Case Study

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ARTICLE I: “Cost pressures cast a shadow over 2011” Introduction Summary: This article indicated the increasing cost pressures would cast a shadow over 2011 in Singapore. Moreover, the mounting trend of cost situation will be the major macroeconomic challenge in 2011. However, Ministry of Trade and Industry (MTI) and Monetary Authority of Singapore (MAS) remain fairly optimistic about the inflationary risks. Fortunately, the cost situation will not be as acute as in 2007-2008, and expected inflation may decrease in the second half of the year. In addition, the unemployment has dropped due to the shortage of the labor market, but the strong wage pressures will affect the Consumer Price Index (CPI). Furthermore, the projected Gross Domestic Product (GDP) growth in 2011 will keep a healthy growth pointed out by MTI’s Mr Menon. With the mounting GDP, labor productivity also recorded a ‘cyclical rebound’ in 2010 after two negative years. Nevertheless, in 2011, there will be a more stable rate of producing growth. List of Theories: [1] Aggregate Expenditure (AE) Aggregate expenditure (AE) is the sum of consumption (C), investment (I), government expenditures (G) and net exports (NX) Formula: AE=C+I+G+NX [2] Consumption Expenditures Consumption expenditures (C) are the expenditures that people spend money on buying goods (such as food and clothing). [3] Cyclical Unemployment Cyclical unemployment occurs when the unemployment rate moves in the opposite direction as the GDP growth rate. So when GDP growth is small (or negative) unemployment is high. [4] Demand Pull Inflation The inflation resulting from an increase in aggregate demand is called demand-pull [5] Equilibrium Real GDP The equilibrium Real GDP is the situation in which Real GDP is equal to Aggregate expenditure. inflation. [6] GDP Growth Rate GDP Growth rate is measured by the

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