Construction Economics: Government Economic Policy

Topics: Economics, Macroeconomics, Economy Pages: 8 (2704 words) Published: April 21, 2011
Construction Economics: Government Economic Policy
A policy refers to any rule or principle used in guiding decision making and achieving rational results. The intended goals to be achieved by a policy widely vary with the organization and the context to which it was made. Policies are basically made to prevent negative effects noticed in an organization or promote positive benefits. Government economic policy refers to the actions that a government takes to influence its economy. The economic policy covers the methods of setting interest rates and the national budget as well as the national ownership, the labor market and many other areas. The economic policy of a government is generally reflected in its national budget. Partly, it is through the budget that the government exercises its three principal methods of establishing control: the stabilization function, the allocative function and the distributive function. The economic policies are usually influenced by international institutions such as the World Bank or International Monetary Fund as well as policies of political parties and their beliefs. Factors affecting the economics of a construction related business The construction Industry

The business environment within which most housing and construction companies operate has continued to change rapidly throughout the world. Construction companies that fail to adapt or respond to these changes have problems in their survival. Therefore, contractors must be capable of improving their performances continuously in order to out smart their competitors. In nature, the construction company is complex because it consists of a large number of parties as contractors, stakeholders, clients, consultants and regulators. However, despite its complexity, it plays a great role in the achievement and development of the goals of a society. Economic growth refers to the rise of per capita gross domestic product (GDP) or other measures of total income. It is usually represented in annual basis as the rate of change in real GDP. The economic growth of a country depends on the ability of that country to improve its productivity, that is, its ability to produce more goods and services using similar inputs of labor, materials, energy and capital. According to most economists, there are two types of economic growths: the long-term economic growth and short-term economic stabilization. However, economic growth is usually concerned with the long-term type. The short-term type is rather deemed as the business cycle. The leading indicator of the state of economy in a given country is the housing and construction industry. This is because it usually begins to falter prior to the beginning of a recession. This was evident during the United States recession in 2008 when the construction and housing industries started to struggle as early as 2006. The economic growth of a country will determine the success of the construction company. If an economy of a certain country is collapsing it is very hard for a construction company to survive. The income level of nationals will determine the number of customers the company have. A flowering economy will make people to be interested in modern housing and by this construction companies will be making profits and maintaining its budget. Stable economic growth creates a good environment for business and enough labour to sustain their activities in a particular country. The economic factors affecting housing materials and construction activities can give industries a warning on what to expect in future. The economic factors affecting the housing and construction industries are discussed in the following sections: Employment Statistics

The personal wealth of individuals increases with increase in employment. The dream of citizens irrespective of every nation is to own homes and as employment increases most of them are able to afford this option and engage in building these homes. This in turn affects the...
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