Environment includes all the agents which impact the individuals, businesses, organizations and the economies. If the environment is favorable i.e if the social, economic and overall technological factors are positive, the economy will automatically be inclined towards boom. Environment plays an important role in determining the direction of the economy. For example, a country might forecast bad economic conditions if it is currently facing political instability. A country facing political, social or financial crisis can expect decline in foreign investment, increase in inflation, increased unemployment etc. If all the environmental factors are positive then it can lead to rise in foreign investment, increase in income, greater employment opportunities etc. Economy is directly related to the environmental conditions and is highly inter-linked with each other.
