How Does the Economy Work?,

What is the Gross Domestic Product?

Private Enterprise

The US economy is measured by considering the US Gross Domestic Product (GDP); it is the marker used to evaluate the economy. The United States Economy is calculated by GDP which equals to all goods produced by all of the people and all of the companies in the United States. Within all economic systems, both managers and entrepreneurs accumulate natural resources, technology and labor to create and dispense goods and services.

The United States is known as a "capitalist" economy that consists of a system that allows a nation or small group of people to control huge amounts of money (capital) and is the ones who make the most significant monetary decisions. The term capitalist economy was first coined by a 19th century German economist and social theorist named Karl Marx. Marx and others like him believed that capitalist economies place power within the hands of wealthy business people whose focus is chiefly on capitalizing on making greater profits while socialist economies expend time placing more control in the hands of government with the intention of concentrating on political goals such as promoting equal distribution of society's capital, as opposed to focusing on making more profits.

However, today the United States is not a pure capitalism country. The United States and many other countries now consist of governments that are involved in the economy to restrict focus on powers. These government agencies also address numerous social concerns and problems. Because of this, the United States economy is more of a "mixed" economy considering that both government and private enterprises have important roles in the economy. In a mixed economy like the US, consumers can help the economy through product choices made as well as via voting for officials.

What Makes up the US Economy?

The United States is blessed with rich natural resources such as mineral resources, fertile farm soil and a moderate climate. This is one of the components that make up the US economy. Secondly, the US has very broad coast lines from the Atlantic Ocean to the Pacific Ocean to the Gulf of Mexico as well as the Great Lakes and rivers. These far-reaching water passages have provided the US with magnificent shipping channels that have helped to develop the United States' economic growth allowing all of the states in America to be combined in establishing one solitary economic entity.

In the United States, Americans are generally proud of their economic system and believe that the American economic system offers opportunities for all American citizens to proper having good lives. However, poverty still exists in many areas of America. There have been many efforts made by the government to dissuade poverty and some success has been accomplished. Also, during high economic growth, poverty is reduced to some degree due to the production of additional jobs.

How Does the Economy Work?

The gross domestic product (GDP) analyzes the total production of goods and services within a year. Although the GDP calculations assist in the measurement of the status of the economy, the GDP does not, however, determine every areas of a nation's well being. GDP only shows the value of the goods and services that an economy produces; however, it does not determine the quality of life for a nation due to the fact that some variables can not be measured by a GDP such as security, good health, personal happiness and a clean environment.

In America, it is believed that supply and demand establishes the prices of goods and services. The prices set decide what products are produced. If people want and demand more of a particular good or service than the economy produces, the price of the good or service is increased. Companies begin to produce more goods because they see that prices are rising.

When goods are not in great demand by consumers and less competition is present among producers, prices of goods drop and manufacturers, during this time, either go out of business or begin to produce other goods.


About the Author

Claudette Pendleton runs a virtual company from home. She performs quality work for several companies. Her areas of expertise include transcription, elementary essay assessment, title editing, freelance writing and editing as well as website user testing and real estate. Claudette enjoys the variety of her work and has been working in these areas for over 7 years.

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