Home | Forums MBA Managerial Economics Discussion Forum Reply To: MBA Managerial Economics Discussion Forum

  • Subatra Krishnasamy

    January 30, 2022 at 10:26 pm

    We can look at three important variables which have a direct impact on the business decision-making environment, which are GDP, inflation, and unemployment. GDP allows businesses to gauge whether there is slow growth or decline in consumer spending which shows a decline in aggregate demand, which economists consider to be a symptom or even a cause of macroeconomic downturns and recessions. Businesses can then decide their business strategies accordingly, it would be helpful for a business to look into customer spending habits, it would help in deciding to introduce new products or to delay launching new products or even to tweak the products to cater to the current needs of the customers during the economic downturn. Where there is inflation, prices of goods would increase but the consumers purchasing power would decrease, this would be beneficial for certain businesses such as banks as customers would be more inclined to save and also would be more inclined to take loans to allow them to continue purchasing, businesses can look into how inflation would affect their business and decide their marketing strategy accordingly. The Government would usually seek to regulate employment levels through monetary policy stimulus and credit measures. These policies can ease borrowing rates for businesses to help improve capital spending and business growth, resulting in employment growth. When there is an economic downturn, businesses would be doing poorly and would need to lay off people hence unemployment rate would increase with the help of government intervention, businesses would be able to sustain in the market and hence does not need to plan to reorganize and reshuffle as there would not be a need to lay off staffs. It can be opined that macroeconomic variables are not good business indicators, this is because, these variables are dependent on external factors and external parties such as government policies or international events, covid 19 measures taken by the government is not beneficial for nonessential businesses and it was out of their control hence to determine whether a business performing, other internal factors should be taken into consideration.