Explain the Difference Between a Macro Hedge and a Micro

question 75

Essay

Explain the difference between a macro hedge and a micro hedge for a financial institution.

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Definitions:

Marginal Efficiency

The expected profitability of investing in additional units of capital, influencing a firm's decision to invest based on future returns.

Net Investment

The total spending on new capital minus the depreciation on existing capital, indicating the growth of a company's or nation's capital stock.

Inventory Investment

The stock of goods or merchandise kept by a business with the intent to sell it for profit.

Depreciation

A measure of the decrease in value of an asset over time, often due to wear and tear or obsolescence.