Economy Before 9-11-01: Difference between revisions
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When the terrorist attacks occurred on September 11, 2001, the US economy was already in its 3rd quarter of contraction and was generally not doing well. Therefore, the negative situation of economy after 9/11 cannot necessarily be attributed to the terrorist attacks, because several of the problems existed prior to this event. | When the terrorist attacks occurred on September 11, 2001, the US economy was already in its 3rd quarter of contraction and was generally not doing well. Therefore, the negative situation of economy after 9/11 cannot necessarily be attributed to the terrorist attacks, because several of the problems existed prior to this event. | ||
<p align="center">[[Immediate Impact]]</p> | <p align="center">[[Immediate Impact]]</p> | ||
<p align="center">[[Economic Impact of 9/11]]</p> | |||
Latest revision as of 02:06, 6 December 2007
In the years prior to 9/11, the US economy experienced a boom, followed by a significant decline. From the mid-1900's until early 2000, the economy was doing extremely well, characterized by high GDP growth, increased productivity, and low unemployment. Then, in the first quarter of 2001, GDP began contracting, and the economy went downhill from there. GDP growth slowed, production fell, and unemployment increased. Inflation rose, stock prices fell, and consumer confidence began to plummet, causing a decline in consumer spending. American businesses were severely affected by this economic slowdown, as companies experienced a decrease in profits and were forced to downsize, which further exacerbated unemployment. In the second quarter of 2001, real GDP had only grown by 0.3%, whereas GDP had grown by 1.3% in a similar period the previous year. In August 2001, the unemployment rate reached 4.9% and 6.9 million Americans were unemployed, compared to 5.5 million a year before. All of these aspects were causes and effects of one another, and they characterized an overall decrease in economic activity.
President Bush, his administration, and the Federal Reserve attempted to mitigate the country's faltering economy by boosting aggregate demand. They reduced income tax rates in several areas and sent out tax rebates to households to encourage consumer spending. Additionally, they lowered the federal funds rate and increased the money supply in the economy with the hopes of raising investment. However, no government actions seemed to help the economy, because investment was not increasing, firms continued to fire employees, and production, income, and sales were still decreasing.
When the terrorist attacks occurred on September 11, 2001, the US economy was already in its 3rd quarter of contraction and was generally not doing well. Therefore, the negative situation of economy after 9/11 cannot necessarily be attributed to the terrorist attacks, because several of the problems existed prior to this event.
