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The Influence of Microeconomics and Macroeconomics on Financial Regulation

Ask any economics student about the disciplines of economics, and they will tell you that these two are microeconomics and macroeconomics. And unfortunately, both disciplines are no fan of each other. In present times, the hammer will drop at any minute in the financial services industry. There are many forces that affect the current financial regulation of the country. It is only in present years in the financial services industry that two major forces are clashing with each other. The area that most business students tend to gravitate toward is microeconomics. Profit maximization is essentially what this particular business area targets. For businesses to grow and make more money, fixed costs and marginal costs must be optimized. Simply put, microeconomics views the world using the eyes of the CEO. And their role is to do whatever is best for the company by delivering value and making more money.

For people who are particular with policy, though, what attracts them the most will have to be macroeconomics. Achieving market equilibrium is the overall goal of this economic discipline. This means that goods and services with the greatest number can be exchanged by sellers and buyers using prices they have mutually agreed upon. There is good competition between businesses in this set-up. What may be bad for the market will be the rise of oligarchies and monopolies. Macroeconomics essentially looks at the world using the eyes of the government. In essence, this economy strives to make everyone involved happy, which often opposites making everyone equally unhappy too.

You can expect these two perspectives to be going against each other with who different they are. While efficient markets generally make everyone happy, the government must take the necessary steps that may go against the microeconomics of businesses to get there. Sometimes, competition can only be fostered when the financial industry finds a way to block the merger. For sellers and buyers to make informed decisions, too, legislation of disclosures may be necessary. Imposing prohibitions and regulations for certain activities may also be necessary so that some will not be put to harm financially.

The extent of market regulations is always a never-ending fight between the government and business sector, which is very much something you can expect. With a booming economy where everyone is happy, though, the fight between microeconomics and macroeconomics goes off temporarily. When businesses make money, they become happy. Consumers are equally happy too because they have money. The government is also happy when everything in the system seems to work just good for all involved sectors.

Unfortunately, the ongoing financial crises have signaled the impending ruin of the financial services industry. It is the job of government regulators to keep track of these market bubbles. To secure the economy, the government must make sure to enact the necessary financial and securities regulations and measures.

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