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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 you have to know that both disciplines don’t seem to like one another. In the present, there will be many changes that will affect 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. Microeconomics is the area of business that students often lean towards. In this set-up, profit maximization is the overall goal. Businesses can make as much money as possible through fixed costs and marginal costs. In simple terms, how CEOs view the world is what microeconomics is all about. It is the job of the CEO to do what they can for the benefit of the company for it to deliver value and make more money.

For people who are particular with policy, though, what attracts them the most will have to be macroeconomics. The goal of this economic discipline is to attain equilibrium of the market. This implies that whatever services or goods are in the greatest number, they can be exchanged at prices that are mutually agreed by both sellers and buyers. Competition between business establishments is good. What may be bad for the market will be the rise of oligarchies and monopolies. It would seem like you are seeing the world using the eyes of the government with macroeconomics. This implies making everyone involved happy or even sort of equally unhappy.

By looking at the differences of these two perspectives, you know very much that they will be going against each other. 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. There are times that the financial industry must stop a merger so that competition can be promoted. Sometimes, there must be proper legislation of disclosures so that informed decisions are made between buyers and sellers. To avoid financially harming others, sometimes, specific activities must go through the necessary prohibitions and regulations.

You can always expect the government and business sector to fight over market regulation extent. However, you should know that if the economy is on the rise and everyone is quite happy, the power struggle between microeconomics and macroeconomics stops. If a business makes money, it means that it is happy. Consumers are equally happy too because they have money. If the system works well for just about anyone, the government becomes happy.

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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