The United States of America has a capitalistic and mixed economy that is highly fuelled by the abundance of the existing natural resources, very high productivity as well as the well developed infrastructure. According to the research that has been done by the international monetary fund the gross domestic product of the American economy is more than 13 trillion dollars and this constitutes 20% of the global gross domestic product. (Bivens, 2004) Different aspects why demand and supply would fluctuate over time
There is a common belief that when the economic forces are unfettered then the supply and demand will further determine the prices of the goods and services. Similarly the prices of the goods and services further tell the businesses what to produce and if the peoples demand of certain goods or services are higher than the economy is producing then the prices will go higher. This however catches the attention of the other companies since they sense an opportunity to earn more profits and start producing more of the demanded good or service.
(Coase 1999) Similarly if the people want less of a good or service then the prices fall and there is less competition between the producers who either go out of that business to start the production of different goods or services. The different aspects that affect the fluctuations of supply and demand over time are inclusive of the prices, income and expenditure, numbers of buyers and sellers, the prices of other goods and services, tastes and preferences, future expectations and also quality of the goods and services.
Price is the most important determinant of demand and also supply. A shift in the prices affects the quantity of goods that are demanded for by the consumers and also the quantity of goods and services supplied by the sellers. The changes in the income of the consumers can also cause fluctuations in demand and supply of goods and services. Such that when the income of the consumers increases then their purchasing power also increases and this further leads them to demand more goods and services thus the sellers will also increase on their supply of the goods and services.
On the other hand if the income of the buyer’s decreases then their purchasing power will also decrease and this will cause them to buy less goods and services and the sellers will supply less since the demand from the consumers is less. On the other hand if there are more buyers demanding a particular good or service then there will be a high supply for the same but if the demand is low then the supply will also be low since the supply of goods and services is dependent on their demand from the consumers. The numbers of buyers and sellers thus affect the fluctuations of demand and supply of goods and services.
(Associated Press 2006) The prices of the other related goods and services also affect their demand as well as supply. This is because the consumers will always demand more of the goods and services that are fairly priced other than those that are highly priced. The lowly priced goods and services get more demand from the consumers and thus they are supplied more by the sellers than the highly priced goods and services. Similarly the consumer’s tastes and also preferences further affect the fluctuations of demand and supply.
This is because the consumers will demand more of the goods and services which they prefer most and thus the sellers will supply more of the goods and services that are preferred more by the consumers. On the other hand the sellers will supply more of what the consumers demand as per their preference and this will further reduce the supply of the goods and services that are not liked by the consumers. The successes of the American government in running its economy over the last 3 years Over the last three years the American government has achieved various successes in running the country’s economy.
First and foremost the government has ensured that the employment levels further remains low at 4. 7 %. In the last two years the economy in America generated over 2 million new jobs which was a major economic expansion in that period and it was also the longest and continuous record of the jobs expansion in the American national history. (John 1999) Similarly the rate of inflation in the country has remained low at a rate of 2%. On the other hand the American government has ensured that the productivity growth of the country is very strong and it averages 2.
5% per annum since the year 2001 which is a very stronger pace than in the past years. The government has also ensured that the workers wages are constantly rising such that for an overall increase of 12% since the inauguration of the current president the results in a real and after tax adjustments for the rate of inflation has increased to over $ 3,500 per person. (Cauchon and John 2004) Despite the returning of over one trillion US dollars to the American taxpayers through the tax cuts, the tax revenues have escalated to over 37% in the last three years.
The tax revenues to the federal government during the year 2006 increased by 11. 8% and in the year 2007 the revenues are expected to be greater than the previous year by 7%. The total amount of the money flowing into the treasury of the federal government is very high and the pro-growth and tax cuts policies have further increased the taxes collected by the government. The president’s tax cuts have further resulted in the removal of over five million Americans from the tax rolls and there has been an entire elimination of their taxes.
The current government is fighting hard so as to ensure that tax cuts are made permanent so as to ensure that the lower income earners in America are not once again added into the tax rolls. The expected current deficit is approximately $205 billion and it is $43 billion less than the last year and it represents just about 1. 5% of America’s gross domestic product. Even though the country’s deficits have gone down in the last three years because of the global war on terror and also the tax cuts the country’s economy has still been on a very good track.
The current economic expansions duration is very remarkable and it beats the country’s expansions in the previous past. Since it has achieved a job growth of 49; straight months and nearly six years of the growth of GDP which is uninterrupted including a rate growth of 3. 8%in the last quarter. On the other hand the corporate profits are very strong and the stock market has also increased by more than 30%in the long term since the year 2001 and 9% in the short term since this year in august. The country’s economy has become very diversified resilient and also flexible.
This is because the government has been capitalizing on adapting to global market place so as to ensure that the Americans compete and will in the global market place and also that the American businesses and workers have access to the global market place. The Americas exports have grown tremendously by 11% over the last year strengthening the economy more and this could be a reflection of the country’s ability to achieve great success in the global market place. The exports nationally have grown more than twice as fast as the imports and this has further driven the nation to prosperity.
On the other hand the government has opened the global markets to the companies in America in the free trade agreements with more than 16 countries. (National Bureau of Economic Research USA 2007) These will further provide the country an access to over 130 million consumers in the emerging global markets and this will be a representation of a combined GDP of an approximate one trillion US dollars. The free trade agreements have led to the elimination of tariffs and other barriers to the American products and services being exported to other countries.
The trade agreements have also promoted economic growth in the country by strengthening the economic ties between America and other nations. In general the American government has been very successful in running the country’s economy over the last three years summarily in the following ways; ? Stabilization of the economy and economic growth ? Regulation and control of the private sector ? Provision of direct services to businesses and individuals ? Provision of direct assistance to businesses and individuals ? Controlling the levels of Poverty and inequality
An analysis of the US economy over the last three years America has the largest gross domestic product in the world and it is also ranked as the eighth in the nominal per capita GDP in the world. In the year 2006 its gross domestic product was $13. 21. The American economy is a mixed economy as it has corporations and other private firms making the major decisions in the micro-economic sector under the governments’ regulations. (Chandler 1999) Thy economy in America maintains a very high per capita income in comparison to all the other major economies in the world.
The major economic concerns in America are inclusive of the entitlement liabilities, external debt, national debt, a low savings rate, consumer debt, and a very large deficit in the country’s current account. The United States of America economy is complicated and very large but it has some easily identifiable features. One of these features is the freedom that exists in the economic decision making process for both the corporations and individuals. This feature has further enhanced a low level of taxation, regulation and also government involvement. (U. S. Dept of Commerce 2006)
The key contributors to the Americas economic performance are inclusive of the large population, the numerous natural resources, the large land area, the stability of the government and also the well developed post-secondary education system in the country. Over the last three years the US economy has had a major growth since the extensive waterways have helped in shaping the country’s economic growth by binding the individual states to a sole economic unit. (King 1999) On the other hand in the recent past there has been a very steady growth in the labour force in America and this has fuelled an almost constant expansion in the economy.
The country has also had immigrants from other countries that are often willing to work for minimal wages and they earn more in America than in their native countries and this has lead to the expansion of the American economy as it absorbs even more newcomers. Over the past three years the strong emphasis on the American education including the vocational and technical training has been a major contribution to the success of the country’s economy. In the American economic system the state and the federal governments have developed rules and regulations so as to ensure that the financial system is sound.
(Bureau of Economic Analysis 2006) The free enterprise system in the American economy highly emphasizes on the private ownership. However the smart tax policy is a very key ingredient in America’s economic growth and the moves of the tax policy in the last three years has had a significant impact on the country’s economic economy. (Buchanan 2001) This influence has been particularly evident when the congress passed the tax cuts that created strong incentives for investments and this highly spurred the economic engine of America.
During the past three years the American economy has further experienced an economic recovery with a growth in the domestic product of above three percent per year. (Alfred 2004) There is also an increased after tax per capita personal income and this means that more than thirty percent of the nations net worth has been increased since the tax cuts policy was instigated. The country’s real wages have also grown highly and this has led to an increment in the family earnings. (Brueckner 2003)