Read the following statements and choose your correct answer.

Assertion: Political factors plays an important role in shaping the environment in which a business operate.
Reasoning: Political instability builds up confidence among the businesses to invest in long term.

Assertion (A) is true but Reasoning (R) is not correct

The correct answer is option 3- Assertion (A) is true but Reasoning (R) is not correct.

Assertion: Political factors plays an important role in shaping the environment in which a business operate. THIS IS TRUE.

Reasoning: Political instability builds up confidence among the businesses to invest in long term. THIS IS FALSE as political stability builds confidence not instability. It shook the confidence of long term investors.

Political environment includes political conditions such as general stability and peace in the country and specific attitudes that elected government representatives hold towards business. The significance of political conditions in business success lies in the predictability of business activities under stable political conditions. On the other hand, there may be uncertainty of business activities due to political unrest and threats to law and order. Political stability, thus, builds up confidence among business people to invest in the long term projects for the growth of the economy. Political instability can shake that confidence. Similarly, the attitudes of government officials towards business may have either positive or negative impact upon business.