clearly state your assumptions about general economic growth and cyclical moveme
ID: 2745113 • Letter: C
Question
clearly state your assumptions about general economic growth and cyclical movements, interest rates (level and term structure), and potential developments in individual industries and regional economies (e.g., agriculture, energy, Asian Markets). Primarily, discuss how the federal regulatory agencies' capital adequacy policy, in the form of risk-based capital adequacy standards and Prompt Corrective Action, might affect financial institution soundness, costs of moral hazard and portfolio choices.
Explanation / Answer
The field of economics is divided into two subfields: macroeconomics and microeconomics. Macroeconomics is the study of the economy as a whole. It examines the cyclical movements and trends in economy-wide phenomena, such as unemployment, inflation, economic growth, money supply, budget deficits, and exchange rates. By contrast, microeconomics focuses on the individual parts of the economy. It studies decision making by households and firms and the interaction among households and firms in the marketplace. It considers households both as suppliers of factors of production (labor, land, capital, entrepreneurship) and as ultimate consumers of final goods and services. It also analyzes firms both as suppliers of goods and services and as demanders of factors of production.
Economists assess the success of an economy’s overall performance by studying how it could achieve high rates of output and consumption growth. For the purpose of such an assessment, three macroeconomic variables are particularly important: gross domestic product (GDP), the unemployment rate, and the inflation rate.
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