State Of The Economy 2002

            
             It is difficult to declare a definite economic state. To declare that the nation is in a recession may be a bit of an overstatement, but it is also difficult to ignore the fact that stock market prices are at some of its lowest points in history. An argument can be made both ways, but based on decisions made by the Federal Reserve Board, current interest rates, employment standings, and GDP; it is probably safe to say that though the economy is weak, it is recovering. .
             Our Federal Reserve's main duty is to monitor our fiscal and monetary policies. When the Federal Reserve lowers the interest rate in a recession or a weak economy in an effort to try and stimulate economic growth. Thus, on November 6, 2002, Alan Greenspan has, as the Chairman of the Federal Reserve Board, lowered interest rates an additional 0.5%, bringing it to a benchmarking 1.25% short-term interest rate, the lowest its been since 1961 (Berry par 2). As a result of the surprising half point decrease, the Dow Jones Industrial Average finished up 92.74 points at 8771.01. The broader S&P 500 climbed 8.37 to 923.76. The tech-heavy Nasdaq rose 17.82 to 1418.99 (Osbourne par 1). Already posing a positive impact on the stock market, it is projected that the rate cut will stimulate the economy and boast consumer confidence. The lower rate only applies to short-term loans and leaves long-term mortgages, 15 years and above, alone. Although the Federal Reserve already believes that the current interest rate is more than enough to stimulate the economy, they decided to lower it an additional half a percent, helping to bring some relief to companies on short term loans. By lowering costs, companies are able to reap in higher profits. Higher profits, in turn, would give businesses the wherewithal to spend. The unemployment rate for the past five months has been staying relatively stable at an average of 5.76% (ESBR 2002). Because of the higher profits that are taken in with the lower interest rates, companies are more inclined to invest which will in turn create new jobs.