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CA Foundation · Business Economics · Nature and Scope of Business Economics

Meera Exports, a Chennai firm, sees that a fall in the rupee's value is raising the cost of its imported components. The manager treats this as an influence on the firm's decisions that the firm cannot control. In Business Economics this type of factor belongs to:

The exchange rate movement is a macroeconomic external or environmental factor. It lies outside the firm's control, and Business Economics studies such factors, along with inflation and interest rates, so managers can adapt decisions. Internal factors, like machinery or workforce, are within management control.

  1. AMicroeconomic internal factors, as the firm is directly affected
  2. BMacroeconomic external (environmental) factorsCorrect
  3. CNormative factors, as they involve value judgements
  4. DOpportunity cost factors

Explanation

Exchange rates, inflation, interest rates and government policy are macroeconomic variables outside the firm's control, forming its external environment. The firm studies them to adapt its decisions. Being affected directly does not make them internal, since internal factors such as machinery or the labour force are within management control. The other options do not describe this classification.

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