What Are the Features of the Economic System of the United States?
The United States economy is the largest and most technologically advanced in the world, according to the CIA World Factbook as of March 2011. The country's gross domestic product stands at $14.7 trillion, nearly $5 trillion above the Chinese economy and $280 billion below the combined GDP of the European Union. The U.S. economic system is free-market capitalism, driven by individual initiative and free enterprise in search for profit.
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True "Free Market" Economy
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Businesses in the United States are more flexible in making decisions to increase their profit, compared to advanced capitalist economies of western Europe. Regulations on commercial law and labor law make it easier for American enterprises to expand their activities, as well as lay off employees as a means to cut off extra costs. However, lack of strict regulations means easier domestic investment, meaning that foreign businesses can enter the American market easier than U.S. businesses enter foreign markets.
Global Importance
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Apart from the sheer size of the U.S. economy, which according to the CIA World Fact Book accounts for nearly 20 percent of the world GDP, American companies are also leaders in technological products and services. Microsoft, Apple and Intel are only a few examples of U.S. domination in the global technological market. For example, Microsoft's profit for 2010 was $18.8 billion.
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Interest Rates
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As stated earlier, a basic feature of the U.S. economy is free enterprise. However, investments are costly and few companies can spend large amounts of money expecting future profit. For this reason, borrowing money from banks, which they will return with interest later, is commonplace for businesses. Low interest rates mean lower cost of borrowing, making investments and market spending easier. The U.S. economy has a history of low interest rates, rising primarily during economic downturns, such as in 2008 and 2009.
International Trade
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The United States imports large amounts of agricultural and industrial products, as well as energy resources (oil), for which domestic production is insufficient to cover the needs of the American population. International trade has been a vital element of the U.S. economy, especially in the post- World War II period. However, imports now exceed exports, leading to a trade deficit of $495.7 billion in 2010.
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