The United States is regarded as the world's leading economy, although this position has come under increased pressure from China, the fastest-growing economy. What are the economic goals of the U.S. that have allowed the country to maintain its position as a global economic leader? The U.S. government and policymakers seek to promote a robust economy through the Federal Reserve Bank's fiscal and monetary policies. Congress has specifically mandated the Federal Bank to implement effective economic policies in ensuring stability, efficiency, full-employment, equity, and economic growth. These economic goals are discussed in more detail in the following subsections.
1. Efficiency
The U.S. government's economic goals agenda targets efficiency. An economy is efficient if it attains a state of optimal resource allocation and reduced wastage. Economic efficiency is applied in microeconomics to designate the best possible operations of the service and commodities market. The U.S. targets economic efficiency by promoting maximum output, minimum costs, and maximum market surplus. According to experts, an efficient economy holds the capacity to improve the situation of one entity without imposing costs on another. Conversely, in an inefficient economy, one party benefits by imposing costs on another.
The economic goal of efficiency seeks a balance between benefits and costs. In determining economic efficiency, policymakers measure the ratio of output to total input. The U.S. intends to achieve this balance and guarantee the highest output level by using the least input. Alternatively, efficient market outcomes are achieved when the marginal benefit of the final output is equal to the marginal cost of production per unit. Another indicator of economic efficiency is surplus. The ideal situation is where the sum of producer and consumer surplus is maximized.
The concept of demand and supply is vital in determining and measuring economic efficiency. An efficient demand and supply model is where an optimal quantity of a commodity or service is supplied and consumed. Markedly, the relationship between supply and demand determines market prices and quantities. Maximum efficiency occurs at the equilibrium point, where there is a balance between the two.
2. Equity
Over the last decades, economic output has grown significantly, however, the fruits of this growth have not been shared equally. Economic disparity remains a key challenge in developed and developing countries alike, and addressing this trend is one of the economic goals of policymakers. There is a consensus among economic experts, scholars, policymakers, and public members that income, wealth, and opportunity inequality is unfair, and measures must be taken to amend the situation. Disagreements remain on what constitutes a fair distribution of wealth, but the U.S. remains committed to reducing poverty by promoting equity.
The U.S. is devoted to ensuring marginalized groups are protected from economic discrimination. Specifically, the country seeks adequate access to employment opportunities and government services for all citizens regardless of race, ethnicity, gender, and economic status. The government creates and enacts policies to reduce political conflict, boost social cohesion, and promote economic equality. In ensuring effectiveness, policymakers actively mobilize political support, institute microeconomic adjustments, and implement structural reforms to narrow the gap between the poor and the rich. The chances of realizing this economic goal have improved due to targeted social safety nets supporting the economically disadvantaged consumption levels.
3. Full Employment
The rate of employment is a valuable indicator of economic performance. In this case, the U.S. is committed to implementing monetary and fiscal policies that create additional employment opportunities for Americans. These decisions are based on financial analyses that apply micro and macroeconomic factors and principles in analyzing the performance potential of the economy. Such decision factors include inflation, GDP, interest rates, central bank policies, and debt. The aspects provide a framework that allows financial analysts and economists to make informed assessments of the economy and develop recommendations for improving performance.
In relation to U.S. economic goals, full employment is optimal for all available labor resources. Admittedly, full employment is a utopian ideal, and the chances of achieving it are low. The unemployment rate cannot be zero, it is more of a theoretical economic goal that U.S. policymakers aim for instead of an achievable economic state. Practically, the ideal unemployment rate should be low, because labor is recognized as an essential resource in producing commodities and providing services. Conventional economic theories hypothesize economic output as a function of capital and labor. High employment rates fuel consumer spending, which explains why it is one of the most important economic goals.
4. Stability
As an American, how would you feel if the price of an essential commodity was $10 and the next day it fluctuated to $25? Such a market would not be conducive for business or attractive to consumers. Stability is a fundamental aspect of the U.S. government's economic goals in this context, and decision-makers and policymakers seek to promote stable prices within U.S. markets. Economic stability is measured with regard to inflation or deflation. According to economic experts, inflation occurs when there is a general increase in the price of commodities and services. A substantial price reduction is another sign of an unstable economy. Deflation refers to the decrease in prices.
While inflations hurt the consumer, deflations are detrimental to the U.S. economy, despite sounding like a good deal for customers. Controlling the level of inflation is a critical role of the U.S. government through the Federal Reserve and agencies, such as the Federal Deposit Insurance Corporation (FDIC), developed to maintain market stability and confidence. The desired economic goal is a manageable inflation rate that does not compromise productivity, profitability, income, or consumption. Minimum fluctuation also stabilizes production and employment. Current studies reveal that expected or unexpected inflation imposes additional costs on households and the overall economy through arbitrary restructuring of purchasing power. An unforeseen increase in market prices adversely affects savings and fixed-income Americans. Furthermore, inflation decreases the rate of economic growth and compromises living standards. The U.S. government actively seeks price stability to protect organizations and consumers from future economic uncertainties in full realization of this.
The economic goal of stability is related to security. A stable economy supports Social Security welfare, such as retirement benefits and pension. These benefits help protect vulnerable Americans, including veterans, senior citizens, and those living with disabilities. Arguably, a stable economy is beneficial to the government, businesses, and vulnerable Americans, which explains why it is one of the main economic goals.
5. Economic Growth
Economic growth is one of the principal financial goals of the U.S. government. Economic growth refers to the increasing production of goods and services measured in the Gross Domestic Product (GDP). GDP is the total market or monetary value of all services and finished goods within a country's borders. The U.S. aims to increase the aggregate production of the economy, because economic growth correlates with increased marginal productivity, translating to higher incomes, more spending, and improved quality of life.
In microeconomics, economic growth is molded as a function of human capital, technology, physical capital, and the labor force. In this context, the Federal Reserve designs monetary and fiscal policies to improve the quality and quantity of the working population, improve economic tools and provide access to raw materials. The government believes that this strategy will increase economic output. The United States' specific strategies to grow the economy include increasing the number of physical capital goods, improving technology, expanding the labor force, and increasing human capital. An improvement in GDP means the economy has grown.
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