What is a Macro Environment?

A macro environment is a wide, broad set of economic conditions rather than the conditions in a specific sector or industry within an economy.

Macro Environment Example

The macro environment in the American economy, for example, revolves largely around the business cycle and includes trends in inflation, employment, gross domestic output or other factors that measure and encompass conditions throughout the whole economy.

Industries and sectors may influence the macro environment -- as the housing sector did in 2008 or the dot-com bubble crashed in 2000 -- but measures of the macro environment go far beyond any one segment of the economy.

Why the Macro Environment Matters

The macro environment can determine whether businesses will expand, whether consumers will spend more, whether seniors will have enough for retirement, whether homelessness will rise and many other broader issues. In turn, the macro environment can advance or deter government policy, regulatory changes and even encourage or discourage entrepreneurship. Additionally, many businesses wax and wane with the business cycle and thus are very attentive to macro environmental conditions.

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Paul Tracy
Paul Tracy

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.

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