Explore BrainMass

effect on interest rates, unemployment, and other factors after 9/11

Detail how the federal reserve kept the US from sliding into a deeper recession after september 11, 2001. In your description, adress in detail the effect on interest rayes, unemployment, consumption, investment, and net export spending, the multiplier effect, and Real GDP.

Solution Preview

The rate of consumption after the 9/11 fell. However, the spending from the Federal Reserve ensured that the confidence was not eroded further and the level of consumption remained at a level that was higher than what would have been the case if the intervention did not take place. The federal spending ensured that the multiplier effect took place and the spending as well as the employment increased. The tendency of the people to hold on to the money fell.The events of September 11, perhaps, were the trigger that moved the economy to a serious recession. In addition to the terrible immediate toll September 11 took there has been a lingering effect on the job market.
The effect on unemployment was that the federal reserves spending ensured that out put increased and so did the employment rate. The net effect of the federal reserve was that even though the employment fell, the rate of fall was much lower than what it would have been had there been no federal reserves.
The current unemployment rate is 5.9% which is near a seven-year high. In July 2002, there were 8.3 million unemployed Americans.
In March, President Bush signed the Recession Relief package which included an extension of unemployment benefits. The President said "The bill I sign this morning will allow the extension of jobless benefits by another 13 weeks, and even longer in states with high unemployment rates. ...

Solution Summary

Demonstrate the effects on interest rates, unemployment, and other factors after 9/11.