Chapter 4: THE U.S ECONOMY

I.                   Major characteristics of US economy

1.      A capitalist economy: private ownership of means of production

2.      A free enterprise system: private business has freedom to operate for profit with minimum interference & regulation of gov.

3.      A free market economy: market forces (invisible hand) control the efficient allocation of goods (laissez faire à leave it alone)

4.      A mixed economy:

-          Give individuals freedom to make profit for self

-          Accept minimum interference of the gov.

II.                Achievements:

1.      World biggest economy

-          GDP 2006: $13,3 trillion dollars

-          World’s foremost economic power with enormous productivity in industry & agriculture.

-          Leading producer of goods & services, one of the world’s largest importers & exporters.

-          Farming is highly mechanized & commercialized

-          Main industries: petroleum, steel, aerospace, automobile, agriculture, telecommunications, chemicals, electronics, computers, processing food, consumer goods, mining.

-          Major trading partners: Canada, Japan, Mexico, EU

+ export: EU (40%), Japan, China (6%), Canada (23%)

+ import: Canada (17%), Japan (8%)

2.      People enjoy high living standards

-          1 of the richest nations

-          Average annual income of households with 2 income earners: $ 67,348 (2005)

-          60% in middle-income of high-income ranks

III.             Challenges

-          Declining economic growth rates

-          Decreasing competitiveness of US goods abroad.

-          Increasing trade deficit: importing more goods than exporting

-          Economy & industrial policy unprepared for the future.

-          Budget deficit (more gov. spending)

-          Overproduction in agriculture (low crop prices, depend so much on export)

-          Big gap between the rich & the poor.

IV.             Changes in the US economy

-          There has been a shift of economic structure fr manufacturing to services (banking, hotel, restaurants, communication,..)

-          Manufacturing of high-tech computer, biochemical products rises

-           Yuppies: young upwardly-mobile professional.

-          Begin in childhood until retirement

V.                Factors to the success of US economy

1.      Rich natural resources (mineral resources, fertile soil, climate, long coastlines, river system)

2.      Huge & qualified labor force: high wages attract highly skilled workers à labor force is strong in both quantity & quality.

3.      High-tech & efficient management (much investment in tech à achievement increases productivity & competitiveness; high-quality training programs provide good management & managers; policies to attract talents)

4.      Favorable financial & political environment (strong financial sector have influence in the world; stability & democracy provide good environment for economic development)

5.      Supportive beliefs & values

VI.             Role of gov.

-          Ensure that economic opportunities are fair & available to every individual & business.

-          Controlling inflation or deflation to stimulate economic growth.

-          Supporting foreign trading & markets expanding.

VII.          Characteristics of US business

1.      The prestige of business & the ideal of competition

-          American business (A.B) are privately owned & operated for profit.

-          A.B institutions enjoy great prestige.

-          B are more firmly based on competition/ seen as major source of progress & prosperity à Bs are respected.

-          Competition means basic A values are put into practice

+ protects individual freedom by ensuring no monopoly of power

+ strengthens the idea of equality of opportunity by offering a race open to all.

+ encourages hard work & self – reliance

-          Businesses offer best opportunity to fulfill  American Dream

+ get rich more quickly than farming

+ rising fr poverty to great wealth has usually been accomplished through successful business careers

2.      2 kinds of A.B heroes

-          The entrepreneur: pp succeed in building st great out of nothing (self-made millionaires) à they are perfect examples of American beliefs & values

-          The organization man/women: pp successfully run or manage business started by someone else.

3.      Changes for A.B

-          Become part of much larger global economy

-          Must become more efficient & competitive

-          More manufacturing operations to developing countries.

-          Create new opportunities & new markets through treaties & agreements

-          Downsize the giant corporations

-          More women & minorities join the workforce à multicultural workforce à compete better in global market

Explanation:

1.      Productivity: the amount of output per unit of input (labor, equipment, capital). There are many different ways of measuring productivity.

2.      Budget deficit: the amount by which a gov., company, or individual’s spending exceeds its income over a particular period of time; also called deficit or deficit spending – opposite of “budget surplus”

3.      Trade deficit: a negative balance of trade; imports exceed exports; opposite of trade surplus.

4.      “The glass ceiling” – a subtle form of discrimination.