Factors affecting economy     Disposable income   Interest rates   Tax rates   Exchange rates   Consumer confidence   Business confidence   Growth overseas   Terms of Trade   Tariff rates   Productivity Labour costs   Industrial disputes   Government regulations   Participation rates   Climatic/geopolitical events   Economicstutor..com.au

Copyright © All rights reserved. Site administered by CPAP and content provided by Romeo Salla    

Email: admin@economicstutor.com.au     romeosalla@economicstutor.com.au

 Course notes quick navigation

1 Introductory concepts 2  Market mechanism  3 Elasticities  4 Market structures 5  Market failures  6  Macro economic activity/eco growth  7 Inflation 8  Employment & unemployment  9  External Stability  10  Income distribution 11.Factors affecting economy  12  Fiscal/Budgetary policy  13  Monetary Policy   14 Aggregate Supply Policies  15 The Policy Mix

Next page

Business confidence

Business confidence refers to business perception of their future levels of sales and profitability. Increases in business confidence are likely to have the same impact on the government goals as that for consumer confidence, with the rise in AD coming from Investment rather than Consumption.  

There is, however, a possibility that a rise in business confidence can have favourable inflationary impacts (supply side) in the longer term.  This can occur if higher business confidence levels result in an increase in Investment that boosts the nation's productive capacity over time.  This will then exert downward pressure on prices in the long run and make it easier to achieve low inflation which should then help to achieve all of the goals.

Test yourself Previous page