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.

Analyse 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:

Were you employed?

Was the economy growing or contracting (recession)?

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 Recession.”

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:

Buying fuel efficient vehicles such as Flex fuel, hybrids
and electrics

Converting existing vehicles to use alternative fuels (Flex
fuel)

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.