Learning Objectives
9 objectives- Understand fundamental economic principles relevant to financial markets and decision-making.
- Analyze supply and demand dynamics and their impact on pricing and resource allocation in financial contexts.
- Evaluate different market structures and their implications for competition and financial market behavior.
- Interpret key macroeconomic indicators and assess their influence on investment and financial market trends.
- Examine the roles of fiscal and monetary policies in economic regulation and financial market stability.
- Explore international trade principles, exchange rates, and their effects on global finance.
- Identify and describe various financial markets and instruments used in finance.
- Assess the relationship between risk and return to support informed investment decisions.
- Apply capital budgeting techniques for evaluating investment opportunities and making strategic financial decisions.
Content Outline
PreviewUnit 1216: Comprehensive Economics for Finance
1. Introduction to Economics for Finance
- Definition and scope of economics in finance
- Basic economic principles: scarcity, opportunity cost, marginal analysis
- Role of economics in understanding financial markets
- Economic agents and decision-making
2. Supply and Demand Analysis
- Law of Demand and Law of Supply
- Demand and supply curves: shifts vs. movements
- Market equilibrium and price determination
- Elasticity of demand and supply
- Application in financial markets: pricing of assets, liquidity
3. Market Structures and Competition
- Overview of market structures
- Perfect Competition
- Monopoly
- Oligopoly
- Monopolistic Competition
- Characteristics and examples of each structure
- Market power and price-setting behavior
- Implications for financial markets and investor strategies
4. Macroeconomic Indicators
- Gross Domestic Product (GDP): definition, types, and significance
- Inflation: measurement (CPI, PPI), causes, and effects
- Unemployment: types and economic implications
- Interest rates: role in the economy and financial markets
- How these indicators influence investment decisions
5. Fiscal and Monetary Policy
- Fiscal policy: government spending, taxation, budget deficits/surpluses
- Monetary policy: central banks, money supply, interest rate control
- Tools of monetary policy: open market operations, reserve requirements
- Effects on inflation, interest rates, and economic growth
- Impact on financial markets and investment environments
6. International Trade and Exchange Rates
- Principles of comparative advantage and gains from trade
- Balance of payments and trade deficits/surpluses
- Exchange rate systems: fixed, floating, and pegged
- Factors affecting exchange rates
- Impact of exchange rates on international investments and trade policies
7. Financial Markets and Instruments
- Types of financial markets:
- Stock markets
- Bond markets
- Derivatives markets
- Key financial instruments:
- Stocks (equities)
- Bonds (fixed income)
- Options and futures (derivatives)
- Functions of financial markets in the economy
- Market participants and intermediaries
8. Risk and Return Analysis
- Concept of risk and types of risk (systematic, unsystematic)
- Measurement of risk: variance, standard deviation, beta
- Return calculation: nominal vs. real returns
- Risk-return tradeoff and efficient frontier
- Diversification and portfolio theory basics
9. Capital Budgeting and Investment Decisions
- Definition and importance of capital budgeting
- Techniques:
- Net Present Value (NPV)
- Internal Rate of Return (IRR)
- Payback Period
- Profitability Index
- Risk assessment in capital budgeting
- Strategic considerations in investment decision-making
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