Economics Paper

Terrorist Activities: Brief Assessment As To The Current State Of The Economy : 5 pages in length. The ripple effect of September 11th's terrorist attack upon the World Trade Center and the Pentagon has created an enormous void in America's economy. With recession on everyone's mind, this unexpected and violent downslide has placed tens of thousands out of work and threatens to completely undermine the very foundation of the United States economic system. As a nervous nation looks ahead at the months to come, every indication seems to point to economic distress. Bibliography lists 3 sources. TLC_WTC.wps

TERRORIST ACTIVITIES: BRIEF ASSESSMENT AS TO THE CURRENT STATE OF THE ECONOMY

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by Lori S. Mohr-Corrigan © September 2001

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The ripple effect of September 11th's terrorist attack upon the World Trade Center and the Pentagon has created an enormous void in America's economy. With recession on everyone's mind, this unexpected and violent downslide has placed tens of thousands out of work and threatens to completely undermine the very foundation of the United States economic system. As a nervous nation looks ahead at the months to come, every indication seems to point to economic distress; according to economists, "the U.S. economy is going to experience some extremely tough times in the months ahead" (The Ripple Effect).

Concerns over inflation, unemployment and interest rates are not unfounded, inasmuch as every element necessary for a recession is currently present within the American economy. While inflation has been a constant component of an already unstable market, the United States is now experiencing an even greater separation between personal income and necessary expenditure to the point where people are finding it extremely difficult to meet basic needs. Coupled with the recent surge in unemployment rates, America's delicate economic balance has become irreparably disproportional. The cyclical aspect of this situation finds that the jobless do not spend, the employed hold fast to their money and the supply and demand for virtually every commodity comes to a screeching halt. "Consumers are like deer in the headlights. They're just paused and waiting to see what happens next" (Ripple Effect).

Federal Reserve Chairman Alan Greenspan may have lowered interests rates with the intention of creating more security in spending; however, this good faith gesture has not proven strong enough to bolster the crumbling courage of a nation in peril. "Analysts are now predicting that consumer spending -- which accounts for more than two thirds of total U.S. economic output -- will suffer even more as people choose to put off, postpone and stay in rather than go out and spend" (Ripple Effect). With tens of thousands of people losing their jobs within just a few days, there was no time to prepare for the plummeting consumer spending that occurred as a direct result of the skyrocketing unemployment rate.

Inflation and the business cycle are two economic entities that are forever intertwined. That one cannot exist without the other's influence is particularly pertinent when assessing how government attempts to minimize inflation along with the size of variations that exist in the business cycle. Samuelson's article explains why there has come to be a balance of unemployment with inflation, noting several changes that have occurred in order to achieve what economists are now forecasting. In examining the economists' findings, Samuelson is quick to point out that "estimating the natural rate involves much guesswork" (Samuelson 33), contending that even with the guaranteed existence of such business cycles, "this elevates everyone's lifetime job prospects" (Samuelson 33).

An example of this existed in the 1980s, which marked what was to be a significant modification in both the economical and political structure of the oil market. The Iran-Iraq war, which ushered in the decade, was to pose a considerable problem for the market's structure, sending industry experts into a spin in fear of the impending major price shock. However, there were a number of considerations beyond the Iran-Iraq war that had the 1980's up in arms about its current oil market situation, including the implications of the gross national product (GNP), the overall supply and demand cycle, as well as the existing price structure. These elements, which represent the foundation of any expert's forecast, were not that easily surmised back in the 1980's, what with all the international upheaval.

Examining the potential of war twenty years later, the year 2001 finds the United States on the brink of an entirely different battle, one that does not provide a promise for economic stability. Historically, wartime activities have meant a boost in the economy, with people dying in exchange for the country's financial solvency. This time, however, things are quite changed in the way in which the war will be waged, threatening to not only withhold