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IBM Assignment 1

Macroeconomics considers the performance of the overall economy including topics like economic growth, inflation, employment changes, and trade balances. It analyzes the supply and demand sides of economies and how fiscal and monetary policies can stabilize fluctuations to return economies to trend growth. Microeconomics studies how individuals and firms make decisions in markets where goods and services are bought and sold. Global business involves transactions across borders to satisfy objectives, taking forms like imports/exports, foreign direct investment, licensing, and franchising. Macroeconomic factors that affect global business are economic growth, inflation, and interest rates.

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Janhavi Bhosale
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40 views

IBM Assignment 1

Macroeconomics considers the performance of the overall economy including topics like economic growth, inflation, employment changes, and trade balances. It analyzes the supply and demand sides of economies and how fiscal and monetary policies can stabilize fluctuations to return economies to trend growth. Microeconomics studies how individuals and firms make decisions in markets where goods and services are bought and sold. Global business involves transactions across borders to satisfy objectives, taking forms like imports/exports, foreign direct investment, licensing, and franchising. Macroeconomic factors that affect global business are economic growth, inflation, and interest rates.

Uploaded by

Janhavi Bhosale
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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What is Macro Economics?

Macroeconomics considers the performance of the economy as a whole. When we study


macroeconomics we look at topics such as economic growth, inflation, changes in employment
and unemployment, our trade performance with other countries (i.e. the balance of payments) the
relative success or failure of government economic policies.

Four propositions of macroeconomics –

1. In most economies, real output (GDP) follows a rising trend determined by the supply side of
the economy.
2. In short run, fluctuations around the trend growth rate of GDP are dominated by demand side
forces.
3. Fluctuations around trend growth may be substantial (and costly) because economies, by
themselves, don’t return to full speed quickly. This is because wages and prices are sticky.
4. Fiscal and monetary policy can in theory be used as discretionary instruments to adjust and
stabilize fluctuations so the economy returns to its trend growth path.

What is Micro Economics?


Micro economics (or price theory) is a branch of economics that studies how individuals,
households, and firms make decisions to allocate limited resources typically in markets where
goods or services are being bought and sold.

Global business –
Global business consists of transactions that are devised and carried out across national borders
to satisfy the objectives of individuals, companies, and organizations. These transactions take on
various forms, which are often interrelated. Primary types of international business are imports/
exports trade and foreign direct investment (FDI). The latter is carried out in varied forms,
including wholly owned subsidiaries and joint ventures. Additional types of international
business are licensing, franchising, and management contracts.
As the definition indicates, for any kind of domestic business, “satisfaction” remains a key tenet
of global business. The basic principles of business still apply, but their application, complexity,
and intensity vary substantially. To operate outside national borders, firms must be ready to
incorporate international considerations into their thinking, planning, and decisions making.
Macro economic factors affecting global business -

Business is affected by the external environment as it is by the competitors. It is important that


firms are aware of the changes in the external environment to be successful. Understanding the
influence of Macroeconomic factors helps the firms to determine the current market conditions
and how beneficial will they be for the success of their business. Various macroeconomic factors
that influence the business are:

1. 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 activities around the world

 Natural disasters - like hurricanes, earthquakes, or flood etc

 Changes in prices of raw materials - oil, metals, fuel, energy and so on

 Changes in world stock markets

The level of economic activity is usually measured by GDP (Gross Domestic product). It
refers to the total amount of goods and services a country produces. Businesses are greatly
influenced by the economic activities. When GDP rate falls or slows down, there will be a
fall in demand for good or services offered by businesses. As a result, businesses will
witness a fall in revenues and profit margins. To curb this business will have to reduce
their prices to increase the sales. This could further lead to increase in unemployment. On
the other hand when there is an increase in GDP, the demand for products will
automatically increase and hence the prices will go up. To cope with the increase in
demand business will need to employ new people resulting in reduction in Unemployment
rates.
2. Inflation -
With the increase in Inflation there will be an increase in the level of prices of products and
services over a specific period of time. As a result the firms will have to incur higher costs of
operations. This will be also due to the increase in wages of the employees.

3. 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 equipments 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.

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