American Government Economy

The U .S . Economy - An Overview

With a Gross Domestic Product close to 14 Trillion at the third quarter of 2007 , the U .S . is the largest and most powerful economy in the world Often described as a market-oriented economy , the U .S . economy is influenced and controlled to a certain extent by the federal and state governments

In a three year period starting in 2004 , the U .S . economy exhibited great resiliency by weathering critical events . The aftermath of the September 11 terrorist attacks led to major shifts in national resources

br to fight global terrorism . The costly war in Iraq led to a more costly U .S . occupation in Sadam Hussein 's country . Budget , resources and human capital were huge investments in the war front . During the same period Hurricane Katrina caused extensive damage in the Gulf Coast . Again vital resources were sacrificed to aid victims and their families as well as affected areas . Soaring oil prices in 2005 and 2006 also threatened the economy specifically rising prices and the number of unemployed . This too tested the American economy to its limits

Despite these setbacks , the U .S . economy posted strong growth by the third quarter of 2007 showing that the world 's mightiest economy is as stable as ever

Looking ahead , the economy still faces long-term problems including 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

Gross Domestic Product

Starting in 2004 through the third quarter of 2007 , the U .S . Economy showed strong GDP growth - 2 .9 in 2004 , 3 .2 in 2005 and 2006 and a leap to 4 .2 at the end of the third quarter of 2007 . According to the Bureau of Economic Accounts , the increase in GDP primarily reflected increases in consumer spending , investment in equipment and software federal government spending , and residential fixed investment . The President , in his State of the Economy address in January 2007 highlighted the strong and dynamic economy , and discussed the challenges faced in keeping the economy growing . The President stressed that the U .S . economy is resilient and responsive , adding more than 7 .2 million jobs since August 2003 despite numerous challenges including a recession , corporate scandals , the 9 /11 attacks , and the worst natural disaster in American history

Consumer Price Index and Inflation

The CPI is a measure of the average change over time in the prices paid by consumers for a market basket of consumer goods and services . During the period 2004 to 2006 , CPI rose at a manageable level - indicating inflation is under control . In 2004 - CPI rose 3 .3 over the previous year . In 2005 , the rate was at 3 .4 and in 2006 it slowed down to 2 .5 The recent behavior of inflation bodes well for the long term . As inflation remains low and stable it has minimal impact on economic decisions such as the ability of businesses to...