Jarrett Saunders
ECON 230: Macroeconomics
7/29/22
General Motors
General Motors
As General Motors continues to grow in recent years following their filing for bankruptcy, the idea of banks policy will have a tremendous impact on the company. The economic growth can also be affecting by these banks and their policies which is why it is important that they identify these things and address them head on. In this milestone we will be going over the economic policies in place for banking along with fiscal policies in America.
According to the Board of Federal Reserve, their Monetary policy in the United States comprises the Federal Reserve’s actions and communications to promote maximum employment, stable prices, and moderate long-term interest rates—the economic goals the Congress has instructed the Federal Reserve to pursue. (Board of Govenors of the Federal Reserve System, 2022) While to some companies this might be tedious, it is put in place to better regulate companies from reaching extremes and also give the normal person a feeling of security in their job, and also rates of interest on purchases that they make. The Monetary Policy can also affect how the consumer is to spend their money, if the interest rates were to skyrocket with no regard to the average consumer, spending would shrink dramatically, companies would lose money due to this and the economy could crumble beneath itself. In recent years we see the US Central Bank make a huge increase in interest rates to combat the rise of inflation. While they are doing this to combat inflation, reports have shown falling consumer confidence, a slowing housing market, jobless claims rising, and the first contraction in business activity since 2020 (Sherman, 2022), according to BBC News.
While this affects America as a whole, we can see the idea of Auto Loans becoming less appealing to the normal consumer. While in 2020 we see the auto loan bubble soon to rupture due to the stay-at-home orders, the auto loan market will need to change to adapt to the low-income consumer that is coming out of the pandemic. (Foohey, 2021) With the interest rates sky rocketing, and the consumer purchase power being at an all-time low, the market for high end electric vehicles is not on the radar for the average consumer, which could result in lackluster quarterly earnings for General Motors as the possibility grows for a recession.
According to the International Monetary Fund, Fiscal Policy is defined as followed, “Fiscal policy is the use of government spending and taxation to influence the economy.” (Horton & El-Ganainy, 2020) With the government being in control of this large market in terms of spending and influencing economic growth, there are many ways to combat the possibility of a recession. We see that General Motors is primary affected by current supply chain issues, as reports show they have 100,000 cars sitting idle waiting for parts. This is due to the chip shortage that has recently been growing as supply chains are hitting a back log. (Ganapavaram, 2022)
Works Cited
Board of Govenors of the Federal Reserve System. (2022). Monetary Policy. Washington D.C.
Foohey, P. (2021). Bursting the Auto Loan Bubble in the Wake of COVID-19. Retrieved from Iowa Law Review: https://ilr.law.uiowa.edu/print/volume-106-issue-5/bursting-the-auto-loan-bubble-in-the-wake-of-covid-19/#:~:text=Stated%20differently%2C%20the%20auto%20loan,products%2C%20such%20as%20credit%20cards.
Ganapavaram, A. (2022, July 1). GM has nearly 100,000 vehicles sitting idle, waiting for parts amid supply crunch . Retrieved from Global News: https://globalnews.ca/news/8961395/general-motors-supply-chain-production-issues/
Horton, M., & El-Ganainy, A. (2020, February 24). Fiscal Policy: Taking and Giving Away. Retrieved from International Monetary Fund: https://www.imf.org/external/pubs/ft/fandd/basics/fiscpol.htm
Sherman, N. (2022, July 28). US makes huge interest rate rise to tame soaring prices. Retrieved from BBC News: https://www.bbc.com/news/business-62310354