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For 4 double tutorial periods Extract 1: The bulk of the price pressures for 2010 will likely come

through the import channel, driven by higher oil and food commodity prices[imported inflation. Serious for Singapore, resource poor, demand for oil and food is price inelastic [not alternatives, necessities] in the global markets [price taker], as well as from increased car prices, as COE supply is expected to tighten further [transport, big part of CPI. However might not be as serious as food because not all Singaporean buy cars. Maybe only the higher income]. Meanwhile, domestic sources of inflation will be restrained in the first half of the year, but are likely to pick up in the second half as output continues to expand [moving closer to full employment levels or Yf as AD increases] and the labour market tightens [lower UE due to increase dd for labour from firms, more competition for labour, wages increase. Higher COP, AS shifts upwards, firms will pass on increase in COP to consumers, leading to dd pull inflation] Accommodation costs are also likely to rise in the latter half, especially if the economic growth turns out stronger than expected.

Extract2: India Overheats India’s current economic growth averages 8.5% annually over the past four years. Foreign investors [FDI??] have increasingly flocked [very high expected returns, very positive investor confidence/sentiments] to India to seize opportunities in one of the world’s fastest-growing economies. FDI = real growth AD rising + potential growth [transfer expertise, capital deepening, accumulation]. REG is faster than PEG. Help India develop Comparative advantage in certain areas. India, unlike Singapore, has large domestic market: I and C dominate GDP. However, the Indian economy is overheating [Due to AD rising with FDI influx]: Consumer-price inflation has shot up, well above its Asian counterpart’s. Deficient infrastructure, such as potholed roads, frequent power blackouts, and creaking transportation network could hardly handle the surge in demand [limited spare capacity due to poor infrastructure, making India very susceptible to DD-pull inflation. The Indian government, infamous for its inefficient bureaucracy and inflexible labour laws, is suffering from chronic budget defiicit [G>T: government is spending more than its income, i.e. taxes.DD-pull inflation due to large G]and could do little. As fuel and food prices continue to soar [imported inflation. Perhaps not as serious as Spore given that India may produce their own food], intervention by the Central Bank is necessary to restore stability [strengthen rupee so that import prices would be lower in domestic currency].

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