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Tutorial 3

Tutorial 3

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Published by NothingToKnow

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Published by: NothingToKnow on Nov 28, 2008
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06/14/2009

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Question 5 (Do not have teacher’s answer for this question only)Money Supply-It does not have an effect immediately-Consumers have to gain confidence-Money is not spent in the economy immediatelyStock Price Index-Reflecting investors’ expectations in the future-Investors sell because they predict future is going bearish New Business Formations-Take orders, hire workers-Production start only after a few months Non-oil Retained Imports-Stocking up raw materials (after taking in orders for products)-Manufacturing companies are producing more in the futureUS Purchasing Manager’s Index-Survey results-More purchasing in the future-Good for Singapore as US is the major trading partner Other indexes include:-Stocks of finished goods-Wholesale price index for manufactured goods-Business forecast for wholesale trade-Total non-oil sea cargo handled-Domestic liquidity indexQuestion 6a)
Reserve requirements determine the proportion of deposited funds that must be kept asreserve in bank 
When MAS lower the reserve requirements, banks will have more funds available for loans
With more funds available for loans, bank will lower interest rates to make loans moreattractive
More individuals will spend on credit with lower interest rates and take up loans to purchasenew durable goods & residential property
Company will take the opportunity to take up cheaper loans for their capital investment
There will be an expansionary effect on the Singapore’s economy b)-Trade is affected by changes in exchange rates

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