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Economy
United States

Economy - overview:

The US has the largest and most technologically powerful economy in
the world, with a per capita GDP of $46,000. In this market-oriented
economy, private individuals and business firms make most of the
decisions, and the federal and state governments buy needed goods
and services predominantly in the private marketplace. US business
firms enjoy greater flexibility than their counterparts in Western
Europe and Japan in decisions to expand capital plant, to lay off
surplus workers, and to develop new products. At the same time, they
face higher barriers to enter their rivals' home markets than
foreign firms face entering US markets. US firms are at or near the
forefront in technological advances, especially in computers and in
medical, aerospace, and military equipment; their advantage has
narrowed since the end of World War II. The onrush of technology
largely explains the gradual development of a "two-tier labor
market" in which those at the bottom lack the education and the
professional/technical skills of those at the top and, more and
more, fail to get comparable pay raises, health insurance coverage,
and other benefits. Since 1975, practically all the gains in
household income have gone to the top 20% of households. The
response to the terrorist attacks of 11 September 2001 showed the
remarkable resilience of the economy. The war in March-April 2003
between a US-led coalition and Iraq, and the subsequent occupation
of Iraq, required major shifts in national resources to the
military. The rise in GDP in 2004-07 was undergirded by substantial
gains in labor productivity. Hurricane Katrina caused extensive
damage in the Gulf Coast region in August 2005, but had a small
impact on overall GDP growth for the year. Soaring oil prices in
2005-2007 threatened inflation and unemployment, yet the economy
continued to grow through year-end 2007. Imported oil accounts for
about two-thirds of US consumption. Long-term problems include
inadequate investment in economic infrastructure, rapidly rising
medical and pension costs of an aging population, sizable trade and
budget deficits, and stagnation of family income in the lower
economic groups. The merchandise trade deficit reached a record $847
billion in 2007. Together, these problems caused a marked reduction
in the value and status of the dollar worldwide in 2007.

GDP (pur