Our Economy

The United States has a market economy. To be more specific, it's a mixed market economy. A mixed market economy is an economic market in which decisions are based on voluntary exchange with limited government involvement. This basically means that the people decide what is to be bought or sold, but the government has certain rules and restrictions.

The people are a major factor that affect the economy. They have many different roles in the economy. People can be workers, producers, consumers, savers, and investors. People invent products and then pay to have people to make them. Other people buy the products with the money they made making the products. With the leftover money, they save it or invest in the economy. This cycle happens every day and it boost are economy's strength. This means that people depend on one another to live in a wealthy economy.

The economy is also affected by the supply and demand. Supply is the amount of a good or service that is available for purchase. The demand is the desire to buy a good or service. The relationship between the two is the driving force for the economy. When the demand increases the prices rise. The producers respond to the increase in demand by supplying more which increases prices and decreases prices. When the demand is too great for the supply, it is called scarcity. When the supply exceeds the demand there is a surplus of the good or service.

The value of the dollar is another factor involved in the strength of the economy. The value you of a dollar used to be based on the amount of gold and silver held by the federal government. But today, the value if a dollar is based on the amount of goods and services that it can purchase. That power depends on the number of dollars people have and the quantity of goods and services produced in a country each year or the gross domestic product (GDP). If the number of dollars increase rapidly without a corresponding rise in the GDP the result will be inflation. Inflation increases the price of all goods and services.

The economy is also based on the nation's interdependency. All countries depend on one another to make money. They produce and trade good with other countries. The amount of goods imported and exported in a country is a major way for a country to keep its economy healthy.