The answers to the WHAT, HOW, and FOR WHOM questions are reflected in the dimensions of the economy. These answers are the product of market forces and government intervention.
Gross domestic product (GDP) is the basic measure of how much an economy produces. Real GDP measures the inflation-adjusted value of output.
The United States produces roughly $12 trillion of output, more than one-fifth of the world's total. American GDP per capita is five times the world average.
The high level of U.S. per capita GDP reflects the high productivity of American workers. Abundant capital, education, technology, training, and management all contribute to high productivity.
Over 70 percent of U.S. output consists of services. The service industries continue to grow faster than goods-producing industries.
Most of America's output consists of consumer goods and services. Investment goods account for only 18 percent of total output.
Proprietorships and partnerships outnumber corporations nearly five to one. Nevertheless, corporate America produces 90 percent of total output.
Government intervenes in the economy to establish the rules of the (market) game and to correct the market's answers to the WHAT, HOW, and FOR WHOM questions. The risk of government failure spurs the search for the right mix of market reliance and government regulation.
Incomes are distributed very unequally among households, with households in the highest income class (quintile) receiving 15 times more income than the average low-income (quintile) household.
The tax system alone does little to equalize incomes. Tax-financed transfer payments like Social Security and welfare do redistribute a significant amount of income, however.
