Economic Factors

Definition of ‘Economic Factors’

Economic factors are variables within the economy which impact on the way a business operates.

What are Economic Factors?

The major economic factors include:

  • Inflation
  • Growth
  • Unemployment
  • Balance of payments
  • Exchange rates

Financial Projections and Economic Factors

Each of the economic factors needs to be considered in turn when producing business plan financial projections using our financial projections template. For example:

  • Inflation
    Inflation affects the price and cost of goods.
  • Growth
    Growth in the economy will create additional demand for products.
  • Unemployment
    Increasing unemployment in the economy will reduce wage rates but also reduce consumer demand.
  • Balance of payments
    The balance of payments relates to international trade and affects the level of imports and exports.
  • Exchange rate
    Exchange rates affect the prices at which a business can buy and sell in international markets.

For further information see the Wikipedia economic factors definition.

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