Macro Factor Affecting Business Essay

879 words - 4 pages

Various macroeconomic factors that influence the business are:
a. Economic Growth 
Economic activities refer to the level of buying and selling activities happening in an economy over a time period. 
It is a highly complex activity and keeping accurate track of it is beyond comprehension. 
Economic activity is not constant and can change rapidly, thereby affecting the business. 
Economic activity changes could happen due to the following reasons:
Changes in income levels Future prospects of individuals. 
Future of the economy The level of economic activity in the world as a whole Political activity around the world Natural disasters - like hurricanes, earthquakes, or flood etc.
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c. Interest Rates
Interest rates are the charges levied by the banks for lending a loan. 
Increase in Interest rates will directly influence the business as businesses borrow money from the banks from time to time. 
Increase in interest rates will lead to higher interest expense: Businesses will have to incur higher costs to repay the loan. 
Interest rate changes also affect customers who in turn will affect the business. 
In case of increase in interest rates the amount that individuals need to pay to borrow the money will increase thereby, reducing the demand for large products in the market. 
Further, if the interest rates decrease then the charges on a loan to buy larger items like cars, electrical equipment’s are likely to fall. 
As a result, a large number of people might be willing to buy such items. 
There will be a sudden increase in the demand for the products offered by such businesses.

1 - Balance of trade:
Balance of trade (BOT) is the difference between a country's imports and its exports. Balance of trade is the largest component of a country's balance of payments. Debit items include imports, foreign aid, domestic spending abroad and domestic investments abroad. Credit items include exports, foreign spending in the domestic economy and foreign investments in the domestic economy. A country has a trade deficit if it imports more than it exports; the opposite scenario is a trade surplus.

2 - Balance of payment : A statement that summarizes an economy’s transactions with the rest of the world for a specified time period. The balance of payments, also known as balance of international payments, encompasses all transactions between a country’s residents and its nonresidents involving goods, services and...

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