One of the macroeconomic variable that has significant effect on productivity of any given firm is inflation rate. Inflation rate influence Consumer Price Index (CPI), which in turn influence the amount of goods and products purchased or services consumed (Mayo, 2017). CPI is calculated quarterly or monthly and represents a weighted average of various items of consumer spending (such as food, utilities, clothing, household appliances, electronics, etc.), each of which, in turn, is also calculated on a weighted average principle. The CPI reflects the ratio of the price of a standard basket of goods and services to the price of the same basket in the previous period. The CPI is an important economic indicator, as it reflects inflation from the point of view of consumers, which makes it a significant economic indicator. For central banks, it becomes an important factor in making decisions on interest rates. For individual firms, CPI is used in making decision on the quantity of products that should be produced. If the firms knows that the consumer price index will reduce, it will lower the productivity by cutting on the labor and raw material costs. The lowering of the productivity is intended to avoid possible wastage.
Another macroeconomic variable is the gross domestic product (GDP). GDP influence the purchasing power parity (PPP). purchasing power is closely related to the CPI. PPP determines CPI. When the purchasing power is high, the consumers will be able to buy more from the firms. On the other hand, when the purchasing power is low, the consumer may not afford to buy more products. PPP of each country is often calculated by international organizations and is one of the indices used to gauge the performance of the economy (O'Connor, 2006). PPP influences the strength of currency and may in turn influence the foreign buyers.
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References
Mayo, H. B. (2017). Investments: An introduction . Boston: Cengage Learning.
O'Connor, D. E. (2006). Encyclopaedia of the global economy . Place of publication not identified: Academic Foundation.
