Economics

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Economics 1 Assignment
Name: Shaun Neo Wei Qiang
Student CT NO. : CT0209608
Date : 18th April 2014
Module : Economics 1
Lecturer : Mr Wong Hean Hoo

Outline

1) Introduction2

2) Relating to the Article – Inflation3

3) Some of the causes for inflation4
4) Managing inflation5

5) Conclusion6

6) Biblology7

7) Actual Article Selected8

Page 1
Introduction
The article I chose Is from Today Online(with approval from Mr. Wong), which is heavily categorized under inflation .Reasons for choosing article due to that its related to present findings and forecast of the general economy. MAS touches on the housing, labor markets, wage pressures and Inflation forecasts. Economic Terms of Inflation

Inflation can be defined as a continual increase in prices for goods which happens over a period of several months usually. Whenever inflation strikes, the purchasing power of consumers declines and the ability to purchase goods drops. This means that during a period of Inflation, the $X of money you spend only allows you to purchase a smaller portion of what you used to be able to purchase (full portion) before inflation. It can also be deemed as money losing its value overtime. Comparison of the difference in CPI(Consumer Price Index) is also vital. CPI is made up 6,500 of goods and services pertaining to general items or services purchased by average households which can be also affected by the cost of imported goods and domestic cost pressures.

Relation Towards Article
The Article speaks about supplying newly built homes to reduce housing rental activity so as to be able to ease inflation. MAS also mentioned the Monetary policy stance, implemented on April 2012, was assessed and deemed appropriate due to considering factors of risks between external demand uncertainties and rising domestic inflationary pressures. The Monetary policy adjusts the interest rates accordingly and in turn, affects the quantity of monetary loans, which leads to the rate of economic growth.

Page 2

For example, if the bank lowers interest rates, more people would borrow money, therefore more spending power which causes prices to go up. Vice versa. ('MAS cuts inflation forecast, but wage pressure remains', 2014) As Singapore progressed through the years, it is known by all that housing and skilled labour manpower shortage has always been a residing issue in Singapore’s economy which directly relates to the scarcity of resources (Part of The Economic Problem) and demand and supply concept. (Kaplan Study Guide Economics 1, 2014)

An Example: The following pictorial graph below states how the MAS limits the LTV (loan-to-value) ratios and loan tenures which directly impacts demand and supply.

('2012 Real Estate Recap', 2012)
From the graph above, we can see that the areas circled in black are the measures the governments were taking to control the market. ASBD (Additional Buyer’s Stamp duty) were targeting foreigners capitalizing property markets and “investors” group of buyers. Foreigners or “investors” had to pay much more just to be able to purchase a unit. From Sep ~ Nov 2012, MAS limited the LTV ratio causing a relatively steep fall in both demand and supply for housing units. This was to curb rising property prices as it was growing rapidly.

Page 3
Some Of The Causes for Inflation
i) One dominant factor of inflation includes domestic cost pressures. The bottleneck of these pressures derives from the Increase of rentals on OOA (Owner-occupied accommodation) although it does not affect those who already have housing. Singapore is land scarce, this is and will be an unchanged fact ( no matter how much reclaimed land is being put together ) . The rate of reclaiming land cannot keep up with the trend of rising population density. In year 2003, Population Density (Per Sq Km) was 5,939. This figure rose to 7,540 in...
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