America, being one of the strongest economies in the world has a definite impact on the rest of the world. It has become imperative to analyze further for a better perspective. The current scenario in the economy is flooded with increasing costs especially in the energy and business sector, leading to inflation. The other leading question pertains to the credit problems of the nation. The outlook of the economy will depend on these two views with strong impacts on the public. Recession is when there is a contraction GDP for two consecutive quarters. According to the CIA-one of the trusted fact books, the GDP-real growth rate is at 2%, Inflation rate is at 2.96%, Unemployment rate at 4.6%. Over the last few months, the dollar is weak, the consumer spending has slowed down and the re Signs of Lying al estate sector has taken a bad hit. The unemployment rate has risen to 6.1% in August 2008, though there has been a marginal increase in the rate of the economy to 3.3. %, the productivity rate is strong at 3.4 %. With the Feds fiddling with the interest rates over the last year, their oversight in regulations has led to mortgage meltdown and banks like Lehman Brothers, Merrill Lynch, AIG; along with the rest of the economy is facing a financial crisis. The system seems to have fallen into a habit of privatizing the gains (in the name of executive compensation) and socializing the losses and further, plummeting the economy of the nation. The government has issued a rescue plan – Emergency Economic Stabilization Act, 2008 to meet the above mentioned challenges in American Economy.