Internal Macroeconomic Goals (i) Sustainable Economic Growth
Economic Growth
- Expansion of increase in an economy's level of output or Gross Domestic product (GDP) over time
Types:
a) Actual Economic Growth
- Annual percentage increase in national output
- Movement within PPC
b) Potential Economic Growth
- Annual percentage increase in an economy's capacity to produce
- Shifting of PPC
Indicators:
a) Real GDP growth
b) Real GNP growth
Problem: Negative Economic Growth
- Reduction in economic activities of an economy
- Measure in period of two quarters
Solution:
- Conducive environment to attract foreign investment to foster economic growth
- Maintaining sound infrastructure to provide ease for economic activities
- Investing heavily on education to train workers
(ii) Full Employment
Full employment - Condition of an economy, where all or nearly all people, of working age, are willing and able to work at the prevailing wages and working condition
Indicator:
Unemployment rate
Problem: Unemployment or underemployment - Number of people of working age who are without work, but they are willing and able to take up employment - Types: (a) Structural Unemployment
- Arises when workers do not have the necessary skills that employers require in growing industries
(b) Frictional Unemployment
- Arises when workers who are retrenched, or who have resigned or who are joining the labour market but cannot find jobs immediately
(ca)) Cyclical Unemployment - Arises from a lack of demand for goods and services during an economy recession
Solution: - Increasing public investment
- Reducing taxes during recession
- Provide necessary skills for labour force
(iii) Price Stability
Price Stability - Minimum change in overall prices of final goods and service - Minimum change in general price level
Indicators: - Consumer Price Index
Problem: Inflation - Sustained increase in general price level in an economy - Types: (a) Demand Pull
- Too much money chasing too few goods
(b) Cost Push
- Rising Cost of Production
Solution:
- Varying interest rate
- Varying exchange rate
- National Wave council (Singapore)
- Foreign Labour Migration Policies (Singapore)
(IV) Balance of Payment Equilibrium
Balance of Payment
- Summarised statement of monetary transactions between residents of one country and the rest of the world during a specific period of time
Type of BOP account:
a) Current Account
- Flow of goods and services
- Flow of income in and out of country
b) Financial Account
- Cross-border purchases and sales of assets
- Net Direct Investment etc
c) Capital Account
- Debt forgiveness
- Acquisition and disposal of non-financial assets
Types of BOP equilibrium
a) BOP surplus
- Export > Import
b) BOP deficit
- Import > Export
Problem: BOP deficit
- leads to increase in unemployment
Solution:
- Imposing tariffs
- Depreciation of currency
(i) Sustainable Economic Growth
Economic Growth
- Expansion of increase in an economy's level of output or Gross Domestic product (GDP) over time
Types:
a) Actual Economic Growth
- Annual percentage increase in national output
- Movement within PPC
b) Potential Economic Growth
- Annual percentage increase in an economy's capacity to produce
- Shifting of PPC
Indicators:
a) Real GDP growth
b) Real GNP growth
Problem: Negative Economic Growth
- Reduction in economic activities of an economy
- Measure in period of two quarters
Solution:
- Conducive environment to attract foreign investment to foster economic growth
- Maintaining sound infrastructure to provide ease for economic activities
- Investing heavily on education to train workers
(ii) Full Employment
Full employment
- Condition of an economy, where all or nearly all people, of working age, are willing and able to work at the prevailing wages and working condition
Indicator:
Unemployment rate
Problem: Unemployment or underemployment
- Number of people of working age who are without work, but they are willing and able to take up employment
- Types: (a) Structural Unemployment
- Arises when workers do not have the necessary skills that employers require in growing industries
(b) Frictional Unemployment
- Arises when workers who are retrenched, or who have resigned or who are joining the labour market but cannot find jobs immediately
(ca)) Cyclical Unemployment
- Arises from a lack of demand for goods and services during an economy recession
Solution:
- Increasing public investment
- Reducing taxes during recession
- Provide necessary skills for labour force
(iii) Price Stability
Price Stability
- Minimum change in overall prices of final goods and service
- Minimum change in general price level
Indicators:
- Consumer Price Index
Problem: Inflation
- Sustained increase in general price level in an economy
- Types: (a) Demand Pull
- Too much money chasing too few goods
(b) Cost Push
- Rising Cost of Production
Solution:
- Varying interest rate
- Varying exchange rate
- National Wave council (Singapore)
- Foreign Labour Migration Policies (Singapore)
(IV) Balance of Payment Equilibrium
Balance of Payment
- Summarised statement of monetary transactions between residents of one country and the rest of the world during a specific period of time
Type of BOP account:
a) Current Account
- Flow of goods and services
- Flow of income in and out of country
b) Financial Account
- Cross-border purchases and sales of assets
- Net Direct Investment etc
c) Capital Account
- Debt forgiveness
- Acquisition and disposal of non-financial assets
Types of BOP equilibrium
a) BOP surplus
- Export > Import
b) BOP deficit
- Import > Export
Problem: BOP deficit
- leads to increase in unemployment
Solution:
- Imposing tariffs
- Depreciation of currency