This category is one of the most important external influences on businesses. Fluctuations in the level of economic activity create business cycles that affect businesses and individuals in many ways. When the economy is growing, for example, unemployment rates are low, and income levels rise. Inflation and interest rates are other areas that change according to economic activity.
This explains the concept that the economy moves in cycles, and the highs and lows of these cycles can have a direct impact on employment, income, and business decisions. This is why economic influences are considered to be a significant external influence on businesses.