Macro Economics

ACCA - F1   ACCOUNTANT  IN  BUSINESS

Macro economic factors that influence level of business activities:

Fiscal policy: looks at the balance between government income and expenditure. It refers to government's budgetary policy. The components of fiscal policy are government expenditure, debt management (borrowing) and tax policy. Fiscal policy mobilizes economic resources, improves equitable distribution of income and economic growth through full employment.

Monetary Policy - Through monetary policy government and central bank controls availability and cost of money. Monetary policy influence cost of finance, which influence investment and expenditure. It affects interest rate, inflation, exchange rates and reserve requirement for financial institutions.

Public policy: Public policy is important vehicle of bringing changes in the overall economic environment. Government plays an important role in formulating and implementing public policies. Some examples related to public policies are defense system, justice, education system, infrastructure (public utility) development, currency stability, market monitor, environmental regulations and competition policy.

Unemployment: Economic growth is intertwined with the level of employment. Employment over 95% is regarded as full employment because voluntary unemployment exists in the economy. Increasing unemployment limits economic growth. 

There are various types of unemployment. Cyclical unemployment is defined as workers losing jobs because of changes in economic business cycle (growth, recession, depression and recovery).

Frictional unemployment is period in between jobs.  

Structural and technological unemployment arises because of technical changes such as automation and innovation of new process.