Macroeconomics in the Auto Industry - Inflation Essay Example

1 - Macroeconomics in the Auto Industry introduction. When gasoline prices go up many things can happen. There are two things that can happen either people will drive as less as possible or people don’t care and just keep paying whatever the oil company wants. Most of the time people will try an save as much as possible. When that happens the supply usually goes up because the demand will go down because people will try and not buy gasoline as much, however if the people don’t try and save their gas then the supply does down and the demand goes up because people will keep needing to buy gasoline, so the supply will go down.

When the demand is high and supply is down that’s what makes the prices go up even more. When it comes to the externalities associated with high gasoline prices each example is positive and negative at the same time. One example is people will try and drive as less as possible, or car pool to save gas, so they use less gas and there is less cars on the road which means that there is less pollution in the air from cars, which is really good, however, with less cars on the road the oil company won’t have to purchase as much.

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Another example is that people are going to buy more fuel efficient vehicles like hybrids, so less fuel is being used and with these vehicles on the road the automotive industry will start to lose again because people won’t need to buy vehicles as much. If gasoline prices keep escalating then that means that they will keep adding to the GDP. I however don’t think that high gasoline prices are going to fix anything.

The only thing that I believe that will help the economic well-being when it comes to gasoline prices is by lowering gas prices by opening the oil wells in the United States because if we keep buying oil from other countries, but also get our oil from our own country it will start to make the prices go down and by opening the oil wells here it will create more jobs which is also good for the economic well-being. 2. As more immigrants enter this country and enter our workforce our unemployment rates go up because our country doesn’t have any more jobs in this country and ith more people competing for the jobs that are open just makes the rate go up. If our industries keep outsourcing then sooner or later there won’t be any more jobs for us in some industries. Outsourcing is also a reason why our unemployment rate is so high. I believe poverty will hit record highs for this country because with all these immigrants there just isn’t enough supplies in this country and eventually our country will be like all those other third world countries unless something is done about it.

When immigrants send home money or supplies to their native country it affects us a lot because that money should have stayed here and be spent here. Immigrants make up a large portion of our population and they do a lot of high to low end jobs. Immigrants that come over for high skilled jobs like in technology are a great asset to our country, however, the low skilled jobs can hurt use dramatically because most of the time they need a lot more training and education that most Americans wouldn’t need.

We also have to think about the immigrants that come here to just get away from their country and do nothing while they are here. By this I mean the people that live off of our government. The people that just sit at home and get county assistance. I know from experience that it doesn’t take much to get on to county assistance and they will pay for everything including food, health care, and some even get cash assistance to pay all their bills. These are the people that are hurting our economy.

3. The Consumer Price Index was a great creation, but it also has its weaknesses. The Consumer Price Index keeps track of inflation, deflation, and helps understand the state of the economy. It also measures the spending habits of consumers, wage earners, and clerical workers. It’s a great tool because this is done yearly sometimes even quarterly. I can’t think of many weaknesses other than some of the categories should be broken down even more like unleaded compared to diesel, or adding in healthy restaurants compared to fast food restaurants.

The Consumer Price Index is a great tool and I can tell that it took a lot of time and effort to put it together. 4. The best way to measure the overall economic well-being of our economy is to use GDP because it also takes into effect of inflation which real GDP doesn’t. Inflation and deflation has one of the biggest affects on our economy and that has to be incorporated when figuring out the well-being of our economy. 5. The Federal Reserve has five main jobs. The first is to conduct monetary policy, which is, by far, the most important job.

Monetary policy is the control of the rate of growth of the money supply to foster relatively full employment, price stability, and a satisfactory rate of economic growth. The second job is to serve as a lender of last resort to commercial banks, savings banks, savings and loan associations, and credit unions. The third job is to issue currency. The fourth job is to provide banking services to the U. S. government and final to supervise and regulate our financial institutions. The Federal Reserve is made up of the Board of Governors, which is seven members nominated by the president, and subject to confirmation by the Senate.

Each member is appointed for a 14-year term and is not allowed to serve a second term, but many members don’t serve their full 14-year term. The president generally doesn’t have any control over the Board of Governors or its chairman. There are some things that Fed can do to fight a recession and they are to lower the discount rate, buy securities on the open market, and lower reserve requirements. To fight inflation they can raise the discount rate, sell securities on the open market, or raise reserve requirements.

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