Cash for Clunkers Zach Barrett
Cash for clunkers was a program that was established by the government in July, 2009.Cash for clunkers can be defined as federal rebates of up to $4,500 to drivers who trade in a gas guzzler for a more fuel-efficient vehicle. This was established to help car dealers get a boost from the money drained struggling automakers and also to generate more sales taxes for cities to receive. This would result in an increase for demand of hybrids and fuel efficient cars. This would try to bring the supply down since people will use the voucher to help them be able to afford a new fuel efficient car. This will try to make an equilibrium price one could call it. This would help make people who were barely short of buying a new car be able too. What people didn’t realize was what this would mean to the supply and demand of used cars. With the world economy being in a recession the demand for used cars was at a high along with a shortage of vehicles. With the cash for clunkers being established it reduced the supply of used cars especially those with a value of 4,500 or less. This made prices on used cars increase because the people who were hurting for money bad could not afford a fancy hybrid or a new car even with a rebate over 4,ooo dollars. This plan however,did help auto dealers and manufactures make money along with help avoid layoffs and job loss in the industry. This is huge for the economy because it is said that over 10 million people rely on the auto industry as a job. This did help make July the month the program was started, to be the highest in auto sales that year. It boosted the auto industry until shortly after the program was over. Many economists such as Mark Zandi said that cash for clunkers will boost the second half’s earning, but then quickly flatten out as benefits fade out. A lot of the sales were from people that were thinking about buying a car in the future but decided to do it that year because of the government rebate being available. This will hurt the future of sales of the auto industry. Another big reason people were not fan’s of the cash for clunkers was because it was going to cost the government billions to do while the government is in debt already. In a time of recession which is explained in economics as two consecutive quarters of decline in real GDP many factors are need to fix the economy. For an economy to recover from a recession you need many different types of programs to help stimulate the economy back to where it needs to be. The big factors include businesses and people spend and invest at normal levels again, banks have to lend more freely, and unemployment needs to decline. In conclusion, cash for clunkers stimulated the economy temporarily, but was a program that was not going to single handily fix the recession that was faced.
Links: http://www.msnbc.msn.com/id/32299850/ns/business-autos/
http://www.lewrockwell.com/blog/lewrw/archives/32538.html
Works Cited
"Populist stimulus or economic clunker?." MSNBC. Associated Press, 8/5/2009. Web. 20 Mar 2011..
Kramer, David. "Cash for Clunkers program meets the law of supply and demand." N.p., 8/8/09. Web. 20 Mar 2011..
Cash for clunkers was a program that was established by the government in July, 2009.Cash for clunkers can be defined as federal rebates of up to $4,500 to drivers who trade in a gas guzzler for a more fuel-efficient vehicle. This was established to help car dealers get a boost from the money drained struggling automakers and also to generate more sales taxes for cities to receive. This would result in an increase for demand of hybrids and fuel efficient cars. This would try to bring the supply down since people will use the voucher to help them be able to afford a new fuel efficient car. This will try to make an equilibrium price one could call it. This would help make people who were barely short of buying a new car be able too. What people didn’t realize was what this would mean to the supply and demand of used cars. With the world economy being in a recession the demand for used cars was at a high along with a shortage of vehicles. With the cash for clunkers being established it reduced the supply of used cars especially those with a value of 4,500 or less. This made prices on used cars increase because the people who were hurting for money bad could not afford a fancy hybrid or a new car even with a rebate over 4,ooo dollars. This plan however,did help auto dealers and manufactures make money along with help avoid layoffs and job loss in the industry. This is huge for the economy because it is said that over 10 million people rely on the auto industry as a job. This did help make July the month the program was started, to be the highest in auto sales that year. It boosted the auto industry until shortly after the program was over. Many economists such as Mark Zandi said that cash for clunkers will boost the second half’s earning, but then quickly flatten out as benefits fade out. A lot of the sales were from people that were thinking about buying a car in the future but decided to do it that year because of the government rebate being available. This will hurt the future of sales of the auto industry. Another big reason people were not fan’s of the cash for clunkers was because it was going to cost the government billions to do while the government is in debt already. In a time of recession which is explained in economics as two consecutive quarters of decline in real GDP many factors are need to fix the economy. For an economy to recover from a recession you need many different types of programs to help stimulate the economy back to where it needs to be. The big factors include businesses and people spend and invest at normal levels again, banks have to lend more freely, and unemployment needs to decline. In conclusion, cash for clunkers stimulated the economy temporarily, but was a program that was not going to single handily fix the recession that was faced.
Links: http://www.msnbc.msn.com/id/32299850/ns/business-autos/
http://www.lewrockwell.com/blog/lewrw/archives/32538.html
Works Cited
"Populist stimulus or economic clunker?." MSNBC. Associated Press, 8/5/2009. Web. 20 Mar 2011.
Kramer, David. "Cash for Clunkers program meets the law of supply and demand." N.p., 8/8/09. Web. 20 Mar 2011.
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