Economic problems of the USA Essay Example | Topics and Well Written Essays - 2000 words

Economic problems of the USA - Essay Example AS-AD model will be used to determine the aggregate demand and supply of the country. The report also highlights measures taken by the government to recover from the economic problems along with the reasons behind government’s decisions for such measures. The evaluation of effectiveness and shortcomings of government measures is done to explore the net benefit of the measures to economy. The report will attempt to suggest the solutions of US economic crises of manufacturing concerns, balance of imports and exports and economic sustainability of the country. SUMMARY The Article reports about economic problems faced by the U.S. since almost past decade. The United States is going through the economic adversity or disaster on a very high scale for the last decade. The article refers that despite suffering, majority of people of U.S. are giving less or no attention to the sources of the current economic decline (Heffner, 2012). The article states that U.S. nation has become a seco nd class country in many aspects Reasons cited in the article for the above statement includes facts that United States no longer produce what they require to sustain their selves; the extensively increased imports than exports resulting in selling off U.S. assets and taking on huge debts to maintain a living standard. The article also refers to an important aspect of the US condition in international context. IT refers that it is the game plan of the US global challengers is to make the US totally reliant on overseas manufacturing, modernization and financing. In losing domestic self-reliance, nationalized security and power – the foreign affairs of a country will suffer to a great extent. Referring to impact of the current situation, the author of the article states that US is getting weakened even to admit greedy foreign trade practices bringing in depression US industry. Instead the economic players are giving confidence to US manufacturers to plan, engineer, and manufact ure in third world markets to minimize the production cost like Mexico and China. The article in addition to the problems being highlighted has also referred to the solution such as carefully managing access to market, re-assessing trade practices etc. (Economy in Crisis, n.d.). DISCUSSION OF THE ECONOMIC PROBLEMS ISSUES: Causes of Problem: High labor wage rates in U.S.: U.S. is facing challenge of high labor wage rate for the last few years due to which the cost of production or manufacturing in the US increased. To survive competitively in this situation U.S. started to shift its production or manufacturing plants in low wage rate countries like China and Mexico where cost of production is significantly cheaper as compared to U.S.. This prevailing situation in the economy bringing down the US manufacturing sector continuously giving rise to import and pressuring the import bill. Service sector growth downsizes the manufacturing and production industry: In the last two decades a bi g portion of investment in the U.S. have been shifted towards the service industry sector because of high manufacturing cost and low margin profits. The service industry of US is contributing 79.7% in the economy, 1.2% is the contribution of agriculture industry and 19.1% by manufacturing industry (CIA, 2012). With this huge side transferred to service sector it has made the manufacturing side weaker in the US and hence large number low wage labor force in US has become unemployed. Higher imports from china and other countries because of low cost: the prevailing situation in the economy of US for the last two decades has increased the percentage of imports over exports in the economy. The final manufactured goods are the major imports of