Macroeconomics Report

This report analyzes two articles concerning Singapore's economy. The first article discusses the rise in consumer prices in January 2017, following a period of recession driven by falling oil prices. The report uses macroeconomic concepts like aggregate demand, aggregate supply, inflation, and fiscal policy to explain the situation. It details how Singapore's government implemented expansionary fiscal policies to stimulate economic growth, leading to increased aggregate demand and a rise in prices. The second article focuses on the technical recession looming in Singapore in 2016 due to weak global growth and the impact of the US election results. The analysis again employs macroeconomic tools to explain the recession, highlighting the impact on employment, consumption, and aggregate demand. The report concludes by discussing the cyclical nature of economic activity and the government's role in managing economic fluctuations through fiscal policy.

MACRO ECONOMICS

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Table of Contents
Summary of the Article 1................................................................................................................2
Economics Concepts related to article.............................................................................................2
Economics Analysis.........................................................................................................................4
Conclusion.......................................................................................................................................9
Summary of the Article 2..............................................................................................................10
Economics Concepts related to article...........................................................................................10
Economics Analysis.......................................................................................................................12
Conclusion.....................................................................................................................................17

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Article 1)
Singapore consumer prices rise for 2nd straight month in January on
recovering oil prices.
Summary of the article 1
Singapore oil prices are recovering from a recession period and gradually showing positive
inflation in the month of January 2017. According to figures released by the Singapore
department of statistics on February 23 2017. The base for measuring the inflation is CPI:
consumer price index which rose 0.6 percent from last month compared with the same month a
year ago. This scenario is seen after 2 years of recession from November 2014 to October 2016,
and a flat CPI in November. Finally, in December this data turned positive and increased 0.2
percent gradually. Recession in the oil market and car market ultimately affect the whole
economy and main drivers behind that long session of negative inflation. In the oil market, a
sudden increase in services and cost of oil-related items leads to increase the price of oil in
January. Overall inflation is predictable to pick up to 0.5 to 1.5 % this year, from negative 0.5 %
in 2016. This mainly reflects the positive contribution of energy-related components as well as
some administrative price increases.
Economics Concepts related to article
Real gross domestic products: during a given period of time, the quality of all the products
produce inside the border of a nation is known as RGDP.
Inflation: a rate at which prices of goods and services increase consistently, as inflation
prevailing in an economy, every currency an individual holds can buy small percent of goods and
services he can buy before.

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Cost-push inflation: when the prices of inputs like labor, raw material, etc. lead to increase the
cost of production; as a result price of that product increases as well, known as cost-push
inflation.
Recession: consistent fall in prices and output in two successive quarters which leads to falling
in RGDP and a period of temporary decline of trade and production activities.
Aggregate demand: at a given period of time, the final demand of goods and services from all
the individuals in an economy is referred as aggregate demand.
Aggregate supply: during a specific period of time, the total quantity of goods and services an
economy is planning to supply is refers as aggregate supply.
Unemployment – workforce those are willing to work and looking for work but not able to find
any work are refers as unemployed and percentage of them with reference to total population is
unemployment.
Expansionary fiscal policy: It is a policy by the government which is adopted so that the
money supply in the economy gets increased and the rate of inflation is raised. This is done by
decreasing the rate of taxes and increasing the expenditure of the government (Hansen, 2013).
Thus, this helps in fighting the recessionary pressures of the economy. When the taxes are
reduced, the disposable income of the people gets increased. Thus they spend more and consume
more. When the goods and services are invested into, and the people spend more, the GDP of the
country gets improved.
Full employment: It is a condition where all the people who can work and they are willing to
work are employed in the economy at a particular time (Beveridge, 2014).

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Economics Analysis
Determination of price in the economy
At a given period of time, the final demand of goods and services from all the individuals in an
economy is referred as aggregate demand. Aggregate demand is a combination of consumption,
investment , government and net export.
AD = C+ I + G + (X-M)
Where,
AD is aggregate demand
C is consumption
I is investment
G is government expenditure
X is export
M is import
During a specific period of time, the total amount of products and services an economy is
planning to supply is refers as aggregate supply. Aggregate supply is different in the long and
short run, in short run aggregate supply is upward sloping because an economy is below full

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employment and able to achieve full employment gradually. On the other hand, in long run
aggregate supply is vertical, and economy ultimately reaches full employment level. In an
economy, the price of all the goods and services are determined by the intersection of aggregate
demand and aggregate supply. As shown in below diagram:
Determination of price by intersection of AD & AS
In the above diagram, the prices of goods and services are determined at point ‘e’ when the
aggregate demand (AD) curve intersects aggregate demand (AS) curve. This is the level at which
the optimal level of price and output of the economy can be determined.
Due to fall in oil prices in, the whole economy gets affected, Recession in the oil market, and car
market ultimately affects the whole economy and main drivers behind that long session of
negative inflation.

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Fall in RGDP & Output, due to fall in oil prices
In the above diagram, due to fall in oil prices, short run supply curve shift leftward, which leads
to fall in RGDP and output. As a result, income of people fall, so does the aggregate demand of
other goods and services as well. Thus, the scenario continue and turn into a recession.
P↓ → AS↓→RGDP↓→Y↓→AD↓
The retail sector of Singapore is negatively impact as unemployment increased in Singapore's.
Thus, the purchasing power of Singapore citizens shrink as there income reduced. Aggregate
demand and consumption will also fall, and then the RGDP will decline. As shown in the below
diagram:

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Retail sector negatively affected
In the above diagram, due to falling in aggregate demand of goods and services from AD (1) to
AD (2). Thus in short run, prices fall from P(1) to P(2), and Output falls from RGDP(1) to
RGDP(2).
Due to fall in income of consumer
AD ↓=C ↓+I ↓+G+X−M
Here
AD↓: Aggregate demand shift leftward.
C↓: Consumption falls
I↓: Investment falls
P↓: leads to Deflation

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RGDP↓: show Recession and High Unemployment
To rectify the above problem, an expansionary fiscal policy was needed to stimulate the
economic growth, each Asian country was under pressure, as central bank reduced interest rates
to resort the situation, government are compel to do expansionary fiscal policy. Global demand
affects Singapore the most as it is more exposed among all Asia countries. Government provide
tax rebates to SME and access to more than S$2 billion of loans, industrial transformation plan
supported financially by S$4.5 billion and for stimulate worker’s wages S$770 million a year
spend by Government (https://www.bloomberg.com/.../2016..). The government boosting the
aggregate demand by spending on infrastructure which ultimately creates jobs and wages reduce
the unemployment.
At the same time, the government support individuals and company by reducing corporate and
personal income. After reducing corporate tax company have benefit of grabbing more marginal
of profit.
As a result, aggregate demand increases and so did the output, after the policy implication by the
government, from December onwards price, start rising upwards and Singapore consumer prices
rise for 2nd straight month in January on recovering oil prices. As shown in the diagram:

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Singapore government apply expansionary fiscal policy
In the above diagram, an economy is not at the equilibrium level and is operating below full
employment, the above situation arises. Due to this government use expansionary fiscal policy.
As a result, In long-run, an aggregate increase from AD(1) to AD(2) and Real GDP increases
from RGDP(1) to RGDP(2). Thus, as a resulting economy attains its full employment level, and
gradually prices of goods and services s start rising from P (1) to P (2).
AD ↑=C + I+ G↑+ X −M
Here
AD↑: aggregate demand shift rightward
G↑: Government increases

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With the expansionary policy, the economy of a country grows in terms of GDP, increase in the
rate of employment, etc. With the rise in people getting absorbed in the labor market, the
employment rate will rise, and thus, the full employment will be reached after a certain point of
time. When all the people who are able to work and who want to work are earning in the
economy, then the money supply in the country will rise. They will spend more and invest more.
With the increase in investment, the rate of interest is likely to fall, and thus, Fed will not be able
to increase these rates.
Conclusion
According to figures released by the Singapore department of statistics on February 23,
2017. The inflation rose 0.6 percent from last month compared with the same month a year
ago. This situation arises because there is a recession in the economy. As a result price of goods
and services falls and output, as well as income level, decreases in an economy. In recession, an
expansionary fiscal policy was needed to stimulate the economic growth, each Asian country
was under pressure, as central bank reduced interest rates to resort the situation, government are
compel to do expansionary fiscal policy. Global demand affects Singapore the most as it is more
exposed among all Asia countries. Government provide tax rebates to SME and access to more
than S$2 billion of loans, industrial transformation plan supported financially by S$4.5 billion
and for stimulate worker’s wages S$770 million a year spend by Government (The government
boosting the aggregate demand by spending on infrastructure which ultimately creates jobs and
wages reduce the unemployment. At the same time, the government support individuals and
company by reducing corporate and personal income. After reducing corporate tax company
have benefit of grabbing more marginal of profit. Thus, by giving less income in tax payment,

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individual can spend more and invest more, which leads to increase aggregate demand as well as
output and stimulate economic growth.
Article 2)
Technical recession looms for Singapore
Summary of Article
In 2016, Singapore economy faced recession in Technical looms which were effect of United
States election's result. OCBC economists said this is a result of weak global growth and rising
market volatility. Thus, in 2016 the Singapore economy shrank 4.1 percent in July to September
period as compared with the previous quarter (Min, C. 2017)
As the definition refers, consistent fall in prices and output in two successive quarters which
leads to falling in RGDP is known as a recession. The Same scenario happened in Singapore,
occurs due to another quarter of contraction. As a result, 2016 become the slowest year for
economy growth with 1 to 2 percent increase in RGDP. US new policies by president Donald
Trump may hinder small open economy of Singapore, which has minor contribution in global
trade and facing slowdown as well. At the same time, the US dollar has appreciated aginst Asian