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Explanation of economic environment in simple words

Definition of Economic Environment

Economic environment is very important factor of business. It means any environment which becomes from economic system, economic planning and economic policies. Main motive of this environment is to effective utilization of resources.

From above definition we get three factor that are :

1. Economic system

Economy works always in any system
There are main three economic systems; any country can adopt any system for making economic planning and economic policy.

a) capitalistic economy

In this economy all powers are in private hands, they are free to choose any business and also invest money in any type of business. Govt. just cares the security of country and life of people but it does not disturb to anyone on the basis of business. This economy is in USA.

b) Socialistic economy

This economy is basically in poor and developing countries and main motive of this economy is to welfare of people and develop the economy. In this economy all businesses are under fully control of govt. and nobody can operate any business freely. Govt. makes rules and regulation for operating business and also appoints authorities for operating it. Because, all powers are in the hand of govt., so there are huge chances of corruption in govt. departments.

c) Mixed economy :

Any country in which both capitalistic and socialistic economy works, and after mixing of both economy, the new economy will comes in our eyes that is called mixed economy. In this economy govt. fixes some sector which are reserves only for govt. investment and no private person can do that business. India is the good example of mixed economy.

2. Economic policies

An economic policy means any policy which is related to fund of nation and its utilization. It also includes fiscal policy and budget of nation.

3. Economic planning

For equal distribution of money and wealth, it is very necessary to make economic plans of development in socialistic economy. These plans are known as economic plans.

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Accounting ! Answers: Explanation of economic environment in simple words
Explanation of economic environment in simple words
Accounting ! Answers
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