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Question
Justify the following statement:
The economic environment has a direct influence on business.
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Solution
- Economic environment consists of economic conditions, economic policies, and economic systems along with basic economic philosophy, infrastructure, national income, money supply, etc.
- Economic condition is based on GDP, per capital income, availability of capital, growth of foreign trade, and capital market.
- Whereas economic policies framed by the government from time to time changes with changes in the government.
- Every business has to function within the policy framework and responds to changes accordingly.
- This relates to Industrial Policy, monetary policy, foreign investment, EXIM policy education policy, etc.
- 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.
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