Question
Please respond to the following discusion if you agree or disagree and why: We live in interesting times now were we can see how much
Please respond to the following discusion if you agree or disagree and why:
We live in interesting times now were we can see how much the economy impacts banks and the greater financial sector. Banks are greatly impacted by how the economy impacts the federal reserves monetary policy. We have seen this affect in the simulation during periods of high inflation and in turn a increasing federal prime rate. My team has been looking at the economic reporter more and more as we notice how unemployment and inflation causes people to save more or less depending on the situation. If unemployment is high we tend to see a increase in deposits. We can take advantage of this by offering higher interest rates to bring in more new deposits as well. We see how this also effects our loans. When unemployment is high our loan tend to stay the same or decrease slightly. So we will increase the credit policy to 2 or greater. Doing this also helps the bank reduce our risk. We also see this effect in the opposite direction when unemployment is low it seems that savings tends to decrease and loans will increase. So we have learned how we can maximize our banks profits. Another thing we look at that I mentioned before was the federal prime rate. This past quarter we saw a high prime rate and a high unemployment. We noticed that interest rates tend to increase when the prime rate is higher. This last quarter we looked at the prime rate and we ended up increasing our credit policy but we also wanted to have our interests be lower. Doing this should increase our loans and we should also see almost no defaults due to a stricter policy. Overall the economy has a big impact on how banks run we can see that now in real time as well with how the federal reserve tries to tackle inflation.
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