the recession caused by 9/11; The macroeconomic effects

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The Effects of 9 /11 on the US Economy : An Assessment

The terrorist attacks on the World Trade Center and the Pentagon on September 11 , 2001 signaled a turning point in US history . The attacks impacted the nation on multiple levels , ranging from the effect on people 's moral psyche to redefining the country 's international relations and major policies . In the months following the attacks , one of the foremost areas of concern was the downturn in the US economy The decline in average real

income , increasing unemployment , and recession within most industries , were widely attributed to the 9 /11 episode . This aims to present an objective analysis of the nature and extent of the macroeconomic effects of 9 /11 , taking into consideration the existing state of the economy during that period , the major economic areas affected , and the overall short term and long term effects of these factors on recession

Existing State of the Economy in 2001

The US economy was undergoing a transition during 2000-2002 . The growth rate had spiked sharply after 1997 , and between1999 and the first half of 2000 the U .S . economy was growing at between 3 and 5 per year . The unemployment rate at 3 .9 was the lowest in 30 years , suggesting excessive demand in the market (Makinen 12 . However , such growth rate is not sustainable , and the US economy was expected to decline and settle to a lower-growth , but more stable , environment . But the combined effect of rising oil prices , decreasing investment in the hi-tech sector , and the US 's constantly widening trade deficit caused a decline in stock prices and subsequently affected consumer confidence In to curb inflation risk and to reduce GDP growth to a more sustainable rate , the Federal Reserve began to tighten credit and reduce interest rates on Federal funds in 1998 . By early 2001 , the interest rate had dropped 2 percent , clearly indicating the slowdown in the economy . The federal interest rate was now 4 ? percent , the lowest level since 1994 "The World Economy " 35 United States Percentage Change from previous year 1997 1998 1999 2000 2001

Consumption peaked in 1999-2000 , and then increased by only 2 .7 in 2001 . Consumption 3 .6 4 .7 5 .3 5 .3 2 .7

Investment : housing 2 8 .3 6 .4 -0 .5 1

Government : consumption 1 .8 1 .5 2 .1 2 2

Investment peaked in 1999 , in 2001 it increased by only 4 .2 from previous year Investment 5 5 8 .8 6 .2 4 .6

br Export volumes 12 .3 2 .3 2 .9 9 6 .2

Import volumes 13 .7 11 .9 10 .7 13 .5 7 .9

Abrupt decrease in GDP growth GDP 4 .4 4 .4 4 .2 5 1 .6

Average earnings 2 .4 4 .8 3 4 .3 4 .8

Private consumption deflator 1 .9 1 .1 1 .8 2 .4 2 .1 Increase in unemployed Unemployment 4 .9 4 .5 4 .2 4...