Interpreting Macroeconomic Conditions Essay Example | Topics and Well Written Essays - 1000 words - 1

Interpreting Macro scotch Conditions - Essay Examplehe unemployment rates does undercut directly the major efforts put underway in the stabilization of the banking industry whenever crises go on like the recent financial crisis. The unemployment rates do increase the amount of toxic assets held by banks. This is because the laid-off borrowers leftover up defaulting on the loan agreements. This indicator also increases the represent of Term Asset-Backed Lending rapidity that is meant to safeguard banks against defaulters. When many people are unemployed, they are unable to make deposits in the banks and thus the liquidity levels go low.This indicator does exacerbate the frictions experienced in the credit market since rates go high. These frictions could end up posing obstacles that bring difficulties to banks in their quest to adjust nominal rates whenever they tog up. Examples of these obstacles created by the pretentiousness on banks is the ceiling by the government on inte rest rates in the banking sector and those that arise from the banks response to the given incentives and risks, which are brought about by the existing regulations, laws, economic conditions and policies. These frictions could also affect the economic growth by lessen the available amount to be borrowed. With high inflation, we get a authority where the interest rates keep rising and the cost of borrowing in the banking sector increases. The increased cost of borrowing due to inflation means that few borrowers would be willing to access loans thus reducing the portfolio of banks.This fiscal policy does affect the rate of economic growth since it adds to the aggregate demand. An increase in meat federal spending, without a similar rise in tax receipts, means that for every dollar fatigued by the government, there is an income for the people that do satisfy the basic increment in the demand for the semipublic commodities. Thus the people are willing to spend and in essence do ri se the income for the s wave of demand increases thus reducing the income