Scenario: Consider your last big purchase such as a car, appliances, home repairs, home purchase, computer equipment, college tuition, or another “big-ticket” item, which are often purchased using loans/financing (by borrowing money). Also consider your decision-making process that led you to choose a particular make, model, or brand of the product (or service) you purchased and whether it was the right time to make the purchase given economic conditions at the time of your purchase. While analyzing your decision, keep in mind everything from interest rates to the prices of complementary and substitute goods are driven by human economic behavior.
Develop a minimum 1,050-word analysis of your decision-making process in which you include the following:
- Retrieve statistics on Real Gross Domestic Product (GDP) and on Real Personal Consumption Expenditures (PCE) by year for the last ten years. You can retrieve those statistics from internet sources including, but not limited to, the Federal Reserve of St. Louis’s FRED web site, the U.S. Department of Commerce’s Bureau of Economic Analysis (BEA) web site, or another credible source of your choice. Post these statistics in a single worksheet of an Excel® workbook and submit your Excel® file with your report. In your report, discuss the latest 10-year trends in both GDP and PCE. Also discuss how the trends in GDP compare with trends in PCE. You are encouraged to include graphs of these statistics in your report; you could create the graphs in Excel® and copy them into your report.
- Retrieve statistics on the Effective Federal Funds Rate and on the Consumer Price Index: All Items Less Food and Energy by year for the last 30 years. You can retrieve those statistics from internet sources including, but not limited to, the Federal Reserve of St. Louis’s FRED web site, the U.S. Department of Labor’s Bureau of Labor Statistics (BLS) web site, or other credible sources of your choice. Post these statistics in a single worksheet of an Excel® workbook and submit your Excel® file with your report. In your report, discuss how the trends in the Effective Federal Funds Rate compare with trends in inflation. If you took out a loan to pay for your “big-ticket” purchase, what was the interest rate on your loan? Were interest rates rising or falling at that time? Were interest rates relatively high or low at that time? You are also encouraged to include graphs of these statistics in your report.
- Discuss the influence of any Federal government or state government programs, such as tax credits or tax deductions for energy-saving/efficiency purchases, on your decision to make your last big purchase; or if government incentives did not factor into your decision, explain why not.
- Develop conclusions about the economy’s influence on personal and business decision-making relative to purchases of big-ticket items, investments, or other major purchases.
Cite a minimum of three peer-reviewed sources. Note: The Federal Reserve of St. Louis, the Bureau of Economic Analysis, and the Bureau of Labor Statistics can be cited to fulfill this requirement.