Book contents
- Macroeconomics for Professionals
- Macroeconomics for Professionals
- Copyright page
- Dedication
- Contents
- Acknowledgments
- Glossary of symbols and acronyms
- Preface
- Chapter 1 Introduction, Motivation, and Overview
- Chapter 2 Real Economic Activity
- Chapter 3 Inflation, Relative Prices, and Expectations
- Chapter 4 Monetary Policy and Accounts
- Chapter 5 The Fiscal System
- Chapter 6 Financial Stability
- Chapter 7 The External Accounts
- Index
Chapter 6 - Financial Stability
Published online by Cambridge University Press: 09 January 2019
- Macroeconomics for Professionals
- Macroeconomics for Professionals
- Copyright page
- Dedication
- Contents
- Acknowledgments
- Glossary of symbols and acronyms
- Preface
- Chapter 1 Introduction, Motivation, and Overview
- Chapter 2 Real Economic Activity
- Chapter 3 Inflation, Relative Prices, and Expectations
- Chapter 4 Monetary Policy and Accounts
- Chapter 5 The Fiscal System
- Chapter 6 Financial Stability
- Chapter 7 The External Accounts
- Index
Summary
A strong financial sector is a force for good. It intermediates funds from savers to borrowers, facilitating both investment and intertemporal consumption smoothing. Without this intermediation, economic activity would be severely constrained. Leverage, that portion of an undertaking financed by borrowing rather than owners’ equity, makes it possible for a resource-constrained entrepreneur to undertake a profitable venture. Insofar as the returns on the investment exceed the cost of borrowing, leverage amplifies the rate of return on equity.
- Type
- Chapter
- Information
- Macroeconomics for ProfessionalsA Guide for Analysts and Those Who Need to Understand Them, pp. 191 - 224Publisher: Cambridge University PressPrint publication year: 2019