• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Assess the measures small and open economies such as Singapore should adopt to reduce inflation

Extracts from this document...


´╗┐Assess the measures small and open economies such as Singapore should adopt to reduce inflation The achievement of price stability is one of the key macroeconomic aims of the Singapore government. Price stability is achieved when low and stable inflation rates are achieved in the economy. Governments that have maintained inflation rate at below 5% can be said to have achieved price stability. Price stability is important in Singapore?s economy as it is the basis for sustainable growth in maintaining export competitiveness and providing a positive business environment. ...read more.


When Singapore?s trading partners expand rapidly, their national income and general price level will rise rapidly. When this happens, the prices of imported goods and services in Singapore, which include both consumer and intermediate goods in Singapore will also lead to high cost-push inflation. Further, the external demand for Singapore?s goods and services will increase rapidly which will lead to high demand-pull inflation in Singapore. Therefore, when the MAS predicts a strong external economic environment, it can raise the policy brand, within which the exchange rate of the Singapore dollar is maintained, gradually and modestly to allow a gradual and modest appreciation of the Singapore dollar to reduce imported inflation, cost-push and demand-pull inflation. ...read more.


Furthermore, given that bulk of Singapore?s imports are raw materials and necessities, since Singapore is resource scarce, demand for imports is expected to be relatively price inelastic. Hence, import expenditure would fall and this translates into lower cost of production for firms, increasing SRAS and helps reduce inflationary pressure. However, the stronger Singapore dollar will lead to lower economic growth and higher cyclical unemployment. Further, although exchange rate policy can be used to reduce inflation in Singapore in the short-run, it is ineffective for reducing inflation in Singapore the in the long run because it will not lead to an increase in the productive capacity of the economy. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level Markets & Managing the Economy section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level Markets & Managing the Economy essays

  1. Case study of Singapore E-Government.

    Model of Singapore e-Government Business. The first e-Government Action Plan has provided a strong foundation for the implementation of the second Plan. The vision of the e-Government Action Plan was to be a leading e-Government to better serve Singapore and Singaporeans in the new knowledge-based economy.

  2. Outline and critically assess J K Galbraiths argument that it is not the market ...

    to employ professional lobbyists. Some may say that firms in this market are pretty powerless and may go as far as to say that they are just putty in the hands of big firms, however small firms continue to and will continue to survive in capitalist economies.

  1. What are the major economic functions of government in transition economies? Should government play ...

    general agreement on a list of basic functions that need to be provided by the government for the proper operation of markets in transition economies: * Providing public goods and services * Maintaining macroeconomic(as well as microeconomic) stability * Maintaining legal and social frame work (law and order)

  2. Australian Stock Exchange

    In 2007, the Australian share market had recorded several years of consecutive strong growth in share prices, led by mining, energy and finance companies. The share market has a significant impact on economic activity. We must consider how the share market is likely to affect the overall structure of investment, borrowing and debt across the economy.

  1. Why should public support be given to the small business sector? Discuss with reference ...

    * EU Definition based solely on employment size * Micro 1 - 9 employees * Small 10 - 99 employees * Medium 100 - 499 employees Source: Power point slide from the lecture Reasons for government to support Small Business The reasons for the government to support small business or

  2. Investments, Rates and Imports

    The Bank of England is the central bank of England. Money for England is minted here.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work