Difference Between Finance vs Economics
Finance and Economics, are two streams of the commerce industry. They are often used synonymously, and sometimes mistakenly mixed with each other. While they do have striking similarities and a thin line of difference between Finance and Economics, they do have their own interpretations.
“Finance” is a subject which broadly deals with concepts like time value of money, interest rates, risk and return, optimum use of money, different exchange rates and how to make the best use of their differences, etc. These terms offer a way of enlightenment to the reader about the money cycle, and how he can chip into the market to make the best use of it in making money. Finance not only helps one to understand the markets but also a sense of self-money management techniques so that we become more aware of what we possess today, how to move ahead for a better financial tomorrow and what plans we can make today for better future prospects.
While Finance deals with smaller day to day concepts, “Economics” is a subject which deals with the economy of the country or state or a region and which may affect the money cycle for the entire industry specifically. This subject deals with topics like monetary policies, exchange rate movements, demand, and supply of products, GDP (Gross Domestic Product), Inflation, Index movements etc. With the help of Economics as a subject, one can try to understand the current market scenario with respect to policies, and how policy changes will affect the economy as a whole.
Economics as studies and career:
Like mentioned earlier, Economics as a subject throws light on the policies of the government of any country. It governs the working of banks and financial institutions and acts as a governance framework for the country. We can also say that Economics acts as a backbone for the entire financial network of a country, on which lies the smaller aspects of finance. Economists study the movement of money in the markets, how demand and supply theories behave for different industries, and how monetary policies will affect the prices of commodities and products in the market.
Economics is studied into smaller subjects of “Macroeconomics” and “Microeconomics”. Macroeconomics works on a broader level and targets topics like GDP, inflation, interest rates, and their influence on the economy as a whole. Microeconomics deals with topics like effects of demand and supply in a particular industry, and about the effects of bigger changes in the economy.
Finance in studies and career:
Finance gives a more minute and detailed study of the different products available in the market which are used for the circulation of money. It gives us information about the different channels available for investments in order to optimize profits. The major groups of study in Finance are “Corporate Finance” and “Personal Finance”. While corporate finance helps to understand the finances of a corporation, company, institution or any particular organization and their industry, personal finance helps an individual to understand and manage his own finances.
Finance vs Economics Infographics
Below is the top 7 difference between Finance vs Economics
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Key difference between Finance vs Economics
Both Finance vs Economics are popular choices in the market; let us discuss some of the major Differences Between Finance vs Economics:
- Both Finance vs Economics deal in commerce.
- Both Finance vs Economics subjects try to explain the concepts related to money movement in the market, although within their scope of explanations.
- In understanding the effects of an outcome, both Finance vs Economics fields work on the same theories of commerce. For example, if there is a change in monetary policy by the government, its effects on the market as determined by fiscal policies are well accepted by all financial analysts and economists.
Head To Head Comparison Between Finance vs Economics
As you can see there are many Comparison between Finance vs Economics. Let’s look at the top Comparison between Finance vs Economics below –
|Works at both macro as well as micro level – at corporate or individual level.||Works at a macro level – at country, state, region or industry level.|
|Deals with actual monetary effects relating to investments, capital budgeting or other decisions and how to maximize profits using various tools.||Deals with creating, amending or determining policies which affect the entire market and all industries at an overall level.|
|Decision power may exist at all levels for a different type of products and in different situations.||Decision power lies with the government or legal institutions.|
|Finance acts on the specifications of products. It offers tools that can exactly calculate the value of money after a specific period of time and competitive methods that provide the best value to money based on different factors.||Economics provides theories and strategies that help in developing the framework of any company, industry or sector, with a broader aspect of monetary policies.|
|Exists at root levels of any economy – even within a household, in the form of personal finance management.||Exists at higher levels. Although decisions made affect the entire economy, the existence and application are hardly at the root level.|
|Financial decisions can be easily taken and amended within a given period of time for an individual or a corporation, in order to maximize returns.||Economy-related decisions cannot be easily changed – they require a very high level of analysis, as they impact the whole economy and not any particular section.|
|Finance is a subset of Economics.||Economics acts as a superset to Finance.|
Finance vs Economics – Final Thoughts
Finance vs Economics walks hand in hand in determining any company’s or individual economic growth. While Economics provides a macro view with the help of strategies and policies, Finance works on the nitty-gritties of how money evolves in the market. Any financial analyst will definitely have to depend upon the primary economics of the country or region and then make decisions for its growth or of the company. Hence, we can safely say that although different, Finance and Economics are two very vital parts of any commercial studies, and by understanding both Finance vs Economics is required for complete knowledge.
This has a been a guide to the top difference between Finance and Economics. Here we also discuss the Finance vs Economics key differences with infographics, and comparison table. You may also have a look at the following articles –