Question

Justify the following statement:

The economic environment has a direct influence on business.

Answer 1

1. Economic environment consists of economic conditions, economic policies, and economic systems along with basic economic philosophy, infrastructure, national income, money supply, etc.
2. Economic condition is based on GDP, per capital income, availability of capital, growth of foreign trade, and capital market.
3. Whereas economic policies framed by the government from time to time changes with changes in the government.
4. Every business has to function within the policy framework and responds to changes accordingly.
5. This relates to Industrial Policy, monetary policy, foreign investment, EXIM policy education policy, etc.
6. Also, the scope of private business and government regulation depends on the economic system such as; capitalist economy, Socialist or mixed economy which impacts business decisions.