Us Economy Essay, Research Paper

U.S. Economy Shrinks

During the third quarter, a falling GDP has the economists worried that the U. S.

economy is heading towards a recession. The GDP (Gross National Product) fell at a rate

of 0.4 percent in the third quarter -a sharp decline from the 0.3 percent increase during the

second quarter of this year. This decline was disappointing to the commerce Department

which only expected a 0.1 percent decline. The decline was the lowest in ten years and

economists expect the fourth quarter to even be worse.

The Federal Reserve will probably cut short-term interest rates by a

half-percentage point instead of a quarter-percentage point to encourage consumer

spending. They have already cut them nine times this year ( two times since the terrorist

attack on September 11). The third showed consumer spending had dropped from 2.5

percent in the second quarter to 1.2 percent in the third quarter which is another indication

that even the consumer is cautious, believing a recession is inevitable. The war and layoffs

have added to the poor economic forecast. Bush is urging Congress to pass another

stimulus package, but Democratic members are still reeling from Bush s last legislation

which they believed favored corporations and did not stimulate consumer spending or

confidence. The outlook is bleak and it looks as if another recession is inevitable