why Marco economics is important to managers?

Macroeconomics can be best understood in contrast to microeconomics which considers the decisions made at an individual or firm level. Macroeconomics considers the larger picture, or how all of these decisions sum together. An understanding of microeconomics is crucial to understand macroeconomics. To understand why a change in interest rates leads to changes in real GDP, we need to understand how lower interest rates influence decisions, such as the decision of how much to save, at the firm or household level. Once we understand how an individual, on average, will change their behaviour we will then understand the large scale relationships in an economy. Macroeconomists study aggregated indicators such as GDP, unemployment rates, and price indices to understand how the whole economy functions. Macroeconomists develop models that explain the relationship between such factors as national income, output, consumption,unemployment, inflation, savings, investment, international trade and international finance. In contrast, microeconomics is primarily focused on the actions of individual agents, such as firms and consumers, and how their behaviour determines prices and quantities in specific markets.

Importance of macro economics to manager

1) Strategic investment decision

If your company is operating globally then it helps to determine production capacity in different countries and anticipate the financial crisis and make strategic investment decision throughout the subsidiary countries. So it imperative for the manager to know about Marco economics.

2) By 1980 to 2001house price 3times house hold income, but after 2001 this ratio start climbing to 4 times and screamed at 2004 it can be alarming for housing and construction business and something is wrong in housing industry. If you are macro economics person and manager for this industry, you can take good decision during this bubble. ( source youtube : Sudesh Mujumdar)

3) government policies are not external factors and manager can study about the government regulation and plan the business plan.

4) Anticipate the trade cycle

Manager should anticipate the trade cycle of this business and run his business. If it is boom period the production used be increased but if the trough then he should minimise production or it can be end of product life cycle. For existence he should shift to new market or change or modify the product.

4) Inflation

If there is inflation in the market then company cost of production and cost of fund is high so his product price can be higher so it might affect its price. so manager should understand about inflation and change in price level.

conclusion

macro economics helps a manager to learn about national income, output, consumption,unemployment, inflation, savings, investment, international trade and international finance. What we can say is that it can helps manager to plan for external factors basically Marco economics component. it is very much important for manager to know about macro economics.