Macro Measures and the U.S. Auto Industry

This paper assesses the probable effects on the automobile manufacturing industry in the United States of projected trends in six macroeconomic measures applicable to the economy of the United States. The (a) six macroeconomic measures, (b) projected trends in these measures, and (c) probable effects of these projected trends on the automobile manufacturing industry in the United States are as follows:

Real GDP: Real GDP is nominal GDP adjusted for price-level changes (inflation). Real GDP is calculated in relation to a base year. GDP typically is measured in terms of rate of change for purposes of analysis.

Projected 18-month trend: The projected change over the 18-month period ending 30 September 2006 is an increase of 4.84 percent, which reflects an average annual growth rate approximating 3.2 percent.

Probable effects on the automobile manufacturing industry in the United States: The projected rate of growth in Real GDP is sufficient to allow new automobile sales in the United States to maintain existing trends. The existing growth trends, however, are modest at best. The projected growth in Real GDP is not sufficient, however, to lead to a substantial market expansion that would allow the automobile manufacturing industry in the United States to overcome (a) poor product decisions - e.g., focusing new model development on high energy consumption vehicles, (b) poor quality perceptions by consumers, and (c) loss of competitive advantage to Japa

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ies of the Bush Administration and the congressional majority). 2. From an economic perspective, what do you believe are the two most urgent issues for the country (or economy) today? How would you address these issues in the short and long term? The continuing and growing federal budget deficit is the first major problem afflicting the United States economy today. The problem is essentially the same as the problem faced in the late-1960s and early-1970s: financing a war through deficit spending in order to assure that the American people will not feel the economic pinch. The major recession of the early-1980s largely was the result of the Viet Nam War deficit financing hangover that had to be addressed. The Buss Administration is leading the country into a similar situation. The bill will come due soon if policies do not change. The solution, in the view of this writer, is for the American people to pay the economic cost of the war. Paying for the war means increasing taxes to cover the cost of the war. If the American people find the economic cost unacceptable, they can demand that the war stop. Increasing taxes to pay for the war would have short-term negative economic consequences. Such negative consequences, howe

Category: Economics - M