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Chapter 21/Is U.S. Economic Leadership Threatened?
CHAPTER 21
IS U.S. ECONOMIC LEADERSHIP
THREATENED?
TEST YOURSELF
1. In what ways is the United States still an economic leader in the world? In what
ways has it fallen behind other nations?
The United States still leads the world in productivity but is slipping when compared to
the growth rates in productivity with other nations. The United States still has some of
2. What factors—both recent and past—have contributed to the U.S. national debt?
The national debt is the accumulated sum of past fiscal deficits and surpluses. Because
the United States has ran deficits almost continuously (except for a few years during the
3. What factors have helped to spur the exceptional economic growth in America since
the Industrial Revolution?
Investments in our labor force through investments in health, education and training
programs, investments in private and public capital accumulation, investment in technology
4. What is the cost disease of the personal services and how does it affect expenditures
on education and health care in the United States (and other wealthy nations)?
The cost disease of the personal services is the tendency of the costs and the prices of
these services to rise persistently faster than those of the average output in the economy.
Chapter 21/Is U.S. Economic Leadership Threatened?
DISCUSSION QUESTIONS
1. The trade deficit is sometimes cited as a prime example of American decline.
Explain why this notion is not accurate.
This notion is not accurate because trade is inevitably a “two-way street.” Although the
United States may temporarily experience a trade deficit because it is importing more
2. Explain how innovative entrepreneurs have contributed to the exceptional growth in
the U.S. economy.
3. Discuss how education funding in the United States differs from many other
developed nations and explain how this affects U.S. students’ scores on international
achievement tests.
Education is predominately funded in the United States through local property taxes.
Therefore, poor neighborhoods are at a disadvantage in educational opportunities
4. In recent decades, how have poverty and inequality changed in the United States?
Discuss how these trends might affect future economic growth.
Poverty and inequality have worsened rather significantly in recent decades—particularly
since 1980. Greater income and wealth inequality can create a vicious cycle—where
stagnant or lower incomes for the majority result in fewer tax revenues collected by
