The Four Pillars of the U.S. Economy The U.S. economy is driven by four key factors: 1/ Consumer Spending (about 70% of GDP): This is the largest factor, driven by the purchase of goods and services, often funded through credit or loans. When consumer spending increases, businesses grow, and the economy expands. 2/ Business Investment (15-20% of GDP): Companies invest in new technologies, equipment, and expansion, thereby promoting productivity and creating jobs. 3/ Government Spending (15-20% of GDP): Infrastructure, defense, and social programs provide stability and economic stimulus, especially during economic downturns. 4/ Net Exports (smaller, typically negative): The U.S. usually imports more than it exports, resulting in a trade deficit that affects the overall economic balance. The Role of Credit in Economic Growth Since consumer spending and business investment heavily rely on credit, access to low-interest borrowing is crucial for economic expansion. When borrowing costs rise due to increasing interest rates, spending slows down, which can lead to economic contraction or recession. This makes the Federal Reserve's policies, particularly interest rate decisions, a key factor in influencing the economic cycle.