Three common economic forces

(a)     What are the three common economic forces, and how do they affect management environment?

Three Common Economic Forces	Within any given environment system, of course, management are influenced by a variety of economic factors over which they have little independent control.  Some kinds of economic factors are  inflation, trade cycle and interest rates. The economic encompasses the systems of producing, distribution and consuming wealth.  In third word countries that are mainly poor countries of the world have very low per capita income.  Their industrial organizations are very little but they have high birth rates.  These factors have always had a significant influence on the development of management thinking and the manner in which it is practiced.
	In the following lines, the three common economic forces that have influence over management of any organizations are discussed in some detail:
INFLATION	An expansion of the supply of purchasing power beyond the amount required to supply the needs of the community at the existing price level.
Inflationary situation	A situation is described as inflationary when either the prices or the supply of money are rising because in practice both will rise together.
How do they affect	Inflation rates affect government policies and consumers psychology which situation cause influence for management in decision making programme.  For instance, during periods of high inflation, consumers spend less  as their buying power declines.  At the same time, they may overspend today for fear that prices will be higher tomorrow.  In turn sever inflation presents real challenges for management in determining the size of price increases.
TRADE CYCLE	The trade cycle means the whole course of trade activity which passes through all phases of prosperity and adversity. The periods of trade prosperity alternate with periods of adversity.  Every boom is followed by a slump, and vice versa.
Prosperity, Recession & Recovery	Prosperity is a period of economic growth.  A recession is a period of retrenchment for consumers and management.  Recovery is the period when the economy is moving from recession to prosperity.
How do they affect	Management need to know which stage of trade cycle the economy currently is in, because a company’s management usually must be known the changes from one stage to another of the trade cycle. Management challenge is to determine how quickly prosperity will return and to what level.
INTEREST RATES	Interest rates are another economic factor that influence management process.  Also of interest rates are the controls over commercial bank operations, credit, discounting and availability of power, water and transport as well as labour skills and productivity.
How do they affect	When interest rates are high consumers tend not to make long-term purchases.