How do macroeconomic policies affect managing a business? What are the major macroeconomic indicators (such as GDP, inflation, and interest rates) that you think business leaders should follow to understand the trends in the national economy?

Macroeconomic factors directly affect a business. As such management has to continuously monitor what is happening in the macroeconomy. Decisions made by the government and the central bank affect a business. Expansionary policies will be beneficial while contractionary policies will generally hamper a business. For example, a corporate tax cut by the government will increase the after-tax profits of a business. On the other hand, a rise in interest rates will mean that management will have to look at alternatives to loans when raising finance.

One important indicator that management should follow is the inflation rate. It is better to anticipate inflation and prepare for it then be taken by surprise by a sudden rise in the price levels. Inflation not only affects the costs that a business will face, but it also affects the confidence of the consumers the business looking to sell to.

Another important indication is real GDP. If this is increasing, management can look to invest more in the hopes that demand will be high in the future. A falling real GDP can signal upcoming problems that the business can prepare contingency plans for.

The income per capita is another important indicator. If the business is selling a normal good, the management can expect sales to go up when the per capita income rises.