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In the U.S, the economic system is capitalistic. The economic system in which the private sector owns the capital goods by making investments instead of the government is called capitalism. It is differentiated by the ascertainment of prices, distribution, and production of goods via competitive markets. Key Elements of the U.S Economic System In U.S…
In the U.S, the economic system is capitalistic. The economic system in which the private sector owns the capital goods by making investments instead of the government is called capitalism. It is differentiated by the ascertainment of prices, distribution, and production of goods via competitive markets.
In U.S economic system, the first basic element is natural resources. The U.S has abundant mineral resources and it also comprises rich farm soil. The climate in the U.S is also very moderate. Its extensive coastlines are present on both the Pacific and Atlantic oceans. These vast waterways play a great role in shaping the economic growth of the country and also have bound the 50 states of America in a powerful economic unit.
The second key element of the U.S economic system is labor; the goods are converted from natural resources by the labor. An economy’s health highly depends upon the number of workers and their level of productivity. The U.S history has witnessed steady progress in its labor force and it has helped the US economic system to expand.
The U.S economic system is considered a mixed economic system. In a mixed economy, both the government and private sector play significant roles. The American system of free enterprise stresses private ownership. Most services and goods are produced by private businesses. 6.67% of the complete economic output is meant for people to be used individually whereas the rest is for the government. The U.S economy is also called the “consumer economy” as consumers play a great role.
The Americans believe that economic forces should be free and supply and demand should determine the cost of services and goods. Then, prices tell what should be produced for businesses. The prices rise when the demand for a specific good is more than its current production. It motivates other companies to start production of such goods and also earn profits for themselves. Contrarily, the prices fall if a good is less needed by the people. It producers either start producing something else or either abolish their businesses.
The government comprises multiple tools through which they can interfere in the market whenever it is necessary. These tools are regulations, price ceilings, price floors, taxes, quotas, tariffs, and anti-trust laws.
While the economy is majorly molded by the decisions made by the producers and the consumers, the government activities also comprise a powerful influence over the U.S economic system. Following are some ways the government influences the U.S economy.
The pace of overall economic activities is guided by the central government. The government attempts to maintain high employment levels, price stability, and steady growth. By adjusting tax rates and spending, controlling the credit use, and managing the supply of money, the government can either speed up or slow down the rate of economic growth.
The central government of the U.S uses numerous ways for the regulation of private enterprise. There are two categories of regulation. Economic regulation, indirectly or directly, seeks to control the prices. Usually, the government prevents monopolies, for instance, from the rising prices of electric utilities beyond the reasonable profit levels. Sometimes, the government also extends the control of the economy to other industries as well.
Each government level provides multiple direct services. The national defense is the responsibility of the federal government. The federal government also provides validations to scientific research and contributes towards the development of innovation. It is responsible for space exploration and conducts programs to develop workplace expertise in the workers. The spending made by the government significantly influences the regional and local economies.
The government also helps individuals and businesses in many ways. It offers technical assistance and interest of low loans to small-scale businesses and students. The government also promotes exports. It prevents foreign states from developing trade barriers so that imports would not be restricted. It also purchases home mortgages and turns them into securities to encourage home lending.