Managerial Economics is often interchangeable with Business Economics, though there is some difference between these two terms:

i) Business Economics - means Economics necessary to be understood for running any business.

ii) Managerial Economics - lays more emphasis on the managerial functions in any business firm. Managerial functions are decision making and forward planning.

DEAN, author of the first managerial economics text books defines managerial economics as "the use of economic analysis in the formulation of business policies"

Out of two major managerial functions served by the subject matter under managerial economics are decision making and forward planning:

Lets explore the scope for decision making:

1. Decision relating to demand.

2. Decision related to Cost and production.

3. Decision relating to price and market.

4. Decision relating to profit management.

5. Macro economic factor.

It is not official policy. It refers to the idea that should a large corporation or entity cease to exist, the fallout from its collapse would cause disastrous consequences for the economy as a whole. For instance, should GM cease to exist, thousands of workers would be without jobs.

A Different perspective: "Too big to fail" has been a "semi-official" policy with in governmental agencies, especially that of the Federal Reserve, that has deemed large financial institutions and large corporations too "interconnected" to the market place to fail. However, this semi-official policy, which is to say not really a policy but an unwritten rule tolerated by the people, is not a procedure by which any administrative agency steps in on behalf of large financial institutions or corporations and stops them from failing but rather watches silently as they fail and then bails them out financially with tax dollars. This unwritten policy creates perverse incentives for these institutions that are "too interconnected" to accept any unnecessary risks they otherwise would not take on. What risk is there when failure only means the hard earned money of individuals payed towards taxes is used to finance the failures of these unnecessary risks?

If we as the United States are to maintain "free market" principles and adhere to, at the very least, a modicum of capitalist principles then "too big to fail" is just too big to tolerate! There are, in the United States, antitrust laws in place, presumably to prevent institutions from becoming to big to begin with. The antitrust laws were created to foster competition which benefits both buyers and sellers by ensuring lower prices and a better quality of product. There are three major antitrust laws that stand today as official policy as they are the law. The first is the Sherman Act which outlaws all contracts, conspiracies and and any other combination thereof that would impede or unreasonably restrain interstate trade. The second is the Clayton Act which prohibits mergers or acquisitions that are apt to diminish competition and the third antitrust law is Federal Trade Commission Act that prohibits unfair methods of competition in interstate commerce.

There are three primary ways in which these antitrust laws are supposed to be enforced. The first is by criminal and civil enforcement brought about by the antitrust division of the Department of Justice, the second is by civil enforcement actions brought by the Federal Trade Commission and the third, being most reliable form of government, lawsuits brought forth by private individuals. That these antitrust laws stand as law only demonstrates the problem we the people face when a government official ignores those laws in favor of a "semi-official" policy of "too big to fail". There is also the matter of equal protection under the law and if there are institutions too big to fail then necessarily there must be businesses too small to fail which would mean every one that fails would be entitled to tax dollars to pay for their failures which would then place that corporation known as the United States of America as the only true institution that is "too big to fail".

From the NY Times:

According to the White House, the 2008 federal deficit is projected to be $410 billion, or about 3 percent of gross domestic product. While deficits are rarely positive, this level is within the ranges maintained over the last several decades. However, if the Treasury's $700 billion plan is fully utilized, it would drive the federal deficit to more than 6 percent, in excess of the last high seen in 1983. The fiscal burden of a deficit of this size creates a considerable barrier to economic growth over the longer term.

http://campaignstops.blogs.nytimes.com/2008/09/23/what-the-proposed-bailout-means-for-the-deficit/

As it turns out, the TARP program (as of June 2010) is making money for the treasury and is REDUCING the deficit.

The NY Times article is not correct.

This is all aload of crap seriously.wtf just because i love cagdas so much, u kno wat yh i wish i cud jus talk to cagdas at least just say hi once i wud be so happu. It is unclear right now how the bailout will affect the federal deficit. Unlike general spending which have an immediate and direct effect on the deficit, this is a purchase of assets and not an expenditure. The initial way that its effect will be estimated by the Congressional Budget Office will be based upon an estimate of how much the government will profit or lose once the assets either are sold or mature. Many people believe that if this is done properly, this will reduce the deficit and the national debt because the government will make money when everything is wound up. It is entirely possible that we "the taxpayers" could make hundreds of billions of dollars on this "bailout".

Everything depends on how the program is structured, how the assets are acquired and how the economy performs over the next decade.

Because the Federal Reserve is run by a banking cartel with no oversight from congress and their activities are secret, it is possible that the current crises could have been engineered by that banking cartel for the purposes of increasing their power base. Your tax money is being given to big banks to gobble up smaller banks. It is not going to support mortgage securities as congress directed. Congressman Kucinich is really upset, he's accused the treasury of rewriting the law. See the YouTube link below. That's what he was supposed to do in the Friday morning speech, and when he didn't the markets tanked. Another demonstration of his total lack of leadership ability. I will answer the first part, "What has happened to the economy" and leave it for someone else to respond to the second part, on how the bailout is supposed to work (if there is one). All problems stem from loose lending standards for home buyers, extending back to year 2000- 2001. The origination of sub-prime loans meant more people now had the borrowing capacity to buy homes. These loans did not require checks of the borrower's income or other assets, so the home they purchased became the collateral for the loan. As there were more people able to in purchase homes, the price of these homes soared. Thus as long as prices were going up, the collatoral was good. The banks to insure the flow of money (credit) to make the sub-prime loans, found ways to make them appear more secure and sell them to investors or investment banks. A poor loan with insurance does not become a good loan, but it passes the risk of default on to the insurers. Now, insurance for home mortgages is unlike insurance for fire or theft (random events). The sudden decline in home values, coupled with higher unemployment, results in more foreclosures. So, those insuring loans began to run out of money. This is the systemic risk that everyone is talking about. In a more complex manner, poor loans were bundled with better quality loans, in a way to make a product that they could sell, to gain more money to loan. In the same way, the systemic risk of a downturn in the economy was difficult to factor into these products. See collatoral debt obligations. Other loan features, intended to make the loans more affordable, included low or no down payment, adjustable rate loans, balloon payments, and no escrow fund creation. The banking industry through these terms was allowing lending that at the time seemed to be popular and profitable, but now with an economic downturn, a disaster. Finally, the banking industry pushed the "home equity" loans, further diminishing equity for home owners.

The funds; if approved, would be used to purchase asset -- presumably default mortgage -- from financial institutions to prevent fire sale, which is selling asset at any price because the financial institutions are in short, and in serious need for liquidity. This intervention can also be considered as a guarantee pricing, not to let the property prices go down to an unacceptable level; or in other words, to prevent a systematic melt down of the financial institutions. - I would like to add: Wikipedia answerers should not engage in politics per the above "ask Bush" response. Shame, Shame. Lots of reasons exists for the market tanking. - I would like to add: In theory, a reverse auction system is employed so the government doesn't overpay for troubled assets. This is where the government specifies what it intends to purchase, giving the properties of the "troubled assets" and the sellers who offer the lowest sales price get their "troubled assets" exchanged for Tresury bonds. At least that's my understanding. This mechanism has been criticized as the seller know more about the assets being transferred than the buyer. Just the facts.... The "ask Bush" comment was based on simple fact. He had been asked by congressional leaders to to a "fireside chat" type thing to calm people down. He didn't or couldn't... This crisis is NOT just related to home mortgages. Mortgages are just the "straw that broke the camel's back" sort of thing. If they just wanted to fix the mortgage problem they would have just done some interest adjustment and created a system of direct aid to troubled homeowners. The AIG package was a corporate bailout and so is this one. The Myth of the Mortgage CrisisThe Mortgage collapse is a symptom, not the source, of economic problems in this country. Distribution of wealth in the U.S. precipitated the mortgage crisis. See the related question on this subject. Additional Information: As the initial responder to this question (the Why don't you ask Bush was added later by someone else, ahead of my comments), I would like to add that wikipedia has numerous webpages on what is now a worldwide economic crises: See: http://en.wikipedia.org/wiki/Economic_crisis_of_2008 http://en.wikipedia.org/wiki/Bailout_of_U.S._Financial_System_(2008) It is an evolving story, and I just tried to summarize one critical aspect, the loose lending standards in the US. Please be respectful and factual. Also, I commend the responder who clarified the reverse auction process for me.

The Bigger Question is how will the resulting fallout affect you personally. The bailout may cost you $2600 but the loss in total wealth will be much greater than that. You should invest in internal funds or mutual funds to diversify your wealth.

Sources:

http://www.amfi.com/types/international-mutual-funds

http://financialplan.about.com/

I've heard that every single American just went in debt $2700 because of it - INCLUDING children!

I'm assuming that's because of some taxes somewhere that we will have to pay.

Actually the government will be purchasing, on everyone's behalf, hundreds of billions of dollars worth of mortgage-backed securities. Effectively everyone will own a piece of America's real estate. When the government sells these mortgages, at a potential profit, everyone benefits. This could actually turn out to be one of the great money makers ever for the United States Government. Bill Gross from Pimco states that this is one of the greatest investment opportunities for America.

That anyone or organization, let alone the government could turn a profit on the

defaulted loans is just ludicrous. Many properties are being vandalized. Most will be in disrepair by the time anyone who can actually afford them will have the cash to buy them. There is $1.3 trillion in bad loans, so be prepared when "they" come back looking for the remaining $600 billion.