The major purchase was a personal car which was financed using a loan. The decision-making process revolved around price and the functionalities of the car. There were five cars in mind which could have succeeded to be the future car. Despite conducting extensive research on the five brands, it all boiled down to fuel efficiency and reliability. All vehicles in the list were fuel efficient and drawing the list required much deliberation concerning available funds, the maintenance of the car and economy. The car was for mobility purposes and other considerations like performance, acceleration, and braking was less important.
The final list contained Chevrolet Cruze, Volkswagen Golf, Mazda3, Ford Fiesta and Honda Civic. From the list, it is evident that all cars are cheap maybe indicating the amount of money that was to be used to buy the car. To start with, the initial budget was $18000 or below and therefore it was necessary to consider all new cars that could be bought at this price. There were options of buying a second car from the market which could otherwise be cheaper than the budgeted amount. However, buying a second car could be a challenge as its difficult to determine the condition of the car or whether its previous owner took care of it.
Delegate your assignment to our experts and they will do the rest.
The final decision was to buy a 2017 Honda Civic. Despite all brands offering features like Bluetooth, power functions and entertainment systems, the car is more powerful and roomier. The power figures for the five brands were almost similar thus they all had superb acceleration. However, the reason why Honda Civic beat the rest was because of its fuel economy. The car can do up to 31 in the city and 40 on the highway. That alone can entice any vehicle owner to buy the brand. If you decide to upgrade the car from manual transmission to CVT, the fuel efficiency can be pronounced further. In addition to the fuel efficiency and the roomier space, the car comes in four trim levels thus the features of the model beat the rest of the cars which were in the final list as potential buys. Additionally, the car offers navigation and driver assistance which gives it bonus points.
From the analysis of the car, everything revolved around features and price or cost. The buying price and the fuel efficiency were the main issues that were considered in making the final decision. It helped in deciding how much to spend on the car and the potential burden of keeping the car on the road. Price is becoming an important consideration while making any purchase. As the economy grows at a slow rate and as personal consumption expenditure remain the same, consumers are shifting to less expensive products that can provide the same benefits as more expensive products.
From the data on personal consumption expenditure, it is evident that there was a decline in the index in from 2016 where it had reported the highest value the previous year. 2016 report6ed the highest values since 2009 when the country reported its lowest value of -1.6 which is attributed to the great recession that affected the global economy. Despite the impressive increases over the years, PCE reported a decline in 2016 and 2017.
From the graph below, personal consumption expenditures affected the GDP of the country. As PEC is a factor in the GDP, a slight decline is followed by a substantial reduction in the GDP of the country. AS consumption increases, the GDP improves whereas a decline in expenditure means that the national output also reduces as people do not have the purchasing power to buy products for consumption. In tough economic times, people are likely to focus on essential commodities only and therefore expenditures in luxury and capital goods are likely to decline to lead to a sudden shrink in the GDP of the country. As people spend more, the GDP increases as factories and other production facilities increase their output to meet the growing demand from the consumers.
GDP and PCE for the U.S. economy the real GDP is as a percentage from the preceding quarterly seasonally adjusted annual rates. The contribution to the percentage change in real GDP: Personal consumption expenditure as percentage points at the annual rates, quarterly, seasonally adjusted annual rates.
The trend in the effective federal fund rate continued to decline over the thirty years period yet inflation continued to grow gradually over the same period. The federal rate in January 1987 was 6% compared to 1.3% in January 2018. The CPI, however, continued to rise implying that a loan taken in thirty years would accrue high-interest rates compared to a loan taken now. The interest rates were relatively high despite the low inflation rates experienced at the time. With time, the inflation rate and the Federal rates were almost equal. Therefore loans became cheaper as the federal rate declined
The influences of the federal government and state government on taxation influenced many customers to take loans from commercial institutions. Efforts by the government to offer tax credits encouraged borrowers as it was cheaper to finance loans. Similarly, efforts by the state government to promote fuel-efficient cars also made it possible for individuals to own cars are relatively cheaper prices as taxes were waived on cars that are environmentally friendly. The federal government is also promoting the manufacture of fuel-efficient cars that are not only environmentally friendly but also cheaper to maintain. Government incentives were also factored in the decision to purchase the car as they led to cost saving. The decision was also informed by the incentive given that the said loan was cheaper to obtain due to the influences of the federal rate. If the repayment period is shortened, it is possible to reduce the interest on the loans.
From the analysis, it is evident that the consumption purchasing expenditure influences the GDP of a country. As consumers buy products, more have to be produced to meet the increasing demand. Similarly, government efforts can stimulate consumption. Incentives, for example, can encourage the consumers to take more credit thus stimulating consumption and the ultimate outcome is an increase in the GDP of the country.
References
Board of Governors of the Federal Reserve System (US), Effective Federal Funds Rate [FEDFUNDS], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/FEDFUNDS, April 14, 2018.
Federal Funds Data - Federal Reserve Bank of New York . (2018). Apps.newyorkfed.org . Retrieved 15 April 2018, from https://apps.newyorkfed.org/markets/autorates/fed%20funds
U.S. Bureau of Labor Statistics, Consumer Price Index for All Urban Consumers: All Items Less Food and Energy [CPILFESL], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/CPILFESL, April 15, 2018.
