Author Name: Avijit Bajpai

To understand the World Economy well, you must attain the in-depth knowledge along with updated coverage of the international economic relations. A world economy is not just restricted to the trade policy issues but also covers the wider issues like exchange rates along with International Monetary Fund/World Bank issues. In addition to this, the world economy concentrates on the debt and environmental issues that affect an economy directly or indirectly. In other words, all international issues that somehow affects or relate to the trading practices fall under the world economy. Thus, it can be said that the world economy is a system of 2 components- production relations and exchange relations on a world-scale.

Before we start discussing the major economies of the world, it is very important to understand that all the economies of the world are inter-connected. Any affect on a particular economy can make the other economies suffer as well. US Economy The US economy is the largest economy of the world. This consumer driven economy, has a GDP as large as 13.84 trillion USD. The service sector is the key of the American economy as it constitutes of 78.5 percent (2007-08) of GDP of the nation. While the industrial and agricultural sectors make 20.5 percent and 1 percent (2007-08) of the GDP respectively.

Economy of the People’s Republic of China The Chinese economy is the fastest growing economy of the world. Even after being the most populous nation of the world, China has succeeded to be the second largest economy of the world with GDP of over 6.9 trillion USD (2007-08), measured on the basis of PPP. This economy is growing at a fast pace and has lifted the Chinese out of the poverty trench with the per capita income growing at an annual rate of over 8 percent. Over the past 25 years, the foreign trade of China has grown faster than its GDP. The agricultural and industrial sector of the Chinese economy are considered to be its most important part as it employs over 70 percent of the labour and produces more than 60 percent of GDP.