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

Which of the following is an example of a macroeconomic factor that forms part of the scope of Business Economics, because it affects the business environment in which a firm operates?

A rise in the repo rate by the RBI is a macroeconomic factor within the scope of Business Economics. It is an economy-wide policy variable that changes borrowing costs for all firms, whereas hiring, shirt pricing and packaging colour are firm-level, micro decisions.

  1. AThe number of workers a bakery in Jaipur hires for its night shift
  2. BThe Reserve Bank of India raising the repo rate, which increases borrowing costs for firmsCorrect
  3. CThe price a local tailor charges for stitching one shirt
  4. DThe choice of colour for a company's new product packaging

Explanation

Macroeconomic factors such as interest rates, inflation and government policy affect all firms in the economy. A change in the repo rate is an economy-wide monetary policy variable. The other options are decisions internal to a single firm or individual and are micro-level matters.

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