Question

1. “Economics and personal finance are intertwine”. Outline and briefly discuss five reasons why to practice good financial management demands the understanding of economics

                                                                                                                                

2. As a financial literate and a student of personal finance, your roommate is indecisive as to whether to choose personal finance or public health as an elective. Briefly discuss five arguments you will put forth why she should choose personal finance         

           

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Answer 1

Economics focuses on publicly policy whereas Finance also focuses on more company or industry specific.

Finance also focuses on how companies and investors evaluate risk and returns. Both the economists and Finance professionals are being employed in governments , corporation and financial markets.

Usually the focus of economics is more big picture in nature like how w country , region or market is performing. Economics is more theoretical while finance is more practical.

Finance describes management, creation and study of money, banking,credit, investment assets and liabilities which make up financial systems.

Economics is divided as micro and macro economics. Macro economics is the study of how aggregate economy behaves. Like it considers inflation, national income,gross domestic product and changes in unemployment. Where as the micro economics is the study of economic tendencies or about individuals making certain choices or when the factors of production changes.

Finance is of three types like

Public Finance

Corporate Finance

Personal Finance

Finance usually focuses on interest rates ,prices, money flows and financial markets. Which means they include Time value of Money,rates of return,cost of capital ,optimal financial structure and quantification of Risk.

While coming to personal finance or public finance - personal finance defines all financial decisions and activities of an individual or household including budgeting, insurance, mortgage plan, savings and retirement planning. Public finance includes tax systems, government expenses, budget procedures, stabilization policy and others.

Based on considering all the above factors it is better to go with personal finance if she wishes to take of more risk individually or else can opt for public finance.