This page is designed to give a very basic overview of some of the fundamental economics concepts that may be relevant for investment banking interviews and internships. It by no means provides a substantive account and far more reading, research and study is required to gain a solid grounding in the subject. Microeconomics may be of greater use when engaging in case studies, whereas macroeconomics may be of greater use when discussing current affairs.
Macroeconomics studies changes and trends in the economy as a whole at regional, national and international levels. It examines economy-wide phenomena such as changes in unemployment, interest rates, Gross Domestic Product, economic growth and inflation. A macroeconomic change in one area will typically have knock-on effects in other areas.
- Bank Base Interest Rate: the interest rate at which national central banks lend money to domestic banks.
- Inflation: the rate at which the prices of goods and services rise. When an economy experiences inflation, each unit of currency buys fewer goods and services. Inflation is the primary reason products cost more today than decades ago.
- Aggregate Demand: the overall amount of goods and services demanded within a particular economy in a given period.
- Aggregate Supply: the overall amount of goods and services produced within a particular economy in a given period.
- Quantitative Easing: monetary policy used to stimulate economies. It involves central banks introducing new money into the economy by purchasing financial assets in the market. Flooding the market with additional capital in such a way leaves investors with additional funds, encouraging them to increase their engagement in investment activities.
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By Jake Schogger - City Career Series