Answer to Question #319818 in Macroeconomics for Buhle

Question

Two major causes of declining business confidence

Answer 1

Business confidence shows a firm’s forward-looking expectations. It is founded upon surveys on finished goods, domestic and export orders, the production sector. Additionally, surveys can be done by asking businesses about their employment plans and whether they plan to increase prices in the months to come. The business confidence index is also useful for checking growth and anticipating curves in economic activity. Two major causes for declining business confidence include:

       I.           Unresponsive nominal income growth and tepid private sector credit growth.

    II.           Unusual high household and business savings rates.