Us Economy

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What factors led to the slowdown of the US economy in 2001? Have matters improved in 2004? Evaluate the risks of a downturn in 2005 if oil prices remain over $40 a barrel. What are the effects on the European and Asian economies?

The US economy throughout the 1990s was positive with an upward trend up to the end of the decade. The US economy was expanding at an average rate of 4.5% a year from 1996 -2000. US' GDP growth in 2000 was at 4.1%, which was very high for a developed country and when compared to other economies, e.g. Japan's 1.5% and the European Union's 3.5% GDP growth in 2000.

The economy was booming during this period, and the growth of the economy led the United States to nine years of consecutive expansion in 2000, which was the longest ever in its history.

However, the US economy suffered a slowdown in 2001 as the GDP fell to -0.4% in the third quarter of 2001. This downturn occurred within the course of a year and led to this weakest performance since the first quarter of 1991 when the economy shrank 2.0% at the end of the last recession.

This slowdown of the US economy in 2001 was due to several factors, primarily being the weaknesses in the manufacturing and IT sectors. The NASDAQ composite which was comprised of technology-related companies in 2000 suffered what came to be called the dot – com bubble burst. On March 10, 2000, the NASDAQ composite reached a record 5048.62, which was more than double the value only a year earlier. The burst of the bubble occurred possibly due to Microsoft being declared a monopoly in the US after they lost the high profile antitrust case. The build up to this dot – com bubble was due to high interests in the introduction of the internet which caused a boom in this technologically related market in the mid 90s. The stock prices soared as companies were being highly over valued until the bubble burst. This dot – com bubble in 2000 was one of the initial and important contributor to the...
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