MACROECONOMICS Assignment Example | Topics and Well Written Essays - 1500 words - 1

MACROECONOMICS - Assignment Example In economics, the guiding principle is to never lose, every amount of money leaving ones coffers must always earn more to the business. This increased influx of money is likely to lower the interest rates in the current market. Interest refers to the additional value that money earns especially from debtors. Money lending is a big business opportunity for banks; they give out money and retain a security which could be in the form of a motor vehicle logbook or a land title deed. When the debtor pays the money back to the bank, he pays a little more, the additional amount is referred top as the interest and is the profit that the banks get from such risky undertakings. Incase the debtor fails to re-service the loan; the security is sold to meet the defaulted amount. The policy is aimed at making the bank having more capital base and liberalizing ther money market. By increasing the amount of money the economy becomes more stable, however, this must be done very cautiously to avoid instances of devaluation. Devaluation of currency is a case in which the value of an amount is lowered. This is different from recession in which more money equally purchases very little in that this is done by the government knowingly with an aim of later strengthening the economy from some of the benefit it tags along. Recession has no benefit whatsoever and is in fact a portrayal of an economic crisis (Miller 133). The figure represents some miss-measurements since just as stated; the resultant figure should be zero. The economies in the world are self fulfilling, some could be very poor like that in Zimbabwe while others could be very strong such as the American but when al these are totaled up, the resultant figure is a zero and a failure to get a zero reflects discrepancies. The pattern is very clear, the developed countries are lending while the developing countries are borrowing. Borrowing is a sign of weakness and plays an integral role in the