Influence of Economics on Household Decision Making

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Purpose of Assignment

To locate, retrieve, and evaluate the effects of macroeconomic indicators on your own decision making.

Assignment Steps

Resources: https://fred.stlouisfed.org

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 paper or 5-10 Powerepoint presentation of your decision-making process in which you include the following:

DATA ANALYSIS

  • In your web browswer, open the following graphic https://fred.stlouisfed.org/series/GDPC1 . Click on Edit Graph. Click on the Add Line tab. In the search window enter PCEC96, select the option shown then click Add Data Series. This will superimpose Real Personal Consumption Expenditures (PCE) onto Gross Domestic Product. Click on the Format tab. At the bottom of the window, click on the Line 2 Move Up button. This should reduce your chart to the 1999 – 2017 time frame. Using a screen capture program such as Jing.com make a screen shot of this chart and past it into your report. Discuss how the relationship between GDP and PCE has behaved over time and explin why this relationship exists.
  • In your web browswer, open the following graphic https://fred.stlouisfed.org/series/FPCPITOTLZGUSA . Click on Edit Graph. Click on Add Line. In the search window enter MPRIME, select the option shown then click Add Data Series. . This will superimpose the Bank Prime Loan Rate onto the annual inflation rate (CPI). Using a creen capture program such as Jing.com make a screen shot of this chart and past it into your report. Discuss how the relationship between the CPI and the Bank Prime Loan Rate has behaved over time.
  • 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?

GOVERNMENT INTERVENTION

  • 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 ticket purchase; or if government incentives did not factor into your decision, explain why not.

SUMMARY AND CONCLUSIONS

  • 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 credible sources. Note: Government publications meet this criteria.

Format your paper consistent with APA guidelines.

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