Appearance of Services Performed by Surveyors on the National Accounts - Assignment Example

Question One Appearance of Services performed by surveyors on the National accounts Services performed by surveyors are ified into property boundary surveys, land subdivision and management, surveying net lettable areas, engineering surveys, representation in courts, land information systems and building subdivisions. Property boundary surveys include redefining and marking boundaries in rural and urban areas, applications and amendment of titles. Land subdivision and management services include management of projects, planning and feasibility studies, negotiating with the relevant authorities, marking of boundaries, engineering services and design of sewers and drainage roads. Surveyors used measurement for net lettable areas to measure commercial buildings. Engineering surveys include control of survey activities such as construction of roads, buildings, bridges and drainage systems. Licensed surveyors provide court representation for cases relating to land boundaries, planning and development. The surveyors also crate and store information about the land including ownership, valuation, usage and other information for retrieval from one source. Surveyors also plan and approve subdivisions of buildings including simple residential and commercial buildings. All the services performed by the surveyors can include providing services to the government including construction of roads and providing services for the private sector, private investment. Appearance of the services performed by surveyors on the National income accounts depends on the approach including production and expenditure approach. In situations whereby the surveyor is hired by the government, the services appear in government expenditure including salaries and wages. For private sector, their services appear in investment expenditure. When the surveyors provide services to households, their services are found in the consumption expenditure (Web) Effects of reduction of construction activity Construction sector is one of the key sectors for the UK economy and is defined as the construction contracting sector, provision of professional services related to construction and products or materials related to construction. The UK construction remains to be the largest in Europe despite the financial and economic crisis. The construction activity is measured in terms of number of enterprises, employment and the gross value. Changes in the construction activity in UK are caused by demographic changes, globalisation, demand for sustainable and green construction, importance of technology in construction and demand by emerging economies including Brazil and China. The construction sector was affected since the 2008 recession and has had direct and indirect effects on the Gross Domestic Product. The effects of construction activity on Gross domestic product can be classified into consumption, government spending, investment and the difference between imports and exports that is net exports. (The composition of UK construction sector as at 2011, Annual business survey, UK construction) The contracting industry accounts for the largest subsector in the construction sector and has a large effect on the construction activity. Constructions services and products, though smaller in size, they also have an effect on the construction activities and the national income. Construction creates and maintains workplaces for businesses, the economic infrastructure for connecting nations, homes, schools and hospitals. A decrease in the construction activity reduces the economic prosperity since there is limited or no infrastructure for connecting nations. The lack of transport infrastructure has a direct effect and results in the reduction of net exports, which will reduce the national income. The lack of transport and communication infrastructure results in reduced globalisation and businesses are not able to separate the parts of manufacturing value chain and carry out economic activities in different regions thus reducing the national income (UK construction, 2013). Construction also affects the GDP through consumption spending. Houses owned by families and individuals form a major asset in their balance sheets and changes in the housing prices are related with the changes in consumption for several countries. The increase in the housing prices makes owners increase their consumption since they feel wealthier, and also they have more access to credit. Consumer spending has a very large effect on the economic output and thus a drop in the consumption spending reduces the GDP. Also, the decrease in construction affects negatively on the wealth effect causing dampened or slowed economic growth. Why rising rates of economic activity may hit a downturn A downturn is whereby the economic growth slows down, and consumer spending starts falling with businesses investing less. Increased economic activity results in increased demand for products and services. Economic activity refers to the activities undertaken by man in production, exchange, distribution and consumption of products and services at all levels within the society. The level of economic activity impacts significantly on the business activities and profits and also on the inflation and the interest rates. Economic activities result in a change in the business output, the gross regional product, wealth, and personal income. The level of economic activities indicates the improvement in the economy. Economic activities lead to fiscal change, that is, they change the government expenditures and revenues. They result in changes in the business sales and the personal income and thus changing the government revenue by increasing or reducing the tax base. Increased economic activity increases the tax base for the government and thus leads to an increase in the revenues. Increased economic activity can lead to a downturn if there are high levels of inflation. The result is that businesses become unproductive and also the uncertainty in predicting prices increases. The government responds by increasing taxes so as to control demand. The measures by government discourage expenditure and encourage saving, and thus results in slowed economic activity, downturn. A downturn can lead to recession, successive periods of negative economic growth, whereby the demand for products and service is low in the economy and leads to shrinkage of markets. During the recession, there is pressure for businesses to reduce their spending, which can result in increased unemployment as institutions are forced to lay off workers. Increased unemployment indicates that people have less or no money to spend and thus resulting into slowed economic activity. It may also lead to closure of some businesses or reduction in the number of stores or outlets. Question 2 Factors that determine the growth of money supply Money supply is the set of monetary assets in the economy at a particular time that people use to purchase goods and services from the product or service providers. The demand for money is determined by the need to do transactions. Businesses, households and governments keep money so that they can buy products, services and other related items. Money supply is determined by open market operations and the bank rates. Money supply depends on the central bank and the private banking system. The central bank uses open market operations including other instruments to provide reserves to banking systems. The central bank manipulates the reserves to determine the supply of money within the smallest margin of error. The government taxation policy, the volume of financing deficits, the extent to which the public can access loans and the amount of demand deposits with banks determine the amount of the money supply. The volume of transactions Money supply is determined by the number or volume of transactions and trade in the economy. When the supply of money is more than it is demanded, it creates inflation and also when the supply is lower than the demand, it results to deflation trends. The nature of trade The nature of trade including wholesale and retail defines the supply of currency for different denominations. In wholesale trade, currency of higher denomination is used; whereas, in retail trade, larger amounts of currencies of lower denominations are needed. The payment method The payment methods used in the economy define the currency component of the money supply. Larger proportions of money are required when payments are to be made in cash as compared to payments made through cheques, which require lower proportions of currency. Income distribution The distribution of income also defines the requirements of currency. When the income distribution favours the rich, large proportions of money with higher denominations is needed. Also, when the distribution favours the poor, greater proportions of currency of lower denomination is required. The Banking habit When people have confidence in the banks, they tend to bank more and use cheques in making payments thus reducing the currency requirements. But, when the public has no confidence in the banking system, its banking habits will be low and transactions are conducted with currency and thus more money is required. Price levels The price level also determines the currency requirements and is proportional to the amount of the money supply required. If the price level is high, also the money supply increases, and when the price level is low, small amounts of currency are required for the given number of transactions. Why growing money supply might cause inflation Inflation refers to the increase in the general level of prices of products and services to reduce the buying power of money. Inflation is calculated by using individual product price indexed weighted averages. The value of money is determined by money supply that is when the economy has a lot of money in supply, the value reduces and also when there is a limited supply, the value of money increases. Money supply determines the price of products and services. When money has less value; the prices increase and thus the supply of money is a key determinant of inflation and deflation. Growing money supply reduces interest rates and the credit conditions. When the demand for money remains unchanged, and there is an increased supply of money results in reduced interest rates. The increased money supply leads to an increase in the amount of credit including borrowing and loans available to people increases. When the supply of money is larger than the output, it results into inflation. The interest rates reduce for businesses building factories, purchasing equipments and inventories and for mortgage borrowers. It results in the devaluation of money and thus inflation. Theory of increased money supply can explained by the equation, , whereby M is the money supply, V is the number of times money is transferred, P is the price level and Y is the national income. The quantity theory assumes that V, the number of times money is transferred, remains constant so that the changes in money supply, M, are proportional to changes in the product of national income and the price level, PY. Changes in PY could be due to change in the national income or the price level or both. Also assuming that the national income is not affected by the money supply; then it means that national income is defined by the labour market equilibrium and the production function and thus only the price level shifts due to change in the money supplied (Why Printing Money Causes Inflation, n.d.). Assuming the government increases the supply of money while the output of the economy is constant that is there is more cash but the amount of products remains constant. The public will be willing to spend more in purchasing goods since they have more cash, and thus the price level increases. An increase in the price level while the output is constant results in devaluation of the money and increasing inflation. (Money and Inflation, n.d.). Question 3 It is more sustainable to consume local produce Consumption of local produce is increased by reducing the amount of imports. Imports are reduced by imposing quotas on products, which results in increased production of local products or services known as protectionism. It is only more sustainable to consume local produce if the exports are less than the imports. When the imports are more than the exports, the difference can be paid by selling off assets or borrowing from foreign countries. Borrowing leads to national debts, and in order to avoid the debts, the government can encourage the consumption of local products. Consuming local products stimulates the economy and results in the creation of more jobs. Consumers are key to promoting sustainable production and development and with more consumers buying locally it results in economic boosts. It increases the economic activity and more businesses are created expanding the tax base for government to collect more revenues. It creates a stronger economic base that supports other businesses. Although imports and foreign companies are key components for a modern economy, empowering the local companies to expand their local market share provides more benefits to the local economies. Money spend to purchase local produce is used in the production of more products in the local companies than in foreign companies. Also consuming local foods is more sustainable since they are fresher than imported products, which have to be flown across the oceans. Consuming local produce eliminates the fear of using stale or expired products that were imported and stayed in the shelves for several days. Buying local products lowers the costs due to the elimination of the shipping, handling, warehousing requirements, and trade tariffs. Purchasing local products means that one is aware of the quality control, that is, the products have been produced or refined in ways that the meets the countys standards. Local consumption creates a link between the producer and the consumer and the consumers are aware of the origin of the products. Buying foods from foreign countries can be difficult to know the quality of the raw materials and the production process that was used (Web). Buying products locally keeps money in the local economy by eliminating the need for middlemen. It is also more sustainable to consume local produce since it encourages local prosperity. Entrepreneurs and skilled personnel invest and settle more in communities that promote their own businesses and consume their own products. Encouraging local purchasing and consumption apart from creating jobs and affluence, it is more effective for the economic development and increases the business activity, strengthens the participation by communities and politicians, and smart growth. Local consumption encourages competition between the local producers who incorporates innovation to produce goods at low prices. It also improves the tourism attraction, promotes health and fosters an entrepreneurial culture. The assertion that it is more sustainable to consume local produce also becomes void since increasing the consumption of local produce limits the amount of imports and imports promote economic growth. Imports provide the people with a wider variety of products from which they can choose. Limiting the amount of imports reduces the nations ability to export. Trading in imports and exports promotes the growth of the countrys economy. It is not sustainable to consume more local produce since importing provides consumers with a variety of products to choose from and results in increased competition and innovations. The purpose of exporting is to acquire products and services in exchange and thus producers strive to produce the competitive products with more utility (Benefits of free trade). References Decision making across the business cycleA CIMA case study. (n.d.). Downturn and recession. Available from: [24 May 2014] Federal Reserve Bank of San Francisco, n.d., SF Fed, Available from: . [24 May 2014] Green Business Bureau - Green Business Certification. (n.d.). Green Business Bureau. Available from: [24 May 2014] Money and Inflation. (n.d.,), Money and Inflation, Available from: [24 May 2014] The Benefits of Free Trade: A Guide For Policymakers. (n.d.). The Heritage Foundation. Available from: [24 May 2014] UK construction, 2013, An economic analysis of the sector, Available from: . [24 May 2014] What is a Building Surveyor? ,What Does a Building Surveyor Do?, n.d., Home Improvement Ideas, Resources & Tips, Available from: . [24 May 2014] Why Printing Money Causes Inflation, (n.d.), Economics Help, Available from: [24 May 2014] Read More