An economy is the amount of money made and used in a particular country or region. The United States is the world’s biggest economy, accounting for roughly 16% of the global economy. The European Union, which is made up of 27 European countries, is the world’s biggest economic region, accounting for 17% of the world’s economy.
Economics look at a number of factors when considering the relative strength of an economy. One of the main considerations is the gross domestic product (GDP). GDP is a measure of all the goods and services produced in an economy and it is generally calculated on a quarterly and annual basis.
Sustained economic growth positively impacts income, employment levels, consumption, and the overall standard of living. In a strong or growing economy, businesses increase their sales, hire more people, are more confident about the future, and invest more in their companies. Consumers earn more, are more optimistic about the future, and spend more.
In the years leading up to the 2008 financial crisis, the U.S. reported annual GDP growth of around three percent. Since the 2008 and 2009 recession, U.S. GDP has been more subdued at around 2.2%.
When considering the strength of an economy, economists also look at inflation, interest rates, jobs growth, consumer demand, population growth, standard of living, and social and political factors.
By measuring this data on an annual basis, economists can determine if an economy is expanding or contracting. An economic analysis can also help investors get a general idea of market conditions and possible trends.
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