The impact of terrorist attacks on economies

By the end of Monday, we can already see the picture of how a terrorist attack will impact on the economy. The tourist industry suffers the most: the stock prices of many French hotels fell sharply on Monday. Moreover, the currency may depreciate as the economy, which suffers a terrorist attack, is considered to be damaged. If attacks cause incredible chaos and damages, people will feel their lives in danger, thus the prices of some goods, such as food, water and first aid equipments will rise sharply. From government aspects, the spendings of all relevant governments will increase to attack terrorists and avoid future possible attacks in order to make civilians feel safe. After the Paris attacks, France launched revenge attacks on Isis; the British spy agencies plan to recruit extra 1900 staffs, and Cameron announced his £2bn of extra spending aimed at attacking Isis. However, in general, all these effects depend on the scale of terrorist attacks. If the scale is massive, like 911, the damage on the economy and the rise in government spendings will be massive; if the scale is limited, the damage on the economy and the rise in government spendings will be limited as well. In addition, any damage caused by terrorist attacks is hardly to be a systematic damage on an economy, thus terrorist attacks are almost impossible to bring one economy into recession, unless people lose their confidence in their government's ability to bring security.