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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 sadly, these two disciplines are against each other. Currently, changes toward the financial services industry are palpable. There are many forces that affect the current financial regulation of the country. In the present-day financial services industry, there are two major forces that are coming face to face. When it comes to business students, they often lean toward microeconomics. For this business area, people strive toward maximizing their profits. Fixed costs and marginal costs are the two aspects that help businesses maximize their ability to make money. 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.

On the other hand, macroeconomics is very much attractive to policy geeks. Achieving market equilibrium is the overall goal of this economic discipline. 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. 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. If you look at the world with macroeconomics, you are using the eyes of the government. This implies making everyone involved happy or even sort of equally unhappy.

Since these two perspectives are very much different, it is expected that they will go against each other in various instances. Though most people are aware that efficient markets will benefit everyone, the steps to get there that the government must take often go against the microeconomic business interest. There are times that the financial industry must stop a merger so that competition can be promoted. For sellers and buyers to make informed decisions, too, legislation of disclosures may be necessary. At the same time, certain activities must be stopped or regulated so that some will not be harmed by others 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. 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. Businesses become happy when they are making money. You get happy consumers too if these people have money. If the system works well for just about anyone, the government becomes happy.

However, with recent financial crises, the financial services industry may get lost and damaged. Any market bubbles are the responsibility of government regulators. To secure the economy, the government must make sure to enact the necessary financial and securities regulations and measures.

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