ECONOMIC CHOICE AND ECONOMIC DECISION MAKING Economic Choice and Economic Decision Making ECO 561 1 ECONOMIC CHOICE AND ECONOMIC DECISION MAKING 2 Economic Choice and Economic Decision Making Consider your last vehicle purchase and the decision making process you engaged in while
deciding what vehicle to purchase or if a new vehicle was the right decision. While analyzing your
decision, keep in mind that everything from the interest rates to the price of gasoline is driven by the
economy in one way or another.
Develop a 1,400-word analysis of your decision-making process in which you include the following: Discuss the role of the interest rate and the cost of financing on your purchase decision.
Interest rates are derived from the supply and demand for money and the actions of the
Federal Reserve System. What was the rate of interest you paid on your vehicle loan? Were
interest rates rising or falling at the time of your decision? Examine the influence of gasoline prices on the choice of vehicle you selected. Gasoline
prices rise and fall dramatically based on economic supply of and demand for crude oil.
When gasoline prices are low, Americans buy larger, heavier autos, SUV's and pick-up
trucks. When gas prices are high, Americans purchase more compact and fuel efficient
vehicles. When you purchased your last vehicle, were crude oil and gasoline prices rising or
falling? Discuss the following in regard to your household at the time of your purchase:
o Were you employed? o Was the economy growing or contracting (recession)? o If you were employed, did you take into consideration the risk that you might lose
your job if a recession occurred during the period of your loan pay-back? A basic assumption of consumers making purchases of large items requiring financing is that their
household cash flow will be adequate to cover the monthly loan payments. For most Americans, this
also means assuming continuation of their present wages. But many jobs are sensitive to rises and
falls in the business cycle, as witnessed by the 10% unemployment rate of the past "Great
Evaluate the financial trade-offs made when making your purchase. This includes lower
maintenance costs for a newer vehicle versus a car payment and higher insurance among other
factors. Discuss the influence of any of these Federal or state level programs on your decision to
purchase a vehicle; or if these did not factor into your decision, explain why or why not:
o Buying fuel efficient vehicles such as Flex fuel, hybrids and electrics o Converting existing vehicles to use alternative fuels (Flex fuel) ECONOMIC CHOICE AND ECONOMIC DECISION MAKING
o 3 Removing old, fuel inefficient, and high polluting vehicles from the highways Explain the influence of environmental factors such as emissions and health concerns on
your decision. Discuss the ways in which your purchase illustrates one piece of the circular flow model of
economic activity. What are the other parts? Develop conclusions about the economy's influence on personal and business decision
making such as purchases, investments, and so forth. Cite a minimum of three peer reviewed sources.
Format your paper consistent with APA guidelines