The Limits of the USA's Long-Term Economic Growth - Assignment Example

The economy was still in the phase of recovery when the recent forecast by the International Monetary Fund shattered all hopes of the US regaining its status as the world’s largest economy. The IMF forecasted that China will surpass the US by 2016 while the US will experience “slow and modest economic growth”. (US Economic Forecast, 2013)

The factors that have impeded US economic growth include a low GDP growth rate, low employment rate, dip in inflation rates, low-interest rates, and, most significantly, a major current account balance deficit and a higher debt risk. In such a scenario, the government should focus on productivity gain as a source of economic growth through “improvement in skills, economies of scale and improved technology”. (Petroff, 1986, 1990 & 2002) This would help in offsetting the effect of the law of diminishing returns, by raising productivity growth in the face of an uncontrollable population growth. Read More