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

Inflation in Singapore

Extracts from this document...

Introduction

Alexandre Silva Economics Homework 5. April, 2008 A. i) Unemployment rate is the percentage of the total labour force that is unemployed but seeking employment and therefore, willing to work. ii) The business cycle is the ups and downs of the general level of the economy. All modern and industrialized countries have fluctuations in their levels of economy, leading to the thought that one nation's economy is "booming" while another economy is in a recession and therefore, not all can be "booming" at the same time. When an economy goes from a positive to a negative rate of growth, it is said to have reached a "peak" and entered a recession. When an economy goes from a negative to a positive rate of growth, it is said to have reached a "trough" and entered a "recovery." B. In some economies there might exist a deflationary gap. ...read more.

Middle

On the other hand, monetary policies would be effective as well. These policies are for example changing the money supplied for the society or the interest rates. In my opinion I would defend the monetarist point of view since I believe that the economy should correct itself and the more amount of money that is injected in the circular flow is going to generate inflation in a bigger percentage than the money injected and in the long-run is going to happen crowding out. C. When an economy is in deflation it means that the prices are constantly decreasing to increase the demand. There are two main reasons why this state of economy creates "unfavorable" conditions to invest. Firstly, since the prices are getting lower constantly whatever we produce today we are going to sell it for a lower price tomorrow. For example, we have a businessperson and he his going to invest 100,000$ in a factory that will produce 10,000 units of a certain product a month which are going to be sold in the market for 10$ each. ...read more.

Conclusion

In Singapore, we have a situation like this where inflation is due to the rise in demand. In a normal case of inflation, inflation would help to decrease unemployment since there is more demand and more things have to be produced by the factories (as shown in the diagram below) and therefore more people will be employed to work in these factories. Singapore is, unfortunately, not a normal case of inflation since they have "already excess productivity capacity" (paragraph 3). This means, in other words, that they have too many people employed than they need. In Singapore's case when there is inflation and more products have to be produced to meet the demand these factories do not need to employ more people, which would obviously decrease the unemployment, since they have too many people to work already in the factories. The inflation is only going to have negative effects since it does not take more people from unemployment and now everything is more expensive (as shown in the diagram below). ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our International Baccalaureate Economics 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 International Baccalaureate Economics essays

  1. Costs of inflation and deflation and evaluation of supply side policies

    Monetarist economists are quick to point to this particular effect of inflation. Labour unrest is also a consequence of inflation. This may occur if workers do not feel that their wages and salaries are keeping up with inflation. It may lead to disputes between unions and management.

  2. Rising unemployment and inflation commentary. The above article Bah Humbug talks about the ...

    Analyzing the current state of the economy we can see the presence of Stagflation, v"the persistent high inflation combined with high unemployment and stagnant demand in a country's economy". As can be seen, the above article mentions the governments plans to have a budget deficit due to high consumer prices and increase required increase in the consumer taxes like VAT.

  1. China Inflation and GDP Growth

    First is the inflation in prices of basic necessities such as housing and food, the other is the lack of wage growth, especially in primary sectors. CPI is rising to the extent of exceeding government targets of 3% and likely to resume expanding.

  2. Winners and Losers of Inflation and Deflation

    Often when workers become aware of inflation they become unsatisfied with their current wages and request a raise in wages to cover inflation. Workers who are unsatisfied with their wages become less efficient or can strike. Less efficient workers and days lost through strikes have major implications on firms' ability

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