US & World Economies
How the US and World Economies Impact One Another
Frequently Asked Questions
What is the largest economy in the world?
When measuring world economies by gross domestic product (GDP) in current, unadjusted prices, the U.S. is the largest economy in the world. However, if you considered purchasing power parity (PPP), China would be seen as the world’s largest economy.
Where does the U.S. rank in the world economy?
The U.S. ranks first or second in the world economy, depending on how you measure it. Based on current, unadjusted gross domestic product (GDP), the U.S. ranks No. 1. If you take purchasing power parity (PPP) into account, China ranks No. 1, and the U.S. ranks No. 2.
How does the U.S. affect the world economy?
The U.S. is one of the largest economies in the world. The U.S. contributes a good portion to the world’s gross domestic product (GDP). The process of opening world markets and expanding trade began in the U.S. and the nation is now a leading global trader. Significant growth in the U.S. could directly boost the world economy, while a contraction could also negatively impact global financial markets.
What is a market economy?
A market economy is an economic system that is based on free enterprise. That means that you as a consumer are free to choose which products or services you want to buy. You can also start or expand a business, or you can be a worker who chooses which job and employer you want to work for. Throughout it all, the government collects tax revenue from sales, income, payroll, and more.
Capitalism is an economic system where private entities own the factors of production. The four factors are entrepreneurship, capital goods, natural resources, and labor. The owners of capital goods, natural resources, and entrepreneurship exercise control through companies. Individuals own their labor.
Socialism is an economic system in which citizens share ownership of the various factors of production. That ownership is acquired through a democratically elected government, a cooperative, or a public corporation in which everyone owns shares
Communism is an economic system where the group owns the factors of production. In countries, the government represents the group and the factors of production are labor, entrepreneurship, capital goods, and natural resources. Although the government doesn't legally own the labor force, the central planners tell the people where they should work.
An oligarchy is a power structure that allows a few businesses, families, or individuals to rule. Those few ruling members have enough power to create policies that benefit them to the exclusion of the rest of society.
A command economy is one in which a central government makes all economic decisions. Either the government or a collective owns the land and the means of production. It doesn't rely on the laws of supply and demand that operate in a market economy and it ignores the customs that guide a traditional economy.
A mixed economy is a system that combines characteristics of market, command, and traditional economies. It benefits from the advantages of all three while also experiencing some of the disadvantages.
International Monetary Fund (IMF)
The International Monetary Fund (IMF) is an organization with over 180 members that works to stabilize the global economy.
A central bank is an organization that primarily manages a monetary system. The term often refers to the central bank for a country (or a group of countries like the European Union), but not every governing body uses a central bank.
Economic growth is an increase in the production of goods and services over a specific period. To be most accurate, the measurement must remove the effects of inflation.
Emerging markets are the markets of developing countries that are rapidly growing and industrializing.
Flat Tax System
A flat tax is a system that levies the same fixed percentage rate on every citizen regardless of their income. Most flat tax systems exempt those living below the poverty line. Some U.S. states use a flat tax system, as do several nations, including Russia, Latvia, and Lithuania.
US & World Economies:
International Monetary Fund. "GDP, Current Prices." Accessed Oct. 20, 2021.