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Banking and its regulation

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Banking and its regulation

Part 1:Appendix graphs

Graphs are essential in macroeconomics as they enable students to understand the aspects of demand and supply curves. The graphs are used to identify the relationship between the two aspects. For us to draw good graphs, we must follow specific guidelines.

We first draw the axes and label them. The axis contains the two variable that is being related; it can be demand or supply versus the price of goods. We are required to put the independent variables in the horizontal axis, and conversely, the vertical axis should have the dependent variables.

After drawing and labeling, we plot the points on the graphs; we start by plotting the points step by step by beginning with the first row as we proceed till we finish. After plotting the points, we then draw the curve. The curve has the purpose of showing the relationship between the two variables.

The slope of the curve is another crucial aspect when dealing with graphs in Macroeconomics. The purpose of calculating the slope is to show the changes this variable has when related to each other. This is the ratio of change in the variables in both the vertical and horizontal axis. The curves in the graphs may shift from one point to another, either positively or negatively.

The slope of graph=vertical change/horizontal change

Part 2:Banking systems and its regulations

The federal reserve is mandated with the creation of a stable and safe financial system for the country. The main objective of this reserve is to ensure the financial system has integrity and not to protect individuals’ deposits solely. Bank regulation is done to ensure the solvency of the banks by avoiding the risk that may prove to be excessive.

Banks offer the customer’s storage services for their money and gold and other valuables. The banks don’t hold your deposits, but instead, they loan it out to the entrepreneurs who, in return, pay higher interest rates as compared to those charged on the bank by the customers who have deposited the money. This ensures that banks generate profits in the long run.

Banks came around to help people to secure their money by depositing in the banks where the money can grow in interest as well as be safe. Banks promise the people that wherever they need their money, they can come and get it. The bank has to keep a deposit aside to cater to the day to day requests to withdraw by its customers. Banks do not just give loans they give loans to the people with very viable projects.

The banks are profit-making organizations that lend out deposits belonging to other people to young entrepreneurs. For the bank to give you alone, they must see that your company will do better and generate more income to pay the loans. Banks need to keep cash reserves of the bank. This will cater for the withdrawals that may be requested by the workers. The investments are called capital investments, as the money saved continues growing.

 

 

 

 

 

 

 

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