to maintain policy (taxes and spending) to maintain low inflation, high economic growth, and low inflation, high economic growth, and low unemployment. A relatively low unemployment. A relatively independent central bank, known as the independent central bank, known as the Federal Reserve, was formed in 1913 to Federal Reserve, was formed in 1913 to provide a stable currency and monetary provide a stable currency and monetary policy. The U.S. dollar has been regarded policy. The U.S. dollar has been regarded as one of the most stable currencies in the as one of the most stable currencies in the world and many nations back their own world and many nations back their own currency with U.S. dollar reserves. During currency with U.S. dollar reserves. During the last few years, the U.S. dollar has the last few years, the U.S. dollar has gradually depreciated in value and its gradually depreciated in value and its reserve currency status is no longer as reserve currency status is no longer as high as previously.high as previously.

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National Debt National Debt The national debt, also The national debt, also known as the U.S. public debt (part of known as the U.S. public debt (part of which is the gross federal debt), is the which is the gross federal debt), is the overall collective sum of yearly budget overall collective sum of yearly budget deficit owed by all branches of the United deficit owed by all branches of the United States government, plus interest. The States government, plus interest. The economic significance of this debt and its economic significance of this debt and its potential ramifications for future potential ramifications for future generations of Americans are controversial generations of Americans are controversial issues in the United States.issues in the United States.As of January 30, 2008, the total U.S. As of January 30, 2008, the total U.S. federal debt was approximately $9.20 federal debt was approximately $9.20 trillion, or about $79,000 in average for trillion, or about $79,000 in average for each of the 117 million American each of the 117 million American taxpayers. The borrowing cap debt ceiling taxpayers. The borrowing cap debt ceiling as of 2005 stood at $8.18 trillion.as of 2005 stood at $8.18 trillion.

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CONTD… CONTD… In March 2006, Congress raised that In March 2006, Congress raised that ceiling an additional $0.79 trillion to $ ceiling an additional $0.79 trillion to $ 8.97 trillion, which is approximately 68% 8.97 trillion, which is approximately 68% of GDP. Congress has used this method to of GDP. Congress has used this method to deal with an encroaching debt ceiling in deal with an encroaching debt ceiling in previous years, as the federal borrowing previous years, as the federal borrowing limit was raised in 2002 and 2003.limit was raised in 2002 and 2003. While the U.S. national debt While the U.S. national debt is the world's largest in absolute size, a is the world's largest in absolute size, a more convenient measure is that of its size more convenient measure is that of its size relative to the nation's GDP. When the relative to the nation's GDP. When the national debt is put into this perspective it national debt is put into this perspective it appears considerably less today than in appears considerably less today than in past years, particularly during World War past years, particularly during World War II. By this measure, it is also considerably II. By this measure, it is also considerably less than those of other industrialized less than those of other industrialized nations such as Japan and roughly nations such as Japan and roughly equivalent to those of several western equivalent to those of several western European nations.European nations.

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EXTERNAL DEBT: LIABLITIES TO EXTERNAL DEBT: LIABLITIES TO FORIGNERSFORIGNERS

Gross U.S. liabilities to foreigners are Gross U.S. liabilities to foreigners are $16.3 trillion as at end 2006.(over 100% of $16.3 trillion as at end 2006.(over 100% of GDP). The U.S. Net International GDP). The U.S. Net International Investment Position (NIIP) deteriorated to Investment Position (NIIP) deteriorated to a negative $2.5 trillion at the end of 2006, a negative $2.5 trillion at the end of 2006, or about minus 19% of GDP.or about minus 19% of GDP. This figure rises as long as the US This figure rises as long as the US maintains an imbalance in trade, maintains an imbalance in trade, specifically, when the value of imports specifically, when the value of imports substantially outweighs the value of substantially outweighs the value of exports. It should be noted that this exports. It should be noted that this external debt does not, for the most part, external debt does not, for the most part, represent lending to Americans or the represent lending to Americans or the American government, nor is it consumer American government, nor is it consumer debt owed to non-US creditors. However, debt owed to non-US creditors. However, this is not the whole picture, as foreign this is not the whole picture, as foreign holdings of government debt currently holdings of government debt currently amount to about 27% of the total, or some amount to about 27% of the total, or some 2 trillion dollars.2 trillion dollars.

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CONTD…CONTD…

For countries like the United States, a For countries like the United States, a large net external debt is created when the large net external debt is created when the value of foreign assets (debt and equity) value of foreign assets (debt and equity) held by domestic residents is less than the held by domestic residents is less than the value of domestic assets held by value of domestic assets held by foreigners. In simple terms, as foreigners foreigners. In simple terms, as foreigners buy property in the US, this adds to the buy property in the US, this adds to the external debt. When this occurs in greater external debt. When this occurs in greater amounts than Americans buying property amounts than Americans buying property overseas, nations like the United States overseas, nations like the United States are said to be are said to be debtor nationsdebtor nations, but this is , but this is not conventional debt like a loan obtained not conventional debt like a loan obtained from a bank. However, foreigners also from a bank. However, foreigners also purchase U.S. debt instruments, such as purchase U.S. debt instruments, such as government bonds, which are forms of government bonds, which are forms of conventional debt.conventional debt.

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PovertyPoverty

Here is significant disagreement about Here is significant disagreement about poverty in the United States, particularly poverty in the United States, particularly over how poverty ought to be defined. over how poverty ought to be defined. Using radically different definitions, two Using radically different definitions, two major groups of advocates have claimed major groups of advocates have claimed variously that (a) the United States has variously that (a) the United States has eliminated poverty over the last century; eliminated poverty over the last century; or (b) it has such a severe poverty crisis or (b) it has such a severe poverty crisis that it ought to devote significantly more that it ought to devote significantly more resources to the problem. The debate resources to the problem. The debate includes how poverty should be defined.includes how poverty should be defined.Measures of poverty can be either absolute Measures of poverty can be either absolute or relative. Absolute poverty is defined in or relative. Absolute poverty is defined in real dollar values, whereas relative poverty real dollar values, whereas relative poverty is a comparison of the highest to the is a comparison of the highest to the lowest standard of living at a particular lowest standard of living at a particular time period.time period.

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Economic predictions and Economic predictions and forecastingforecasting

Predictions about the direction of the Predictions about the direction of the United States economy in the short term United States economy in the short term and long term are crucial factors in and long term are crucial factors in determining federal government policies, determining federal government policies, business decisions, and Federal Reserve business decisions, and Federal Reserve decisions. Several institutions make decisions. Several institutions make economic predictions, including: Global economic predictions, including: Global Insight, and the UCLA Anderson Forecast. Insight, and the UCLA Anderson Forecast. Various state agencies, including the Various state agencies, including the California Department of Finance.California Department of Finance.

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THANK YOU..THANK YOU..