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Examine policies of governments.

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In today's current business climate, how do changes in the macro environment affect individual firms and industries through the micro-economic factors of demand, production, cost, and profitability?

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This solution shows how the changes in the macro economic environment can affect the individual firms and industries.

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Let us look at two macro changes that will affect individual businesses. Both changes are results from business cycle changes.

The first one is changes in interest rate.

It is evident that the interest rate is low during bad times (i.e. recession and depression) to encourage consumption. In good times, the interest rate is usually high. How can this change affect businesses?

1. The investment side. Businesses are always looking to grow and increase production by buying new equipment/land/buildings. When the interest rate ...

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