Economics & Finance: The Synergy

Economics & Finance The Synergy

Category Economics Finance
Definition It refers to the study of allocating limited goods and services to quench infinite human wants. It refers to the process of handling funds with respect to cash in hand, time and involved risk.
Branches Microeconomics: it deals with the behaviour of individuals and small firms with regard to allocation of scarce resources.Macroeconomics: it deals with the behaviour of the economy as a whole with respect to decision making, output, labour, growth etc. There are three main branches of finance. They include personal finance, corporate finance and public finance.
Future prospects Economists are hired as consultants by private, as well as, public industries. They are hired by banks and other financial institutions.


Economics and finance, though studied as separate disciplines are often used as interchangeable terms by us. They are inter-linked in various aspects and it is their synergy that helps in economic growth.

Economics refers to the study of allocating limited resources to meet unlimited human desires in an (attempted) equitable manner. Finance includes saving, lending, borrowing etc. Thus, finance is often regarded as a subset of Economics. A good example of the amalgamation of the two subjects is Financial Economics. Financial economics studies the interdependence of financial variables with two main aspects, which are asset pricing and corporate finance. Another example is Financial Econometrics. This deals with various techniques of advanced statistics in corporation with microeconomic, as well as, macroeconomic models used in the study of financial economics.

Moreover, literature and evidence shows that a more efficient and effective financial system helps not only to alleviate external constraints of financing but, also promotes the development of mechanisms that stimulate economic growth.  A wide range of evidence suggests that finance is tremendously important for growth, especially during the first few stages of economic development. Political, geographical, legal and cultural aspects effect financial systems which in turn effect the economy.

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