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Name: Muhammad Hamza Akram

Roll Number : 087


TOPIC
ECONOMIC FACTORS EFFECTING BUSINESS.
1- Interest Rate
Interest Rate is major factor affects the liquidity of cash in the economy.

With an increase in investment cash flow in country decrease and result in

a decrease in liquidity of country whereas with a decrease in investment

cash flow in country increase and result in an increase in liquidity of

country.

2 – Exchange Rate
Exchange rate comes into the picture in case of export and import. It

affects international payment and price of goods and that affects the

economy.

3 -Tax Rate
The tax rate is a crucial part of the economy. Tax rate affects the price of

goods and its sales which affects the economy.


4 – Inflation
With the increase in demand price of goods or service increase which

result in inflation and with inflation money supply in market increases.

5 – Labor
Labour and it is cost or wage is always an important economic factor that

affects the economy. Many countries have started outsourcing of labor from

other countries. The company starts its plant or production where labor is

cheap.

6 – Demand / Supply
Demand or supply of goods or services affects the economy as with the

increase in demand price of goods or service increase which result in

inflation and with inflation money supply in economy increases and with

increases in the supply of goods or services price of same

decreases. Demand and supply are depended on each other.

7 – Wages
Wages paid to labour or employee is a direct cost to the company which is

added to cost of goods or service through which it affects the economy and

another way through which wages affect the economy is with an increase in
wages consuming the power of one increases and increase consumer

spending.

8 – Law and Policies


With change or modification in law economy of country changes, for

example, its government make a law that liquor should be ban in the

country it will affect companies dealing with it, their employees and

shopkeepers which at broad level affect the economy. Similarly, any policy

made by the government will affect the economy.

9 – Government Activity
Government activity also affects the economy. If the government is

promoting any industry like insurance or medical or technology it will

promote that sector that boosts its economy which will overall support the

economy.

10 – Recession
Recession affects the purchasing power of consumer which force.

companies to drop the price of their goods or services.So, we can see how

the above economic factors affect the economy.There are many other

economic factors examples which affect economies like unemployment,

market, land, capital, science, and technology. For proper functioning of the
country economy need to be stable and in a macro level, one can see the

effect of that with stable business with competitive earnings.

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