The American Economy

1. The American Economy By Salma Hussein

2. Introduction The American economy is built largely on production and production makes goods and services possible. The factors of protection provide the means for a society to produce its goods and services. Productivity relates to the affiant use of resources . Productivity tends to go up when workers specialize and the things that they do best. The economic system of the United States is based on capitalism and free enterprise. Important characteristics are markets, economic freedom, private property rights, competition, the profit motive, voluntary exchange. Consumer advocates promote the following consumer rights: the right to safety to be informed to choose to be heard and to redress.

3. Factors of Production • Natural Resources- Refer to all of the “gifts of nature” that make production possible. Forests, mineral deposits, abundant rainfall and fertile fields are examples of natural resources. • Labor- Is the nations labor force or human resources used for work. Labor refers to both physical and mental effort that people contribute to the production of goods and services. • Capital- Is the tools, machinery and buildings used to make other products. Trucks, hammers, saws and drills are examples of capital goods. • Entrepreneurs- Individuals who start new businesses, introduce new products and improve management techniques.

4. Gross Domestic product (GDP) One way of measuring the economy’s success and size is Gross Domestic Product (GDP). This is the total value, in dollars, of all final goods and services produced in a country during a single year. The Gross Domestic Product helps economists determine whether the economy is growing or shrinking. It is also one measure of our standard of living. Standard living is the quality of life based on the possession of necessities and luxuries that make life easier and the Gross Domestic Product measures it.

5. Circular Flow of Economic One model economists use to study a market economy is the circular flow of economic activity. The circular flow illustrates the movement of goods and services and the relationship between different economic sectors. The diagram below shows the major groups of decision makers and the major markets in the market system. The Factor and Product Market

6. Economic Growth The more goods and services that are being sold. Growth in the Economy occurs when a nation's total output of goods and services increases over time. This means that the circular flow becomes larger, with more factors of production, goods and services flowing in one direction and more payment flowing in the opposite direction. Meaning that if there are more goods and services that are being sold, there will be a lot of payment or money going back to the producers. The more money or payments the producers receive.

7. Productivity There are 3 things that help the growth of the economy- Productivity, Specialization and Division of Labor. • Productivity isto produce goods and services that have exchange value. • Specialization takes place when people concentrate on goods and services that they can produce better than anyone else. • The Division of Labor is the breaking down of a job into separate, small tasks which can performed by different workers. Specialization and division of labor are linked to improving productivity. When people specialize, they are usually far more productive than if they attempt to do many other things at the same time. Division of labor is a form of specialization improves productivity.

8. Features of Capitalism • The economy of the United States is built largely on free markets and private ownership known as Capitalism. Free enterprise is another term used to describe the American economy. In a free enterprise economy, consumers enjoy many economic rights and protections. The Features of Capitalism are: • Markets • Economic Freedom • Private Property Rights • Competition • The Profit Motive • Voluntary Exchange

9. The Spread of Capitalism The idea of Capitalism developed gradually from the changes in medieval and early modern Europe over hundreds of years. Two important concepts laid the foundation for the market system that is at the heart of capitalism. The first concept was that people could work for economic gain. The second was that government should have a very limited role in the economy.

10. Consumer Rights • Through much of history, consumer rights can be summed up in one phrase: “caveat emptor” or “let the buyer beware”. This phrase probably stresses the significance to let the buyer beware of the products that they purchase. Ina free enterprise economy, there is a lot of responsibilities on consumers to be informed about the safety and appropriate of the product they purchase. Consumerism is a movement to educate buyers about the purchase they make and to demand better and safer products from manufacturers..To assure consumer safety the United States government passed a number of laws to protect consumer rights. These rights are: • Right to a Safe Product • Right to be Informed • Right to Choose • Right to be Heard • Right to Redress .

11. Your Roles As a Consumer Your role as a consumer depends on your available income and how much of it you choose to spend or save. Income can be both disposable and discretionary. You also have to make decision on how else to spend your money which is kid of like opportunity cost. While also you should start your own budget to reach any financial gain. Saving can help tremendously if your goal is to invest in a business or buy something that we simply want.

12. Conclusion The American economy is in constant change and struggle. The American economy has accomplished so many things. We have resources necessary to produce goods like books, cars, and services like haircuts and home repair. Also, the gross domestic product to measure the total value of the goods and services and the standard of living. We have a circular flow of 4 sectors and 2 markets. Economic growth is vital because it increases people’s standard of living.Although the growth comes from productivity, it also comes from specialization and division of labor. In a free enterprise system, there are markets, economic freedom, private property, competition, the profit motive and voluntary exchange.

13. Analysis In my opinion, it is a good thing that people can work for economic gain. In our economic system, we have markets where we can exchange goods and services. We can also choose what and how we choose our lives when it comes to economic decisions. In this economy, we are allowed to own, use, or dispose of our own property as we choose to.. We also have competition where sellers keeps the cost of production low and the quality of the goods higher than they would be otherwise. Under free enterprise and capitalism, people are free to risk their savings or any part of their wealth in a business venture and freely engage in a market transactions. I agree it is also a good idea that the government should have a very limited role in the economy. I believe that the government should only help out when businesses ask for it.