Macroeconomics: Analysis on GDP, Inflation, Wages, Financial Markets and Short-term Economic Fluctuation

This article provides an analysis on different macroeconomic indicators such as GDP, inflation, wages, financial markets and short-term economic fluctuation. It discusses the current economic situation of China, Singapore and the United States.

Running head: MACROECONOMICS
Macroeconomics
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Chapter 1: Analysis on GDP and economic growth
Article name:
“China’s Economic Growth Hits 27-Year Low as Trade War Stings”
Date:
July 14, 2019
Source:
https://www.nytimes.com/2019/07/14/business/china-economy-growth-gdp-trade-war.html
Summary:
The article mainly discusses the current slowdown in China’s economic growth. The
economy of China now has reached to the three decades’ lowest growth rate. The main factor
contributing to China’s growth decline is the triggering trade tension between China and
United State. The resurgence of trade tension has exposed the economy to different financial
problems. The economy accounted a growth of 6.2% between April and June1. The growth
rate though is higher than most of the countries in world, it indicates the slowest growth rate
since 1992.
Analysis:
One major indicator of evaluating economic performance of a nation is the trend in
economic growth rate. Economic growth rate is measured by the percentage change in GDP
between two consecutive periods. GDP traces the economic growth of a nation by evaluating
rate of change in aggregate output. China shares a good trade relation with United State and
exchanges various goods and services. Now, as President Trump announced tariff on
different imported goods from China, there is significant contraction in trade volume between
the two nations. China’s shifts towards a consumption based economy from a manufacturing
based one together with the trade escalation has given a break to historically higher growth
trend that the economy is maintaining since the last thirty years. Most of the growth rate in
April and in the beginning of May has been taken place due to increase in public confidence
arising from a cut in tax and increase in infrastructural spending. This is the sign of
expansionary fiscal policy on the part of government2. The imposition of tariff on goods
imported from China adversely affect confidence of consumer along with damaging financial
confidence.
Chapter 2: Analysis on Price Level and Inflation
Article name:
“Singapore's headline inflation seen slowing in May: Reuters poll”
Date:
June 21, 2019
1 Bradsher, K, "China’s Economic Growth Hits 27-Year Low as Trade War Stings.". Nytimes.com, , 2019,
<https://www.nytimes.com/2019/07/14/business/china-economy-growth-gdp-trade-war.html> [accessed 21 July
2019].
2 Acemoglu, D, D Laibson, & J List, Macroeconomics, Global Edition. Harlow, United Kingdom, Pearson
Education Limited, 2018.

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Source:
https://www.reuters.com/article/us-singapore-economy-inflation/singapores-headline-
inflation-seen-slowing-in-may-reuters-poll-idUSKCN1TM10T
Summary
The headline inflation in Singapore recorded to be slowed down in May due to a fall
in economic growth along with a decline oil price. The consumer price index in Singapore
increase only by 0.6 percent in May compare to a rate of 0.8 percent in the previous month.
As against this, core inflation rate is found to be stable at 1.3 percent in May3. Growth has
slowed down due to a rapid decline in Singapore’s export to China. This raises the possibility
of a monetary policy easing for the economy.
Analysis
Inflation is a measure of stability in the price level. Inflation refers to the phenomenon
where general price level in an economy increases continuously. Two types of inflation used
to understand status of overall price level are headline inflation and core inflation. Headline
inflation is the measure of overall inflation which includes prices of all goods and services.
Core inflation on the other hand is a measure of inflation that does not include price of energy
and food items. Price level in the economy is related to growth rate of the economy4. The
decline in GDP growth rate in Singapore has down sided headline inflation. The contraction
in export and a fall in prices of oil have lowered the inflation expectation in Singapore.
Chapter 3: Analysis on Wages and Unemployment
Article name:
“Full employment will shift progress to wage increases.”
Date:
July 7, 2019
Source
https://www.detroitnews.com/story/opinion/2019/07/08/opinion-full-employment-shift-
progress-wage-increases/1657697001/
Summary
The labor market in United State has recently added nearly 75,000 jobs. Despite an
economic slowdown, people are still hoping a positive recovery for the economy. The job
creation though is below the expectation but it helps the economy to attain the lowest level of
unemployment. With this the economy has almost attained a situation of full employment. As
reported by Federal Reserve, there are currently 7.5 million new job openings allowing
almost a six-figure income annually to a worker5. The increasing tendency of GDP growth
3 reuters.com, "Singapore's headline inflation seen slowing in May: Reuters poll.". U.S., , 2019,
<https://www.reuters.com/article/us-singapore-economy-inflation/singapores-headline-inflation-seen-slowing-
in-may-reuters-poll-idUSKCN1TM10T> [accessed 21 July 2019].
4 Mitchell, W, L Wray, & M Watts, Macroeconomics. London, Red Globe Press, 2019.
5 Semprevivo, J, "Full employment will shift progress to wage increases.". Detroitnews.com, , 2019,
<https://www.detroitnews.com/story/opinion/2019/07/08/opinion-full-employment-shift-progress-wage-
increases/1657697001/> [accessed 21 July 2019].

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has further supported the job growth. With more number of jobs and less number of available
workers, wages are on a rise.
Analysis
Performance of labor market measured by the number of unemployed people is a vital
indicator for health of the economy. People in the labor force are classified as unemployed
when despite active job search they fail to find a suitable job. Higher unemployment rate
restricts economic growth. The new job creation in the U.S economy has helped the labor
market to attain an almost full employment condition where everyone searching for jobs find
a suitable job. In fact, the currently available job openings are larger than number of
unemployed people. As a result, employers have to bargain to get best employees. This
pushes the wage rate to the upward direction.
Chapter 4: Analysis on Saving, Capital Formation, Financial Markets and Financial
System
Article name:
“Regulatory, capital market reforms needed to revive Singapore’s stock market.
Date:
July 11, 2019
Source:
https://medium.com/venture-views/regulatory-capital-market-reforms-needed-to-revive-
singapores-stock-market-3e9e497e3338
Summary
The capital market in Singapore has recently initiated significant reform to improve
the condition of financial market. These reforms include development of investment trusts,
allowing robust franchises in the debt ridden capital market derivatives and business trusts
along with developing a wealth management hub6. Despite the reforms, the equity market of
Singapore remains dysfunctional compared to best practices of international standard.
Analysis
Financial market indicates a broad term that mainly refers to the marketplace where
sellers and buyers interact for trading assets and securities. Financial market of a country
plays a critical role in economic growth of the nation. The major functions of financial
market include price determination, saving mobilization, ensuring liquidity and other. Capital
market which is a part of financial market deals with transaction with equity backed securities
and long term debt7. The state of financial market in Singapore lags behind the international
standard. In order to revive the status of the market reforms are needed to be undertaken in
capital market, pension system and other aspects of financial market. The reforms that have
6 Yap, S, "Regulatory, capital market reforms needed to revive Singapore’s stock market.". Medium, , 2019,
<https://medium.com/venture-views/regulatory-capital-market-reforms-needed-to-revive-singapores-stock-
market-3e9e497e3338> [accessed 21 July 2019].
7 Strumeyer, G, & S Swammy, The capital markets. Hoboken, Wiley, 2017.

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been recently undertaken in Singapore’s capital market thus is expected to improve
dysfunction of financial market contributing positively to economic growth and development.
Chapter 5: Analysis on Short-term Economic Fluctuation and Aggregate Expenditure
Article name:
“Singapore economy: leaders ease recession fears as US-China trade war bites.”
Date:
July 13, 2019
Source:
https://www.scmp.com/week-asia/economics/article/3018437/singapore-economy-leaders-
ease-recession-fears-us-china-trade
Summary
The leaders in Singapore current fear an economic recession due to adverse
consequences of US-China trade war. Because of the tariff, the manufacturing sector of
Singapore particularly hit badly. Economic growth in Singapore has now hit to a lower level.
There is no sign of improvement unless state of global trade improves. GDP has increased
only at a rate of 0.1 percent8.
Analysis
Economic fluctuation of a nation is broadly classified into four business cycle phases.
These are economic expansion, peak, recession and trough. Performance of different
macroeconomic indicators point out which particular phase the economy is currently
experiencing. For a small economy like Singapore, international trade plays an important
role. China is a vital export market for Singapore. Now the trade war between United State
and China has slowed down China’s economic growth along with a decline in import demand
for Singapore. As export decline, there is a fall in export earning which adversely affects the
economic growth. This raises the possibility of a full year recession in Singapore.
Conclusion
The analysis of different macroeconomic indicators suggest that China has maintained
a steady growth for three continuous decades, is now entered into a phase of relatively lower
growth rate. The headline inflation in Singapore has seemed to be slowed down due to a
declining economic growth. Labor market in United States restores almost a full employment
situation ensuring lowest unemployment rate ever. Several reforms have been undertaken to
revive the financial market of Singapore. The Singapore’s economy is now facing a threat of
recession due to a decline in trade volume with China.
8 Sim, D, "Singapore plays down recession fears as US-China trade war bites.". South China Morning Post, ,
2019, <https://www.scmp.com/week-asia/economics/article/3018437/singapore-economy-leaders-ease-
recession-fears-us-china-trade> [accessed 21 July 2019].

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References
Acemoglu, D, D Laibson, & J List, Macroeconomics, Global Edition. Harlow, United
Kingdom, Pearson Education Limited, 2018.
Bradsher, K, "China’s Economic Growth Hits 27-Year Low as Trade War Stings.".
Nytimes.com, , 2019, <https://www.nytimes.com/2019/07/14/business/china-economy-
growth-gdp-trade-war.html> [accessed 21 July 2019].
Mitchell, W, L Wray, & M Watts, Macroeconomics. London, Red Globe Press, 2019.
reuters.com, "Singapore's headline inflation seen slowing in May: Reuters poll.". U.S., ,
2019, <https://www.reuters.com/article/us-singapore-economy-inflation/singapores-headline-
inflation-seen-slowing-in-may-reuters-poll-idUSKCN1TM10T> [accessed 21 July 2019].
Semprevivo, J, "Full employment will shift progress to wage increases.". Detroitnews.com, ,
2019, <https://www.detroitnews.com/story/opinion/2019/07/08/opinion-full-employment-
shift-progress-wage-increases/1657697001/> [accessed 21 July 2019].
Sim, D, "Singapore plays down recession fears as US-China trade war bites.". South China
Morning Post, , 2019,
<https://www.scmp.com/week-asia/economics/article/3018437/singapore-economy-leaders-
ease-recession-fears-us-china-trade> [accessed 21 July 2019].
Strumeyer, G, & S Swammy, The capital markets. Hoboken, Wiley, 2017.
Yap, S, "Regulatory, capital market reforms needed to revive Singapore’s stock market.".
Medium, , 2019, <https://medium.com/venture-views/regulatory-capital-market-reforms-
needed-to-revive-singapores-stock-market-3e9e497e3338> [accessed 21 July 2019].