\
MICKOECONOMICS
Ecorcnies of Scole (EoS) ore experimced when unit a# fall as l'llc
*ab of p rod wti ott fuirreo*s.
lnternal EOS
. Technical Economies
. Specialization and Division of Labour
. Less training is needed
. Simpler jobs, workers can be more efhcient
- lndivisibility of capitalgoods like machinery
. ' RnD to develop more efficient methods of production
CostAdvamages
. targe Firms
. Pricing power
. Greater market share and market power
. Non-PriceCompetition
. Greater resources available for non-price competition
. Small Firms
. Niche Market
- Reach out to consumers who desire individuality and
variety
- More personalized services
- i.e. small accounting firms
. SubcontractingRelationship
. Provide infrastructural support for the large firms
-'ContainerPrinciple'
.
For capital equipment for storage purposes, it tends to
cost less per unit of output the larger its size
Cost related to Surface Area
Output related toVolume
Greater Efficiency of Large Machines
More output can be gained for a given amount of input,
more efficient use of raw materials
i.e. 1 worker needed to operate machine, regardless of
whether it is big or small
Marketing Economies
Bulk Purchase for lower price and betterterms
.
Prcfit Maximization
.
.
,
.
. Reduced transportcosts by bulkdistribution
. Large scale advertising, lower per unit cost
Financial Economies
Considered more credit worthy, easier to be awarded large
loans
Enjoy lower interest rates on big loans
Risk-BearingEconomies
Larger market share, predict demand accurately
Diversification of products to minimize potential losses
Administrative and Managerial Economies
Often, when firms merge, savings can be made by
Short Run:
.
.
.
.
Long Run:
rationalizing
IM
.
-
.
producs
lnGrnaldisEOS
AR
Reorganizing of production to cut waste and duplication
May cause unemployment though.
Economies of Scooe
Largecompanies produce a range ofproducts
lndividual product producd more cheaply than ff it was
produced by a single-product firm
Marketing and distribution costs as well as administrative
and financial economies can be shared amongst all the
A.
K
.
.
.
. ManagementDifhculties
. Problems in coordination and communication
. PoorWorker Morale
Graph
e/a/c
production.
lf MR exceeds MC, revenue will increase more than cost of
production is increased.
KH
.
lf MC exceeds MR, profit can be increased by cutting back on
LA
.
AN
I
MC= MR
.
.
l}r
Background Theoty - Rwenue
Bd<ground Theory - Cost
.
-tt2Ecor{outct
MICROECONOMICS
Shut Donn Point
Firm will shut down if revenue cannot cover
variable costs, as it can go some way to pay off
the fixed cost
All costs are variable in the long run, hence it
will shut down if AR is lowerthan LRAC
Barriersto Entry
Econonries of Scale (Naunal Monopoly): Not efficient for more
than one firm to o<ist in the industry due to lower unit cost achieved
from substantial economies of scale. Hence, average cost will be
lower if industry was under one firm. This is mostly because of high
fixed or setup costs, especially in industries like transport and public
utilities.
Lwer CosB for Established Flrm, because an established firm is
likelyto have developed specialized production and marketing skills,
and would be aware or implementing the most efficient methods of
production or the cheapest suppliers.
Control wer l(ey Factors of Ploductlon. lf a firm controls the
supply of key inpu6 eg de Beers companyb control over diamond
producers, it can deny access to potential rivals.
Control overWholesale / Retail Outhts
lcgal Protection: A Monopoly's position may be protected by
patents on essential process and other barriers like tarifts and trade
restrictions to keep out foreign competitors.
Prcduct Difrerentiation and Erand loyalty lf consumers associate
the product to the brand, it would be very difficult for potential
entrants to produce a good of similar quality to attract consumers
who are loyal to the brand.
I{otes:
Turning point of MC is where law of diminishing marginal returns
set in.
AFC falls continuously as total fixed cost (constant) are spread over
more and more output
MC cuts AVC and AC at minimum point lf MC < AC, new units cost
less than the aveftlge cost, hence AC must be falling. if MC > AC<
new units cost more than average cost, hence AC must be rising.
EcTNFTDENTTAL DtrruMENTS
AggressiveTactks by established firm: Price war; Advertising
Campaigns etc.
t]F BEN.JAMTN NG TzE wEE
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H2 Ecolor,ilcs
MrcRoEcoNoMrcs
P
Perfect Competition
Large number offirmt such that each produces an insignificantly small portion oftotal industry supply, have has no power on the price ofthe
product. Hence, it is a price taker. and can sell as much as it wants as its output is a negligible portion of market supply.
Homogenous Product, hence there is no branding or nongrice competition like advertising. Considered perfect suhitutes (XED = 1)
No Barriers to Entry leading to complete freedom to entry and exit. This means that if a firm is earning supernormal profit, new firms wi[. be
attracted to the industry. lndustry supply increasel causing price to fall, and hence the firm will only earn normal profits in the long run.
Perfect knowledge of the market exists. Consumerc are perfectly aware of prke, quantity and availability of product, while producers are fully
aware of prices, costs, market opportunitiet and production methods.
Short{un Equilibrium
Price: Determined by the intersection of market demand and supply. Firm faces a horizontal demand (AR) curue at the market price.
Quantit),: Maximize profitat MC=MR
AN
I
YIClA
Pl'lP
KH
P= DD. AR
?
LA
Long Run Equilibrium
t{otrnq\ Pr{t
lclv
SLAL
AR
IM
SBAC
TKAL
P. DD.ltta
0.
ReaSnns for Existence (or Non*xistence)
Advantages
o
o
o
o
Allocative€fficiency
o
o
A.
K
For PC to exist, EOS for the industry must be very limited. PC requires numerous small firms which cannot reap EOS. lf a firm expands sufhciently
to achieve EOS, it will be able to undercut the market price and gain market power, and PC is destroyed.
P=MC=MarginalUtility
Optimal Resource Allocation
Productive Efficiency
Firm producesata pointon LRAC
Competition amongst firms spurs efhciency
Less efficient firms will make hss than normal profits and shut down
More efficient firms get to earn supernormal profits (until other firms copy you)
o
o
o
o
LowCosts(LowAC)
o
o
o
Desire for supernormal profit or to prevent losses supe6 innovation of new and cheaper methods of production
No advertising costs
Firm produces at lowest point on LRAC hence it produces at the least-cost output for the given state of technology
Customer Sovereignty
Customers. through the market and price signalt determine what and how much is to be produced
Example, if demand rises, the resulting price increase will lead firms to respond to raise supply (in a bid to earn short-run profit)
Firmscannot control price ofgoods
o
o
o
Disdvantages
r
o
Dynamic lneftciency
Firms may not have the incenti\re to develop new technology as their innovations are easily copied by rival firms
May not have the funds for research and development
o
o
LackofConsumerChoice
PC lndustries produce undiffierentiated products.
o
EENFTDEN?|AL r).]cuMENTS EF BEN.raMrN Na TzE WEE
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H2 EcoNoMICs
M[RoECoNoMICS
+
Monopoly
Single Firm in the markeu hence market demand is also the firmb demand curve. Firm! supply curve is also the market supply curve. Monopoly is
thus a Price Setter with complete market share, with a downwad sloping demand cunre.
Unique Product, no close substitutes,
High Barrie6 to Entry allow firm to earn supernormal profits in the long run without fear of new entrants into the market.
Combinotionof naturol ond artifrcialobstelesthotdeterorprevantnewfirmsfiom enteing a mo*et
See List of Barriers to Entry
Short Run Equilibriun
Quantity: Maximize Profit at MC =MR
PlLl\
AN
I
Sq4rnurmo\ lrufits
LA
KH
Long Run Equilibriu,m
Advantages
o
o
o
o
is
used
IM
o
Productive Efficiency
Firm producesata pointon LRAC
Dynamic Efficiency
Has the funds for research and development due to supernormal profits
lncenti\re to innovate since techniques will not be copied by any rival firms if therc is good lP Protection
May be able to supply a good if therc is no single price at which the producing firm can covertotal cost of production if Price Discrimination
$Cm= SSf(
ilLlA
Pm
?r,
)
F >mL t e\$q1M\
AR
o
_\
hrqh.rfic, \ou,ru:tP$
I
A.
K
hc
.01)rc
fon'
0
Lower Price and Higheroutput
lF Monopoly is able to reap substantial interhal EoS
o
?ll)t7.,lSrc
Pk
P-
Dlsadvantages
o Allocativelylnefficient
r
o
r
o
'
qK:
lE=DDpc
oPc &w.
u
Regardless of the level of output at the equilibrium, Monopolist does not achieve allocative efFciency as P>MC
Higher Price and LouerOutput
o
o
See Diagram
TransfurofConsumerSurplustoPloducerSurplus
HigherCosts(X-lnefficiency)
No Competition, hence no impetus fior monopolist to de\relop more efficient techniques to minimize cost
LaxCostControlssuchasoverstaffing
Others
Can practice price discrimination, which not only benefits the monopolist more, but also cause inequalities as some people have
to pay more
o
o
o
coNF|DENT|A.L [)t]truMENTS oF BEN.J.AMTN NG TzE wEE
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H2 EcoNoMtcs
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MICROECONOMICS
*
Oligopoly
Few Dominant Firms, each with significant market share.
High barriers to entry.
Can be homogenous or differentiated product.
Mutual lnterdependence of Firms and firms have to consider the reactions of other firms in decision making'
price Stability, hence firms competitive via non-price methds like advertising where the firms aim to increase market share, through:
A. Product De\relopment and lnnovation
increase demand for its products'
Firms must continuously seek out new products to provide it the competitive edge to
Advertisement and Promotions
demand for the
Attempt to create a consumer perception of product differentiation even when there is noL to increase
P/hlL
product.
?L
Advantages
KH
Ha\re the incentive as vrell as the funds for research and innovation.
Greater choice due to product differentiation
AN
Disadvantages
lCollusive Oligopoly has similar cosVbenefit to Monopolyl
Competitive Oligopoly:
May harre less scope for Economies of Scale than that of monopoly.
Higher costs of Advertising
I
B. Marketing,
Competitive -
Fomal Colkrsion - Cartel
ArLFrnk<'\)
Demand Curve
LA
The firms act as a single firm or monopoly, will set a price or quantity at Assumptions:
No Collusion, Product is Homogenous
the intersection of the industry MC and MR curve.
Rival Firms will match decrease but not increase
Share of resulting sales depend on either:
Non-price competition
lf the firm lowers price rival firms will follow. Hence, while sales volume
will increase, revenue falls. Hence it is price inelastic below current
price. P/./a
AR
IM
lf the firm raises price, rival firms will not follow hence the original firm
will suffer a fall in revenue. Hence, it is price elastic above current price'
market share.
A.
K
Pre-determined quota given to each firm, often based on current
Each member, under cartel agreemenL produces at an output level for
which individualJMbMC. Hence,each membercan increase its own
proftts by producing more output than allocated. Hence. there is a
tendency for members to cheat on allocated quotas.
TacitCollusion - Price lcadership
Firms keep to the price set by an established leader, often the most
dominant firm or the most reliable one.
MR curve is a discontinuous line.
Evaluatlon:
Explains the phenomenon of price stability, even in the face of minor
cost changes. As long as the MC shifu within the vertical section ofthe
MR Curve, price and output is unchanged.
However, it does not o<plain how initial equilibrium price and quantity
are reached.
Price rigidity can be due to other causes such as high menu costs
(costs
involved in re-printing labels, printing new brochures etc)
ComPetftive - PriceWars
Strategy to eliminate new competitors or to increase market share by
cutting the price temporarily. Firms that are unable to sustain the
losses will be forced to leave the industry. They are often waged when
a firm has significantly lower costs of production than othert so that its
losses would be minimized.
very costly to wage, hence often a last resort strategy.
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H2 ECONOMIC5
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MrcRoEcoNoMlcs
+
Price Discrimination
proctice of charging different pricesforthe same ptduct or for differmt units of it when such price differences do not resultfrorn differences in cost
Aim: To generate higher revenue and more profit than when a uniform is charged.
Conditions Requircd:
Monopoly power, so that consumers cannot turn to ahemative suppliers. lt must also be able to set its own
price.
geographical boundaries, age group etc. seepage refers
segregation ofthe Market, to prevent seepage between markets through conditions like
marka.
product
higher-prked
to
the
resell
the
to the situation when consumers in the lower-prked market
price in the more
Different pED in Different Markets. Revenue can only be increased if they charge a higher
price in the price elastic market
price inelastic market and a lower
Mvantages / Dlsadvantages
groups who are unabh to
I
price is for
Sorne consumers will have to pay more, while others pay less. May be socially beneficial if the loweled
afford the servke previously.
to slash prices in other'
AN
Monopolies may use price dixrimination to dri\re consumers out of business, using profits from one region
if the profits are spent in research and innovation'
Raises monopoly profits, whkh may be an undesirable reallocation of income in society, but
may lead to lower costs in the future.
First Degtcc:
LA
KH
When o fum charges euh ansumer for eoclt upitthe maximum price which tltat consumet is willing
Fr(, -----i
There is a complete loss in total consumer surplus.
Not practical in the real world, as it is impractical to charge every
lo pqy fot that unif-
orips\ i61'6515
DD 'AK,= r''ttt
it different price. and 6rms do not know the price each customer is
IM
willingto pay.
it
Whmofirmchorges
A.
K
totrr\ \tsS 4
AR
There may be increased output and allocative efficiency is reached.
A<-
t[ //* 2 t], ,
€"1\
monqrtlql rs s\ll 4\a\t
n vmo./{.PwroYvnc'\ Pn}rts
I
SecondDegrce:
so manyunitspurdtad,ond odifferent(normally lower) pricefor thenantsomarry uniEputchased.
ThirdDegrce:
priceto consuners in
Whq ofirm divides con*mers inu differentgtoups and charges a different priceto consumers in diflerent grwps, buttlp. mme
FR
-\v
Note: MR must be the same fota\l markets, otherwise revenue couU Gincrcased by reallocating resources
from one market to another'
Er]NFTDENT|.AL DasuMENT5 oF BEN.raMlN NE TzE \^/EE
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.-H2EcoloMtct
MICROECONOMICS
lLr
Regulation of Monopoly / Oligopoly
Ain*
ELunpSumTax
lmprorc Consumer Welfarc (aka lower prkes, higher outpttt)
Ensure Monopcilies remain viable
Reduce albcative ineffi ciency
Sotle lneqnlity in income distributiofl by redistributing tax rcvenue
from nonopolbs to the general pubHc
Ac.
1
Ac
A.Lffiandl4dA.don
S$ntrno\ p^fas . rsu.
Presence of laws designed to preveot formation of monopcilies, such
as antitrust laws. Other methods irrclude limiting mergers, breakiqg up
of monopolies, introdrring competition, reducing patent period etc.
ln Singapore, the Singapore Competitive Commission (2006) acts
against the abuse of monopoly povveL
B.ll*ionahatio
Price Output unchanged
Monopoly Profit-per-unit &reased
Redistribution of incorne from monopoly to go\rernment
C.tGPrfdng
F.SpeciicTax
Settingthe Prkeat P= MC
lncreases Variabb Costs (AC, MC Shifs Upwards)
LA
KH
AN
I
For natural monopolhs of strategk national intercsts, they can be
nationalized by ttle state. The state is not profitdrirren, hence will be
able to produce at the allocati\relyeff€ient level of drtput
M
Results:
RI
Prke Lorercd, Output Higher
Allocative Efficient
profis (especiatly for natural
I monopoty mnv suffer fronr subnonnal
[-monopolies with substantial intemal EOS)
*
KA
ILiCPridng
A.
SetthrgttE Prkeat P=AC
AC
ML
L*er
Pricc Rabe4 outptrt
Profit per unit decreased
Burden of rax borne partly by monopolist and partly by the consumer.
Ihcory of ConhstrHc Msd(ets
Free entry ard o<it from the market tence there are no sunk costs of
production
The threat of competition rrleans that regardless of the number of
firms in the industry, they will act as if it is a perfectly competiti\re
market This is because ff entnnt firms think they are more efficient
than the cunent firm, they will enter the market forcing the cunent
firm to stayefficbnt
Flence, normal profits are earned in tlre long run as firms are forced to
lcwer costs, and firms have the impetus to produce as efficiently as
possible.
Evaluetion
Does not take into accouflt the possible reactions of the established
firmt as cunent firms may adopt an aggt€ssive stance and threaten
Price Loryuercd. Output Higher
Reduces Allocative Etrrciency
newromers with prke wars, hence becorning an entry deterrent as
Monopoly eams normal profir
welL
S"lrnuma\ Pd(
Ferv markets are perftctly contestable, and hence a monopo$ may
still be abh to make supemorrnal prdts in the long run.
Ho,vever, in theory it allour for the achhvement of low costs and
efhciency by still allowing firms to leap economies of scale.
AC
lqc
0.r
EoNFTDENTTAL DBtruMENTS oF BEN.JAMTN NE TzE WEE
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H2EcoNoilrcs
E.CONOMICS
Showing Economic Gtowth via PPC
Microeconornic Goals
.
.
.
.
J}L
MACRoECONOMICS r
X+
Equity / Equality
Measured by Gini Coefficient
Economic Efficiency
lncludes both allocative and productive efficiency
Production on a Point on the PPC
'I
.
I
l-
t-:--
.
.
l
i
!-
.SMC=SMB
\,
Goals of Firms
.
Maximize Profit
Goals of Government
Maximize Social Welfare
,;'
ftdur,t
,/,
-
Macroeconomic Goals
.
.
Showing Economic Gtowtlr via AD/AS
Full Employment
Zero Cyclical and Structural Unemployment
Stable Exchange Rate
Healthy Balance of Payments
GrL
.
/i
AD AD'
tt _.> As,'
I
.
.
Sustainable Economic Growth
Both Actual and Potential Growth
Low lnflation Rates (2%- 5%)
.
KH
AN
.
I
I
l
i
I
I
ECOilOMICGROWTH
i
Actual EG: Annual 96 lncrease in National Output
Potential Eg: Annual 96 lncrease in Productive Capacity
l
Key lndicator: GDP / GNP
Determinants
AE =C+ G+ l+ (X-M)
PromotesSocialWelfare
More Equitable lncome Redistribution
Under a progressive tax system, tax revenue will
increase when incorne increase
Governrnent can spend more on social weffare
.
.
.
programs
Reduces Unemployment
. lncrease in AD will help reduce ryclical
.
.
KA
RI
.
lncreased Levels of Consumption
Higher real income
lncrease in Purchasing Power
Cwill increase
.
.
.
.
unemploynent
Potential growth due to increase in productivity
may reduce structural unemployment
Environment Benefits
Environmental consciousnesstendstoincrease
with increase in affluence
.
A.
.
M
Benefits of High and Sustained Economic Grwth
LA
Singapore:15% in 2008
Singaporc's Policies
Conducive environment to attract foreign investment, such
as maintaining strong infrastructure and investing heavily in
education to train workers.
> S{rd 0rrPu1
I{ational tncomeAccounting I IilDICATORS I
GDR Total market value of all final goods and services
produced within the geographical boundaries of a country
during a specified period
i
GttlR Total market value of all final goods and services
produced by factors of production owned by residents,
during a specified period.
Factor Cost
Market Price
Price purchasers have to PaY Refers to what the factors of
for the goods and services
sold on the market
production received for the
lncludes indirect tax
lncludes subsidies
goods and services
GDP (Market Price)
+ NPIA
GNP (Market Price)
+ Subsidies / - lndirect Tax
GNP (Factor Cost)
- Capital Depreciation
NNPrc (National lncome)
EI]NFTDENTTAL DotruMENTs oF BEN.J.a.vtH Ne TzE WEE
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H2 EcoNoMrcs
MACRoEcoNoMICS
: v
SOL: Quality of life, encompassing both material and non material well being. Material well being refers to the quantity and
quality of goods and services available, while non-material well being includes social factors like working hourt stress
and pollution.
C-an weconcludefrom the increase/decrease in GDPthat SOL has risen/fallen?
Factor
Elaboration
Remark
lncrease/Decrease in GDP
lncrease in the guantity and quality ofgoods
and services in the markeL available to the
consumers for consumption
I in GDB t in Materialwell Being, 1 SoL
Nominal GDP does not take into account
changes in Price level, and thus may be
Changes in Price Level
Real GDP should be used as it measures the
value of output at constant prices. As such, an
lf lnflation rates are high, t in Nominal GDP is
mainly due to increase in prices and negligible
increase in output and SOL
I
misleading.
AN
increase in real GDP will indicate a rise in
output, and hence SOL
Populations tend to change over time, and
thus an increase in GDP may not indicate an
increase in an individual's share of national
income.
lf population increases faster than real
national income, individua13 share of Nl will
be falling even if GDP
KH
Changes in Population
t
GDP per capita should be used instead.
LA
lf a large proportion of the increase in GNP is
due to higher spending on deftnse or space
exploration, SOL would not have increased.
GDP measures a country's output, and thus
includes both consumption goods and
Composition of GNP/GDP
investment goodt but SOL is onlyaffected by
consumption goods.
M
A fall in national income due to increase in
consumer
RI
lncrease in GNP may not be equitably
distributed to the people / sectors, thus one
cannot say that the average person is better
off.
Distribution of GNP/GDP
KA
lndicators like the Gini Coefficient are needed
to show whether the increase in Nl also
caused widening of the income disparity
lf a transaction which was previously nonmonetary becomes a monetary one, Nl figures
will see a rise without a corresponding
A.
Non-Monetary vs Monetary Transactions
A rise in Nl that arises from a rise in exports
does not correspond to a rise in SOL ff income
generated is not spent on consumer imports
increase in welfare.
lf the small majority (the rich) reaps in most of
the benefits from the increase in Nl, while the
majority remain poor, the SOL of the average
person would not have increased.
E.9. Voluntary Charity Work contributed to the
total output offinal goods and services in a
country but are not accounted for in Nl
Nl understates the true level of production as
some services do not pass through the market
National income figures are mere estimates
based on samples.
Nature and Reliability of Data
The country may also lack proper accounting
systems, where officials lack expertise in data
E.g. lncome tax may be understated for
occupations like hawkerr
collection, or where there are many
inaccessible areas
GDP does not measure intangibles which
Social Factors
affect the quality of life and the general well
being of the society at large. (non-material
well being)
Other indicators like HDI and KlLlare needed
EoNFTDENTTAL
DEtrUMENTS
oF BEN.JAMIN
Rising Nl and production leading to higher
levels of pollution willcause SOL to fall.
Rising Nl due to increased productivity from
an increase in working hours mayactually
cause SOL to fall.
Nc TzE WEE
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H2 Ecor{oMrcs
MACRoECoNOMICS
_
v
C.an we conclude that one country has a higher/lower SOLiust because it has a higher/lower GDP?
Remark
Elaboration
Factor
Different Provision for depreciation because of
different accounting practices and tax laws
Different Accounting Practices
Different methods of valuing inventory/
Exclusion ofchange in inventory in Nl
Different Size of Non-Monetized Sector
Developed countries have goods and services
exchanged in an organized market. but barter
trade (not in Nl) may still be prevalent in low
incomefamilies
Exchange rates ale volatile, does not reflect
actual purchasing power and may be subject
to manipulation bythe government orto
Different Currencies are lnvolved
PPP must be used to oftset the shortcomings
ofthe omcial exchange rate
Real income of some developing countries
may be lower but production is concentrated
on consumer goods and services
AN
Differences in Composition of Nl
I
huge capitalflows
Lower Living standards despite a high GNP
may be due to greater inequality in the
distribution of income
Differences in External Costs
Higher output may be accompanied by higher
levels of pollution, congestion and depletion
of natural resources
Differences in the work hours vs leisure time
A higher GDP may be the result of people
working harder or longer hours
Differences in availability, reliability of data
Comparing relatively more accurate estimates
of advanced countries with relatively
inaccurate figures of more backwatd countries
will yield misleading results
A.
KA
RI
M
LA
KH
Differences in Distribution of lncome
cDNFTDENTTAL DotruMENTS BF BEN.JAMIN NE TzE wEE
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v
AE=Y
For use when the question is regording the effect of chonges to C G I X M on nationol income and employment, or to aqloin recession
or the solving of it by increosing AE such thot it diminishes the deflotionary gap as the economy moves towqrds full employment
AE=C+G+l+(X-M)
There is only one level of national income where AE equals the total value of goods and savices prcduced.
Equilib,rium Level of National lncome is the level of Nl which, when reached, will be maintained until further disturbed
Aggregate Expenditurc is the total planned expenditure on goods and services in an economy.
Consumption(C)=a+bY
a: Autonomous Consumption, minimal amount of consumption that households will still spend on even if Y = 0
bY lncome-lnduced Consumption, consumption that increases as income increases (b: MPC)
APC: Proportion of Total lncome that is consumed
I
MFC: Change in consumption as income changes
AN
Represents the gradient of the Consumption Function
DeErminants:
l. Wealth
i. More Accumulated Wealth, tC
'....91
KH
2. General Price Level
,- --'
i. lncrease Price Level
ii. Erodesthe real valueof income, Cl
bruktrr-t pcrrrt
3. ftpectationsaboutFuturelncome
i.
LA
Expect Rising lncomet 1C now
4. Consumer Credit
i. Lower interest rate, lower cost of borrowing, tC
5.
Distribution of lncome
6. Taxes
M
i. lncrease in tax lowers disposable income, thus Cl
RI
lnvestment (l): Expenditure over a given period on the production of capital goods and on net additions to stock of goods
I{OTE Changes in I increases Nl by a magnified amount the multiplier, but also inoeases LRAS and Productive Capacity
KA
Firms aim to maximize profits, and thus they will only invest if the expected rate of return is greater than the expected rate of
interest. As such, there is an inverse relationship between interest rate and level of investment, as shown by the MEW curve.
/r
I
I
Determinants:
1. BusinessExpectations
l. Business Optimism: Expected rate of return higher, I t
2. BusinessPessimism:MceVersa
A.
MEI
2.' Cost of new capital goods
1
3.
. lf cost of K suddenly increase, I 1
' lnnovation and Technology
1. lmprovement in l&T stimulate a demand for additional
i
capital goods, causing I
4. ProfitTaxes
t
l. Firms estimate rate of returns by considering expected
after-tax profits
ft'lrr'
2.
Rise in corporate tax thus decreases the expected rate
ofreturn,causing I t
3.
It also decreases the amount of money firms have for
investment
Government E<penditurc (G) represents the current spending and capital spending by the government on the provision of
social goods and services. lt is assumed that G is autonomous.
Net Eeorts (X-M) refers to the difference between the value of exports and values of imports, and is dependent on external
factors which are often beyond the control of governments. lt is also assumed to be autonomous.
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_.
MACROECONOMICS
r
Determining Equilibrium National lncomet theAE =Y Diagram
Note: x-axis for the diagram refers to nominal national income, does not take into consideration price levels
AE =Y
*r =t
.---
Below Full Employment Deflationary Gap
Shortfall of AE below Nl at the full employment level
Situation of Economic Recession
Deficient Demand causes unemployment
.
.
.
- AE"
...-' -''l)"
NI
Above Full Employment lnflationary Gap
Excess of AE over Nl at the full employment level
No spare capacity
Any shift in AE only causes demand pull inflation
Rise in Nominal GDP but no rise in Real GDP
-1er.
KH
A
Multiplier Effect
The rise in AEwill cause o mognified change in Nl based on the multiplier ratio (k),wherek= ANI / AAE = I/MPW = l/ (l-Mrc)
Normal Multiplier:
LA
tusuming Singapore has an MPC of 0.5 and a resulting MPS of 0.5, an injection of 540 million will have the following effects. lt
portion
causes Ni to rise initially by 5210 million, and this increases people's income by S40 million.These people, in turn, spend a
for
million
of
generates
new
income
S20
This
in
turn
million.
another
while
saving
million,
S20
income
of
this
new
of
S20
producerl who will spend half of this new income (Sl0 million), while saving the other half. The cycle continues until
equilibrium national income is reached, where total injections = total withdrawalt and the total expansion of Nl is S80 million,
where k= 2.
Reverse Multiplier:
themultiplierk=2.
AR
I
M
Assuming that Singapore has an MPC of 0.5 and a resulting MPS of 0.5, a leakage of 540 million will have the following effects. ln
the first itage of thi multiplier, Nl will contract by an initial amount of S40 million, and this will cause a decrease in income of the
people, whowill in tum deqease consumption by S20 million, and another S20 million is lost in savings.The second stage of the
multiplier will cause the Nl to fall by a further S20 million due to the lowered consumption, and this in turn will decrease the
consumption of the people by a further 510 million. The third stage will see the Nl contracting by another 510 million, and the
cycle wiil continue until the equilibrium national income is reached again. As such the total contraction of Nl is 580 million, as
A.
K
The Singaporc Scenario: Very low multiplier (0.54)
Traditional values of thrift Compulsory Savings Scheme (CPF)
High MPS:
Trade volume 30@6 of GDB highly dependent on foreign imports for raw materials as well as consumption
Hlgh MPM:
goods as Singapore herself lack natural resources.
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v
AD/ASAnalysis
For use when the question is regarding the changes in price level as national income dtonget comparing inflationary grovvth and noninflotionory growth os well os showing demand pull inflotion ond cost push inflotion.
Definition
Aggregate Supply (AS)
Aggregate Demand (AD)
Factor
Shows the inverse relationship between price lerrel
and real equilibrium output at which planned
expenditure equals actual income
Amount of goods and services all firms in the
economy are willing to supply at different price
leraels over some given time, usually a year
Downward Sloping
Fall in domestic price levels will
Exports more competitive + Xl
Domestic Goods preferred + MJ
ChangesinCGlXM
.
.
.
.
.
.
.
SRAS
Changes in Economic Outlook
Changes in expected inflation rate
Government Policy (Fiscal)
Changes in Money Supply
Changes in lnterest Rate
Change in Exchange Rate
Changes inTrading Panne/s Nl
M
Factors that Shift Curve
lncrease PP of S + Ct
KH
'
'
'
Three Ranges
Keynesian Range: Excess Capacity
lntermediate Range: Some Supply bottleneck
Classical Range: No Excess Capacity
LA
Slope of Gmph
AN
I
Sraph
.
.
Changes in input prices or COP
SupplyShock
Both LMS and SRAS
lncentives like Lower MarginalTax Rate
.
.
.
.
.
Changes in lnstitutional-Regulatory Env,
Capital Stockand Human Capital
TechnologyandEntrepreneurship
LabourForce
lnfation
Type of lnflation
RI
A sustained increose in generol price level
Demand Pull lnfiation:tAD exceeds 1A5, economy
with limited/no excess capacity
lncrease in C G lX M (See Determinants of AD)
KA
Causes
lncrease in Money Supply
Cost Push lnfation: Caused by JAS (SMS) due to
rising Cost of Production
Wage Push
Wages rise faster than productivity gain
*Wage-Price Spiral
Excessive growth ofthe money supply can cause an
A.
increase in AD as people have more money to spend
on goods and services
lmport Price Push
lncrease in P of imported raw materials, increase Cost
of Production
Profit Push
Firms use market power to raise prices and extract
more profits
Tax Push
Adds to cost of living
Firms raise prices to ofBet costs
Graph
T,,'
t\
rl
lx ''lf
rl--++l\<
(lrP
Ct]NFTDENTTAL DotrUMENTS oF BEN.JAMTN NG TzE wEE
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Effects of High Infatlon
Effects on Economic Growth
lf mil4 firms may experience higher profits margins
Firms who are unable to keep up with rising costs by
as factor costs are unlikely to rise in the short term
improving productivity and efhciency will feel a
significant pinch in profit margint as such
investment is discouraged
due to pre€greed contracts, thus investment and
growth is encouraged
Effects on lncome Redistribution
V
Some segments of the population may experience windfall gains, and others losses:
Fixed lncome Earners suffer, as their real income falls while Variable lncome Earners do not.
Firms benefit during DPI as profits increase. but suffer during CPI as profits diminish
Savers suffer as the real value oftheir savings decrease
Debtors gain because the value of the loan will be less in real terms
lncreases Unemployment
Effects on Unemployment
Reduces Unemployment
Effects on Allocation
Results in Misallocation of Resources due to distortion of price signals in the market. E.g, Producers may be
unable to distinguish normal price increase from real price increase as such they may end up producing
more even though real prices might not have changed.
Renders unneeded administrative cots to keep up with the constant change in nominal values (menu costs)
Px l, causing Qd J as exports lose their competitiveness in the foreign market.
Demand for imports increase as foreign goods are cheaper than domestic goods
NI
Effects on Balance ofPayments
Falling Export Revenue, Rising lmport Expenditure (this assumes PED > 'l )
KH
A
BOP Deteriorates
Falling BOP Causes Exchange Rates to weaken
Effects on Currency Value
Continuous High lnflation may also erode investorS confidence, and thus are likely to pull their capital out of
the country.This causes massive capital flighL and thus currency crisis (sharp devaluation)
Decreased Purchasing Power of currency
Efiects of Low and Stable lnfation
LA
Low and Stable lnflation (2-5%) is a sign of a buoyant and expanding economy with jobs and output growth
t
Stable hices and Eusiness Optimism causes investors to have a higher expected rate of return. and as such I
lncrease in AE + Magnified lncrease in Nl and Y based on the multiplier, k =+ Actual Growth, High Employment
lncrease in LRAS =+ lncreased Qty of Capital Goods + lncreased Productive Capacity + Potential Growth
Allow for Non-lnflationary Economic Growth
M
.
.
.
AR
I
Savings are also encouraged, as lnterest Rate > lnflation Rate. and thus increasing funds for investment i
Exports more competitive if inflation rate is lower than that of other countries. Quantity Demanded of Exports increase (more than
proportionately if PED > 1 ), increasing Export Earnings, lmproving BOP and Strengthening the Exchange Rate
The Singapore Scenario
Prices of certain essential items like cooking oil, bread, milk and other diary products have gone up significantly over the past year
Snowstorm in China disruptsfood supply,causing supplyshocks
.
High Global Prices of food and oil, increasing Cost of Production
Tax Push lnflation
.
A.
K
.
Import Price Push lnflation
Rise in GSTfrom 3%to 5%
Rising Values of Property increase in rental and business costs
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Unemployment
Refers to the number of people of working oge who are without worh but willing and oble to toke up employnent
The labour force refers to oll within working age, who are willing and oble to work ond are either employed or seeking employment
llnemployment Rote = No. of Unemployment / Lobour Force x 100%
Full Employnent iswhen the economy hos no qlclical unemployment
Cyclical Unemployment
Cause
Demand Deficient, Decrease in AD such as during the downswing
Firms find that they cannot sell at current outpuL so stock pile up
Firms thus cut back on proportion and fire workers
Policy
Raise AD through fiscal and monetary policies
Structural Unemployment
Changing structure of the economy causes mismatch between worker's skill and job requirements.
This can be caused by a change in the pattern of demand or methods of production. lt arises when
changes in technology or international competition change the skills needed to perform or change
I
Cause
Poliry
Provide finance of unemployed workers who wish to acquire new skills that are currently in
demand
Steer the education system towards the needs ofthe economy.
Supply Side Policies (Shift AS)
KH
Seasonal Unemployment
Cause
AN
the location ofjobs.
Unemployment that varies with the season or weather, predominantly occur in temperate
countries.
Usually not a serious problem unless economy is heavily dependent on those industries
Diversifu its industries
LA
Policy
Frictional Unemploynrent
It takes time for workers to match with suitable jobs flmperfect lnformation]
Not a cause of concern, may be good as a better match between workers and job after sorne
deliberation would mean the economy becomes more efficient
Policy
lmprove Job lnformation services by providing job centers
IM
Cause
Effectsof Unemployment
Standard of Living is lowered
AR
Loss of Production and lncome
Decrease in an economy's actual output, possibly causing deflationary gap
A.
K
loss in Human Capital
Prolonged unemployment may cause to lose touch of the skills and knowledge he once possessed, and may face
increasing competition with the fresh graduates
Costtothe Unemployed and their Families
Workers lose their financial security. possibly leading to loss of self esteem, strest and even suicide and mental illness
loss inTax Revenues
Loss in income, thus government loses tax revenues from income tax.
Unemployed do not pay income ta& and spend less thus lowered collection of GST.
There is also increased expenditure on welfare payments
Loss in Social Stability
Leads to greater incidence of crime, violence on streets, drug abusq alcoholism and vandalism
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v
-
Fiscal Policy
through Tax or Government Expenditure
The deliberote manipulotion of govemment expenditures
andtaxesto promote mocroeconomicgools
Government Expenditure
Taxation
Types
Current / Ordinary Expenditure includes the expenditure
incurred in the day-to-day routine work and is recurrent year
afteryear
ProgressiveTaxTaxtakes a higher proportion of one's
income as income increaset more equitable
RegressiveTax Percentage of income paid in taxes falls as
income increaset heavier burden on the poor
ProportionalTax Percentage of income paid out in taxes is
the same as income rises
Developrnent / Capital Expenditure includes spending on
public investment
AN
I
DirectTaxes are paid directly by the individual on which the
taxfalls. Reduce disposable income of the individual.
lndirectTaxes is one where the incidence of the tax can be
shifted from the seller from the seller to the buyer. lt shifts the
supply curve of goods, and they reduce the real value of
income through the rise in prices
KH
Purpose
Provision of Public and Merit Goods
Raise Revenue for government to finance its expenditure,
including the provision of goods and services not efficiently
produced bythe market
LA
Reduce inequalities of incomg by taxing the rich more
Redistribute lncome and Wealth through benefits and
pensions
proportionately than the poor (progressive tax) and using tax
revenues to provide essential goods and services to everyone
regardless of income.
Regulate Economic activities and promote economic groMh
Pay interest on the National Debt
IM
Correct Market Failure (esp. Negative Externalities)
lnfl uence Level of total Expenditure
Distribution of lncome
AR
Promote economic Arowth by giving tax holidays for the initial
years for companies/industries. (S'pore corporate tax is 179o)
Effects
Resource Allocation
.
.
A.
K
lncentive toWork
lncome Effect Higher taxes force people to work more so lncome and Wealth Distribution
Expenditure on health, educational services etc benefit
that they have to cut down less on consumption
mainly the poor, thus reducing extent of the inequalities
Substitution Effect Higher taxes encourage people to
of
income and wealth distribution
involve
a
work less as an extra hour taken in leisure
smaller sacrifice in consumption
Economic Growth
Resource Allocation: favor the untaxed / lower taxed good
Capital expenditure promotes potential growth
Consumption
(shift
SS, DD unchanged)
lndirect Reduce Qd ofgood
Price Stability
Direct ReduceYd, discouraging consumer spending
G can be varied to raise / lower AD to reduce inflation or
Ability & lncentive to Save
.
.
.
-'
.
Ability & lncentive to lnvest
. Profits reduced to higher taxation, reducing investment
to promote economic groMh
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_ MACROECONOMICS
r
Fiscal Policy
limitations & uses
Expansionary Fiscal Policy increase G ond/or decrease tox so os to boost AD, AE ond Nl, reducing cyclical unemployment
Contractionory Fixal Policy entoils o reduction in G ond/or increasing tax so os to reduce AD ond demand-pull inflation
Uses
Limitations
Remedyfor:
Crowding-out Effects
Unemployment
where does the money for fiscol spending come from?
lf G was financed through tax, consumers will have less to
spend, and if it was financed through loans, it will cause
interest rates to increase, cutting back on investment.The.-..
increased government spending thus will be offset by lowgr
Expansionary Fiscal Policy can increase AD/AE through
increasing G, to stimulate corresponding increases in C, I and X
so as to shift AE upwardt causing a magnified increase in
natisnal irrcome and employrnent as there would be the
creation of demand for labour.
.
NI
private household consumption ad lower private sector
It con anly solve cyclicol unemployment. Structural and ond
investment
May not stimulate consumption if only viewed as temporary
measures. lnvestment is also dependent on business outlook
as well, and thus tax cuts with a bleak economic outlook may
not stimulate investment
KH
A
fiictionol unemployment would require Supply Side Policies
Limitations of tax cuts
lnfation
Contractionary Fiscal Policy can be reduce Demand Pull
lnflation by causing AD to decrease
Cannot solve cost push inflotion, requires SS Policies
SlowGrowth
Expansionary Fiscal Policy can bring about actual economic
LA
Relative lnfrexibility
Much of government expenditure is tied down to long term
contracts, and budgets are only drawn up once a year.
gromh byincreasing AD.
Time Lags
For sustoinoble non-inflationarygrov,tth, shifts in AS brought
obottt bySS policies ore olso needed
Sizeof Multiplier
lncome Disparity
Progressive income tac the provision of merit and public good
and the provision of transfer payments will aid in the
achievement of a more equitable distribution of income
A.
K
AR
I
M
Small k means that increasing AE will only cause a small
increase in Nl, limiting the effuctiveness of fiscal policy to raise
output and employment
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Supply Side Policy
SS-Side Policies aim to encouroge ond reward individuol enterprise and initiotive, ond to reduce the role of the government; to put
more reliance o morket forces ond competition, ond less on govemment intervention and regulotion.
lf successful, AS curve wi ll shift outymrds.
Remedyfor lnflation
Remedy for Unemployment
Remedy for Potential Growth
Supply Side Policies aim to increose
thetotol quantity offactors of
production or encouroge grcaW
yo d uaivity of fo cto rs of
government budget
. Resistance in acquiring new skills
Population and Labour Force
I
.
-
production.
. lncrease inflow of skilled and
AN
. Restructure Education System
. Training Facilities and Grants
. Skills Development Fund
. CosBbecomeaburdenon
Sotue Wage-Push/Profit-Prish lnflation
Clamp down on trade unions
Retraining of Labour, investment
grants or tax incentives
lncrease Productivity in tandem
with wages
Resistonce in acquiring new skills
- (t6n4t, ds$ln on 6rms urlh rrvrqotu{tt
.
-
unskilled foreign labour
. Resentmentfrom Local Workerc
. lncreaseCompetition ond hence
efficiency
KH
Combat Structural Unemployment
LA
P(rn'16
Encourage Competition
. Restrict Mergers and Takeovers
. Privatization; Firms have additional
incentive to cut costs for profit
IM
. Have to be followed with
A.
KA
R
deregulation to prevent
Combat Frictional Unemployment
monopoly formation
. lmprove flow of information
. Compromise guolity of goods and
. Labour exchanges, job fairt career
seruices
guidance
. Possibleunemployment
. Conditional welfare benefits (e.9.
recipient must make concerted
effort to find employment)
Price and lncome Policy
. lmperfect information if employerc do . Short-Term SS-Side Policy
not publish full list of requirements
- Legislation to block wage rise
. Price Controls (e.9. Price Ceiling)
- Block Market
. Wage Freezes
- Distort market forces in the lobour
morket
- Confrontations with trade union
- Social Problems likeCrime
. Encourage higher fertility via profamily stance
- Boby Bonus, Longer Maternity
Leave, Better Chi ld ca re
Enhance Human Capital
lnvest Significantly in education via
subsidies or direct provision
Resentmentfrom Local Worken
lncreoseCompetition and hence
efficiency
Sociol Problems like Crime
Subsidize worker training
SDF/ux deductions for firms who
send their workers for training
Education has a high gestation
period (LongTerm)
-
.
.
.
.
.
Savingsand lnvestment
. High level of domestic savings
provide funding for lnvestment
through CPF and POSB
. Encourage FDI through tax holidays
. Wooing by EDB
R&D
. Encourage R&D via subsidies,
preferential tax treatment and
grants
The Singapore Scenario
Well Established Trade
I Variable CPF contributions. The government can cut
Union
I employerd CPF contributions to lower the total wages the
employer has to pay (20% -> 10% during AFC), but this may
National Wage Council introduced a flexible wage structure, I cause households to be unable to finance house loans and
with a fixed component and a variable bonus component.
I reduce retirement savings.
a recession, government can cut wages by reducing
I
variable
I Skills Development Fund (SDF) subsidizes firms who send
their workers for training
Government charges and fees are reduced during recessions, I
to help firms survive the
I Out of every I 0 workert 4 have no received secondary
the
component
ln
recession
education.
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H2 Ecotomrcs lR
--
MACROECONOMICS
r
Monetarv Policv
lnterest Rate Centere'd Monetary PSlicy
Monetary Policy is the deliberate attempt by the Central Bonk to regulate the money supply or monipulating the rote of interest to
influence economic octivity so os to ochieve the mocroeconomic gools.
Contractionary Monetary Policy
Expansionary Monetary Policy
I
0(y ahn'or*y
Decrease in Money Supply
lnterest Rate lncreases
lncrease in Money Supply
lnterest Rate Falls
.
AN
The Liquidity Preference Curve - Money Supply and Money Demand Diagram
.
. Cost of Borrowing lncreases
. Decrease in Consumption
. Decrease in lnvestment
. Rate of Return > Interest Rate
. DecreaseAD
. Cost of Borrowing Decreases
KH
. lncrease in Consumption
. lncrease in lnvestment (MEl Curve)
. Rate of Return > lnterest Rate
. lncrease AD
. Magnified increase in Nl
'Deutasctn CrPL
LA
Purpose
Reduce Cyclical Unemployment Stimulate Economic Growth
Reduce Demand Pull lnflation
Limitations
i
RI
M
. Responsiveness of Demand for Money to lnterest Rate
. lnterest Elastic Small change in MS cause significant fall in lR
- People hold money for transactions and precautionary reasons
. lnterest lnelastic Large change in MS required to cause significant change in lR
. People hold money for speculative purposes
KA
. Responsiveness of lnvestment and Consumfiion to lnterest Rate ****
. land C are lnterest lnelastic:
- C and I unaffected by changes in lnterest Rate
. Case 1: Economic Recession - Business Pessimism
. Case 2: Economic Boom - lrrational Exuberance, Business Optimism, High Consumer Confidence
A.
. Size of Multiplier
. lncrease in C and I increases AE, and thus Nl will increase in proportion to the multiplier k
. Active Market for Bonds
. Open Market Operations are only effective in reducing MS if the market for bonds is viable and broad based, else
government's selling operations will be hampered
. Liquidity Position for Bank
. lf bank are holding large amounts of liquid assett they might not respond to changes in Liquidity Ratio.
. Degree of Control bythe Central Bank
. ln developed countriet lending activities are carried out by moneylenders who operate beyond the control of the
Central Bank
. LiquidityTrap (See Next Page)
Note: Open Market Operations (OMO): Purchase and sale of government bonds by the Central Bank in the money and capital
market to alter the money supply in the economy. Selling bonds will reduced the money supply, while the buying of bonds will
increase the money supply.
EBNFTDENTTA.L DEtrUMENTS ttF BEN.JAMTN NE Tze Wee
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H2 Ecor{oMtcs
MAcRoECoNoMlcs
P
LiquidityTrap
additional material
I
0t! "t s
AN
Expansion of Money Supply under the Liquidity Trap will not cause the interest rate to fall, and hence it will not lead to
additional expenditure.
Supply of Money increases from Q to Q' but lnterest Rate remains constant at R.
KH
Extract From: http://www.economicshelp.org
A liquidity trap occurs when low / zero interest rates fail to stimulate consumer spending and monetary policy becomes
LA
ineffective. ln this situation, even an increase in the money supply could fail to increase spending because interest rates
can't fall further.
A liquidity trap means consumers' preference for liquid assets (cash) is greater than the rate at which the quantity of money is
growing. So any attempt by policymakers to get individuals to hold non{iquid assets in the form of consumption by
increasing the money supply won't work.
M
For a long tlme, the ma€ro-economy was managed by changing interest rates. So it is quite a shock for policy makers to
experience a situation where their main policy tool was no longer sufficient. Hence the range of unorthodox monetary and
r
fiscal
Liquidity Trap 2009 (USA)
RI
policies.
KA
Base interest rates were cut to 0.5olo in March 2009. For a considerable time, the economy remained in recession. Technically,
the economy is now creeping back to positive growth, but, the economy remains sluggish. So 2009, has been a good
example of a liquidity trap.
.
.
.
A.
Why do LiquidityTraps Occur?
.
Expectations of deflation. lf there is deflation or people expect deflation (fall in prices) then real interest rates can
be quite high even if nominal interest rates are zero. - lf prices are falling2o/o a year, then keeping cash under your
mattress means your money will increase in value. The difficulty is in having a negative nominal interest rates
(banks would be paying you to borrow money). There have been attempts to create a negative interest rates (e.9.
destroy money in circulation but in practice it is rarely implemented.
Preference for Saving . Liquidity traps occur during periods of recessions and a gloomy economic outlook.
Consumers, firms and bank are pessimistic about the future, so they look to increase their precautionary savings
and it is difficult to get them to spend. This rise in the savings ratio means spending falls. Alsc in recessions banks
are much more reluctant to lend. Also, cutting the base rate to 0olo may not translate into lower commercial bank
lending rates as banks just don't want to lend.
Credit Crunch. Banks lost significant sums of money in buying subprime debt which defaulted. Therefore, they are
seeking to improve their balance sheets. They are reluctant to lend so even if firms and consumers want to take
advantage of low interest rates, banks won't lend them the money.
Unwillingness to hold bonds. lf interest rates are zero, investors will expect interest rates to rise sometime. lf
interest rates rise, the price of bonds falls (due to inverse relationship between bond yields and bond prices)
Therefore, investors would rather keep cash savings than hold bonds.
EENFIDENTIAL DEtrUMENTS oF EIEN.JAMIN NE TzE WEE
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H2 EcoNoritcs
MACRoECoNoMICS
_v
Excha n ge Rate.S;l:ffif,":$,M oneta ry Pol i cy
Features
Reasons
l. Managed using a Basket of Curtencies
I . Small Size Limited Resourcet Openness to Trade
a. l,leed to import daity necessities and raw materials
b. Small Dornestic Market
c. (X+M)=4xGDP
d. Need to maintain stable exchange rate to keep out cost-
push inflation and maintain reasonable cost of living
e. Adjusting interest rate would result in a volatile o<change
rate and thus might affect trade and investor confidence
2. Managed Float Regime
a. Exchange Rateallowed tofluctuatewithin an
undisclosed band
3. Reviewed Periodically
4. Relinquish control over interest rate and money supply as
wlren MAS inten enes to buy or sel] domestic currency in
I
2. Openness to Capital Flow
AN
the forex markeL money supply witl fall or rise respectively.
a. lnternational Financial Centre
b.Small changes in domestic interest ratewill cause large
capital movement
c. EG lf interest rate falb investon will withdraw money
and save in bank of another country with higher interest
KH
rates => Capital Outflow
3. lnactirie Secondary Bond Market
a. OMO is ineffective
Combatlnflation
Gradual Appreciation of SGD during Economic Boom
Reduce lmport Price hrsh lnflation
A.
KA
RI
Expensirte Exports
Reduce Dx -> AD Falls -> Reduce DD Pull lnflation
CombatRecession
Depreciah against the USD
M
Cheaper lmports
LA
techanism
. Exports beconre relatively cheaper
. lf PED of Exports > 1 (Price Elastic)
. Fall in Pwill cause a morethan proportionate
increase in QD
. Export Revenue lncreases
. lmpors become relativeli more expensive
. lf PED of lmports > I
. lmport Expenditure Falls
. (X-M) lmproves
. lncrease in AD
. lmprovement in Current Accountl BOP
OR
lf Marshall-Lerner Condition is satisfied, (X-M) will improve
when exchange rate depreciates.
ML Condition: PEDx + PEDw > 1
uimitatinns
Elasticity of Export Dernand and lmport Demand
. DOUBLECHECKWITHTUTORIAL
Transrnission lags
Takes time for changes in exchange rate to work
Short Run: Temporary worsening of BOP
Demand for Exports and lmports not price sensitive
.
.
.
Maintenance of a large Foreign Reserve
. To support the exchange rate policy and to build investor confidence in the strength of the SGD
lmperftct Knowledge
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.E
v
Excharg3"*?le Policy
Fastors Affecting Echange Rate
l(ef €oncepts regdding E Ghange Rate
a. The o<change rate of the dornestic currency shows the
l. Changes in demand for exports and imports
price of domestic currency in terms of foreign currency
b. One country's currency is only legal tender in that country
c. Determined by intersection of demand and supply of
2. Capital Flows, short run and long run
3. Changres in domestic prices relativeto pricesabroad
4. Relative economic perforrnance of the country
i. lmportsdependonYED
curency
5. Changes in the relative interest rate
a. Demand for currency is a derived demand
b. EErived form foreigner's demand for our goods and
services and financial assets
i. lf domestic interest rates rise
a. Attract furds for abroad, hence DD increases
b. Locals discouraged from transftrring their funds
o\rerseas
6. Anticipation in exchange rate movements
AN
I
c. Supply deriried from local3 demand for imported goods
:i.*iffi
::.:,.:;,:;,,:;iff
.iljiiffi
Rate of exchonge of one country's cunency
by buying or selling ifscunentin thefora<
is determind frely @ mo*et forces of
ma*et using reseles to o<aaly oM the
dtanges in ma*et demand ond supply.
demand ond supply intheforeign
exchange market.
Ad\rantages:
LA
l. Automatic correction of BOP
disequilibrium
Adnantages:
1. Confidence and Certainty
2. Absence of Speculative Aaivity
2. No need to hold foreign exchange
reserves
3. Freedom to pursue dornestic
1. No Automatic BOP adjustment to
correct disequilibrium
A.
K
BOPand EconomicGrow*r
Disadvantages:
1. Lack of confidence due to volatility
2. lncreased Speculative Activity
3.
AR
2. Need to maintain foreign reserves
3. Vulnerabh to currency crisis
4. No freedom to pursue own domestic
goals due to conflicL such as between
IM
economic policies
Disadvantages:
Govem ment sr;ts an upryr and bwer limit
toexchange ratefor the currency and
allows the cunency to fluctuote within
these limih, butwill intervene once it
KH
gwm nent m ai ntafuv th e fi xed rate
Th e
npves bepnd the bond.
Advantages:
1. Some degrce of exchange rate
stability
2. Some degree offreedom to pursue
Domestic Policy, as it is not restricted
by BOP situation
Disadvaritages:
1. Need to maintain foreign exchange
reserves
Brdrange Rah Folky and Macroacmmic Obiectives
l. Achierae High Growth
3. Correct Balance of Payments Problems
! t . Depreciation, assuming Marshall-Lemer condition is
AD and hence allorrring growth
I satisfied, will cause import expenditure to fall and export
revenue to rise, reducing deficit
2. Stable Exchange Rate encourages more investrnent I
3. Low exchange rate may attract long term investments I
due to lourcr costs of setting up operations
| 4. Manage lnflation
1. Depreciation cause trade surplus to irrcrease, irrcreasing
4. Expectation ofapp reaction can attract inffow ofhot
money
l. ln economies which are open to trade they are highly
susceptible to import-price push inflation
2. Appre{iation of currency keeps import price low
2. Reduce Unemployment
preventing imported infl ation
Ccf NFTDENTTA.L DoEUMENTS oF BEN.JAMTN
Nc TzE WEE
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MACRoECONOMICS
P
lnternational Trade
or most skillful at ond using these to trade for other
The rationale is to speciolize is producing goods and services that one is best suited
around the world'
goodsond services that one needs. Setf iufficiency is impossible as FOP ore unequolty distibuted
Specialization and trade will lead to an efficient allocation of
world resources, and nations will be able to consume at
points beyond the countrY's PPC
Higher OutpuL Efficiency, Lower Costs and lmproved Welfare
I
countries like lndia if they specialize in labour intensive
goods, pushing up wage rates, closing the wage gap
between them and those of the developed world
. lncreased Competition and Prevention of Monopolies
FreeTrade: Exchange of goods and services between
countries without any artificial restrictions.
Note: Benefits of Trade still aPPlY.
KH
AN
. Wder Consumer Choice and GreaterVariety
. Higher SOL
. Efficiency in production and LowWorld Prices
. Economies of Scale (LRAC Falls)
. lmport Cheapest Raw Materials => COP falls
. Factor Price Equalization
. E.g. Demand for labour in will rise in labour-abundant
. Promote Economic EfficiencY
. lnnovation and Transfer ofTechnology
. Competition encourages entrepreneurship to improve
competitiveness
. Tech transfer from Advanced to Developing nations
LA
- "Engine of Growth"
. Political, Social, Cultural Advantages
A country has Abslute A&nntuge if she can produce more of
thegoodthon the other countries using the some amount of
rcsources
A country hos Compomtive Mvanfuge if she con produce the
good at a lower opportunity cost thon another country
ffigestate5thattradecanbenefitallcountriesiftheyspecializeinthegoodsinwhichthey
M
have a comparative advantage.
i
A.
KA
RI
Limitations:
. Law of lncreasing Opportunity Costs
. Complete Specialization is not possible
. Not all resources are equally suited for all types of production
. A country will lose her CA as she specializes further in the production of a good
. Factor lmmobility between onetype of production and another
. TransportCosts
- Protectionism, Protecting domestic industries which do not have CA\
I Export Price lndex / lmport Price lndex ] x 100
note: TOT = 'l 00 in base year
lmprovement ofTOT: A given unit of exports can now
exchange for more imPorts
Relationship betnreen TOT and BOT
Depends on PEDx and PEDm
lF Export Prices lncrease (PEDX > 1)
. TOTlmproves
. Qd of exports fall more than proportionately
. Export Revenue falls -> BOT falls
Export Revenue (X) - lmport Expenditure (M)
PoSitive Trade Balance SurPlus
Negative: Trade Balance Defi cit
Relationship betweenToT and SOL
Depends on PED"
lF TOT improves and PED of Exports < 1, it means there is a
greater Gpacity to import and hence a higher SOL
CoNFtDENTI.A.L DotruMENTsi t3F BENJAMIN NG TzE WEE
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.E
v
Protectionism
I
nternational Trade Part Two
Evaluation
Arguments
competition from abroad. Protectionism will thus allow the
lnaccurate identification of lnfant lndustries
lnfant lndustries may fail to develop CA
Duration of Protection - lnfant industries might become
complacent or inefficient due to lack of exposure to
industryto develop
competition.
Protection of lnfant lndustry
lnfant industriel having potential CA cannot survive
Consumer Suffert Domestic Resources tied up
lower prices
. Excuse for countries to keep out imported goods
- Cost of Protectionism borne by domestic consumert who
have to pay higher prices
AN
Foreign exports may be subsidized by the state using huge
profits at home, to reap EOS and drive out local producers,
leading to creation of Monopolies with the ability to raise
prices and make consumers worse off.
. Difficult to accurately identifr dumping
. Foreign firms may be more efficient and thus able to sell at
I
Protecting against dumping
KH
- Monopoly Argument unsupported (only a hypothesis)
. Protection may be difficult to remove once introduced
. Slow down the restructuring process
Protection of Sunset lndustries
Protect industries who have lost their CA to create a buffer for . Prolong inefficient use of resources
. Removal of protection can allow for economic restructuring
workers and prevent massive structural unemployment.
and development of new sectors
. Other countries likely to retaliate with their own trade
Protection against Domestic Unemployment
from domestic Aoodt causing domestic unemployment
Protection of Strateg:c lndustries
barriers, sparking trade wars and causing rapid contraction
in world output and income
LA
Claim that important foreign goods diverts demand away
IM
Existence of political or strategic reasons to protect a
domestic industry such as to be be sufficient in times of war.
E.g. Rice lndustry Defense
Protection to (orrect BOP Disequilibrium
Use trade barriers to reduce import expenditure, improve BOT
. Protective tariffs and quotas justified.
- No-tariff policy might not apply to all goods within the Fl-A
. Stop-gap measure, other countries likelyto retaliate
. Persistent trade deficit points to other fundamental
weakness in a country's abillty to export
AR
Protection aoainst "Badf
Protection against import of harmful goods e.g. Drugs
Protection to improve TOT
Restriction of imports mayforce foreign producers to lower
A.
K
prices, improvingTOT
Protection aoainst Low Waoe Countries
Poorer countries operate on low wage structure, and thus
able to compete on an'unfair'basis
. Unlikely to work unless country has buying power
- Probable retaliation by trading partners
. Protectionism perpetuate the exploitation and workers
cannot earn enough to rise above poverty
. Prevent equalization of factor prices and wage rates
. Work against welfare of consumers
Protection to achieve Political Objectives
Note Try to use the bolded arguments and not the unclCflineel ones.
EENFIDENTIAL
DDcUMENTS
BF BENJAMIN
NE TzE \A/EE
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-
v
Tariffs
Tox on lmports, con be Specific or Ad Volorem
Redistribution Effect - Transfer of consumer surplus to
domestic producer surPlus
Protective Effect - Unnecessary higher MC incurred in
producing and not importing the extra goods
Revenue Effect - Government Revenue
Consumption Effect - Decrease in Consumption
Deadweight Loss = PE + CE
';. l trv'tl'
Effectiveness
. Causes loss to society
- Consumers worse off (Loss of Consumer Surplus)
. Other Policies more Effective
. Depends on PED of lmPorts
. EarnsGovernmentRevenue
f '.*
Dd
63
E
q4
I
Hidden Export Subsidies and lmport Restrictions
AN
Quotas
lndirect form of protection given domestic producers to lower
the actual cost of production allowing them to become more
competitive.
quantity
that
is
less
than
that
Limit the amount of imports to a
prices
also
rise.
will
imports
of
free
trade
and
under
lmport restrictions include complex import regulations,
technical and administrative regulations etc. Although not
Does not earn revenue, effectiveness does not depend on
intended to restrict trade, they have the effect of doing so
prices.
PED but foreigners may gain by raising
KH
Legal timit on the quontity of imports over a given period of time
Exchange Controls
Agreement to reduce the volume of trade in o specific good.
Regulation of imports and exports via controlling availability
of currencyvia goW buying and selling of foreign exchange
LA
Voluntary Restraint Agreements
Embargoes
Total Bans on certain importt often used as diplomatic tool.
IM
lnformal type of quota, often including provisions for increase
in sales at some later date.
Economic lntegration
AR
lnternational Trade Part Three
Customs Union
Common Market
Economic Union
Harmonizing monetary and fiscal policy of member countries.
A.
K
FreeTrade Area
Agreement to remove tariff and non-tariff barriers among
themselves, maintain restrictions for non-member countries
Operate as a single market, lifted restrictions on trade in all
servicet capital and labour movement. May have common
laws government production, employment and trade.
Advantages
Trade Creation, lncreasing Welfare
Greater Output Levels and Extended Market
Free movement of FOP allow FOP to move from areas of
.
abundance to scarcity
. trlew ideat technology and skills flourish
. Larger Market - Allow firms to grow and gain EOS
lmprovement of TOT
. a CU, through common external tariffs, has greater
economic power for a reduction in tariffs by non-member
nations
Remove alltrade barriers, adopt a common external tarifffor
non-member countries.
Common currency and Exchange Rate
Disadvantages
. Trade Diversion
: Trade diverted from a more efficient non-member
producer to a less efficient but tariff-free member of the
economic unit
. Loss ofTariffRevenue
. No net increase inTrade
- TradeDeflection
. lmports enter the FTA via the country with lowest
external tariff and is then sold to other countries within
the FfA
. Loss of tariffrevenue
. Countered by complex rules of origin which ensure that
only goods produced within the FfA are tariff free
. Loss of Economic lndePendence
. Each member must consider policies of the Union
limiting thefreedom of economic policies
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'E
v
Globalization
lnternational Trade Part Four
The growing economic interdependence of countries worldwide through inoeosing volume ond voriety of cross-border transoctions in
goods, services and free intemationalcopital and lobour flows.
Equalization of COP
- Take resourcesand goodsfrom
Realization of a global common market:
. Worldwide and broader access to
where they are cheap to where they
are expensive
Erode differences in
and living standard
Contagion Effects
- Transmission of shock from one
Faster Catchup by the developing
.
range of foreign products
. Movement of Resources
. Firms have access to resources not
only within their country
countries due to the speed of
technology transfer and information
Stronger and Faster Contagion Effects
country to another
lnterest Rate Centered Monehry Poliry
sensitive to global demand conditions
KH
Exchange Rate Centered Monetary Policy
. Effective
. lncreased shares of imports made CPI more responsive
to changes in world prices
. Higher risk of lmport-Price Push lnflation, makes policy
LA
. NotSoEffective
. LostControl overCapital Flow
- Lost of independency of use of lnterest Rate
. lnflation less sensitive to domestic demand, more
more effective
Fiscal Policy
IM
. NotSo Effective
. LowerTaxes on imports and corporate Profit
. Might be able to gain higher tax revenue in economic
boom
. Wdening income gap, increased need for Government
Expenditure to solve it (Social Safety Net etc)
Higher change for increase in Public Debt
Weaken fiscal discipline due to easier access to global
AR
.
.
fundsfor borrowing
AN
Policy lmplications
I
lncrease in information flow between
geographically remote locations
SupplySide Policy
Effuctive
. lncreased need for government to help business to
identiff new niche areas and advances in technology
. Greater need to climb up technology ladder to gain
Comparative Advantage
Trade Policy
A.
K
. Signings of more FTfu, increased pressure for countries to lower import tariffs
. lncreased Competition for Domestic Producers
. May cause increased protectionism as countries try to protect employment and output
Benefi*
Economics of Scale
Greater Competition
Erosion of Monopoly Power
Promotes Efficiency
Prevents Exploitation
lncreased access to Resources like Foreign Talent and
Labour, which complement Singapore3 small domestic
worKorce (low birth rate)
Other Benefits of Free Trade / Economic lntegration
.
.
.
Costs
. Growing lncome Gap
. Wages of lowly skilled labour will generally grow
slower than that of highly skilled labour
. Contagion Effeets
- Crisis in one country will affect all other countries.
. Companies outsourcing to locations with lower labour
costs
. Stiff Competition from other countries who have greater
resources etc.
. Need to increase budget for R&D in order to stay
competitive
. More Susceptible to import-price-push inflation
. Singapore stands most to gain from Globalization due to our heavy reliance on FDI and Trade but Globalization also makes
us most Vulnerable to the the ups and downs of Trade Cycles and the World Economy.
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MACROECONOMICS
BaI
?.nce
g
ojr,f"ay$"e n t s
value of oll economic transactions betvveen the residents of the
thi restof theworld during a specified period of time, usuollyoneyeor
The Bolance of payments is o summory statement of the money
countrywith
The Current Account
Trade in Goods Account (X-M) - lmport and Export of Tangible Goods
2. Trade in Services Account - lmport and Export of Services
3. lncome Flows/lnvestment lncome Account - NPIA etc
I.
4. Current Transfers - UnilateralTransfers e.g. Contribution to lnternational Organizations
The Capitil Account - NOT IMPORITANT
disposal of non-financial assets
Records debt forgiveness, migrant transfels, acquisition and
KH
AN
I
The Financial Account
l. Direct lnvestment (Net) - Purchase and Sale of Real Assets to earn profit or rental
e.g. MNCs build plants in Singapore
interest
2. portfolio lnvestment (Net) - Plurchase or sale of Company Shares and Government Bonds to earn
(shares)
rate (bonds) or earn dividends
of
3. other lnvestment (Net) - shortTerm lnvestments or Monetary Flow' Normally used to take advantage
differences in interest rates or expected trends in Exchange Rate
Note: Financial Account Surplus may cause Current Account Deficit'
LA
Official Reserves Account - (-) Favorable, (+) Not Favorable
IM
BOP Equilibrium means that trade and capital flows into and
. Accommodated by reduction in foreign reserves or by
borrowing in the fficial Reserves Account
A.
K
AR
. Depletion of Countryt Reserves
. lf loans are used, it needs to be repaid with lnterest
. Deflationary lmpact on EconomY
. Contraction of Nl, UnemploymenL Falting SOL
. Currency Depreciation, Loss of lnvestor Confidence
. Freely Floating Exchange Rates
. BOP Corrected automatically by Exchange Rate
. BOP Deficit - Earns Less Foreign Currency than it spends
. Sell Domestic Currencyto buy Foreign Currencies
. Depreciationof ExchangeRate
. Exports Cheaper - More Competitive
. lmPorts ExPensive - Qd Decreases
. BOP lmProves
. Exchange rate will continue to depreciate until BOP
Equilibrium is reached
out of th" to'ntry ut"
"q'ul
*'u n"k*t
. Unstable Situation, Surplus in one country implies a deficit
in another
. lnflationarY Pressures
. Appreciation of CurrencY
- Causes of Long Term BOP Disequilibrium
. Dlfferent Rate of lnflation between Countries
. Exports become less and less competitive if a country
has higher inflation rate
. Diffurent Rate of Growth between Countries
.
Economic Growth, lmports will rise faster than
' Faster
Exports as lmports depend on lncome
. LongTerm Structural Changes
. Emergence of Trading Block, Development of
Substitutes, Moving up the value chain towards
exports of new growth industries
Consequences of BOP Deficit
Fall in Equilibrium National lncome
. Fall in (X-M) cause AE to fall, Nl falts by magnified amount
lncrease Liabilities to Foreigners
through borrowing, aka at the expens€ of future spending
. Finance curr"n,
in the future
. CA Deficit might"..orn,ieficit
not be bad, if it i, dr-" to purchase of Capital Goods for production
Less Employment Opportunities for Domestic Economy
FDI providesEmployment,andRedirectionof FDI inioforeigncountries
will causedomesticemploymenttofall
.
Account
current
the
profit
improve
and
in
will
bring
. ln the long term, suth FDI
ETNFtDENTIAL DBtrUMENTE EF BEN.IAMIN NE TZE WEE
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H2 EcoiloMrcs
MAcRoEcoNoMtcs
-
v
Policiee to Correct Persistent BOP Def,cits
Expenditure Switching Polkies
SupplySide Policies
Switching domestic expenditure awoy
from imports while switching foreign
expen d iture towards the country's exports
Long term Policy to increose its
productivity ond sharpen i* export
competitiveness
Expenditure Reducing Policies
Use ofContractionory Monetory or Fiscol
Policies to reduce AD and Nl in the country
Protectionism
. Trade Restrictions
. lmports expensive, demand falls
. Switch to cheaper domestic
substitutes
. Domestic Production lncreases,
Unemployment Falls
Supply Side Policy
. lnvesting in Education
. Encourage lnvestment
. Takes time to work
. lmplemented simultaneously with
expenditure reducing and
expenditure switching policies
. Export Subsidies
. Stimulate Nl
Outflow
. Tight Monetary Policy
. Contractionary Fiscal Policy
. ReduceADand Nl
. lncome Falls
. Demand forlmports Reduced
. Demand for Domestically
breed ineffi ciency, complacency
Retaliation from other countries
LA
.
. PEDm>1
Produced Goods fall
. Advantages
. Causes Domestic lnflation Rateto
to develop new export markets
. ExpertAssistanceto hasten the
documentation needed for exports
. Export Guarantee Scheme
. Fora small premium,the
government pays the exporters
for goods sold abroad should the
rorergn rmponers oeray paymenrs
Denaluation of Domestic Currency
. For Fixed Exchange Rate Regimes
. Lowered Exchange Rate
. Exports Cheaper, Qd lncreases
. lmports Expensivg Qd Falls
. Conditions
. Marshall-Lerner Condition must
be satisfied
. Country must have spare capacity
AR
Fall, increasing price
competitiveness and demand for
exports
. Rise in lnterest Rates (MP) attracts
funds for portfolio investment
. Special Assistanceto Exporters
. Provide information and assistance
IM
. Exports Encouraged
- Disadvantages
- Economic Growth Compromised
. Conflict betrreen domestic
to increase exports and produce
import substitutes
- Disadvantages
. Potential lmport-Price Push
A.
K
goals of FE and E Grourth and
external goals of BOP Balance
. Best used to combat lnflation and
lnflation
. J-Curve Effuct
- Demand for X and M may not
BOP defi cit simultaneously
. Decrease in M based onYED and
MPM
KH
. Disadvantages
. Forgoes benefits offreetrade
. Shelters domestic producers,
De{ationary Policies
purposet increasing levels of
capital inflow
AN
. ExchangeControls
. Restrict lmportand Capital
I
Other Policies
be price sensitive
. Takestimefor Consumersto
adjust spending habits
. Currenta/c mayworsen in the
short-run, improve in the long
run
flrr
Note: Effects on Exports
and lmports are affected
by PEDx and PEDrvr
respectively, but lmports
are also affected by YED.
*----"-"---r trtrt'(
J-Curve
EoNFTDENTTA.L
DotruMENTr oF BEN.JAMTN NG TzE wEE
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H2 EcoiloMrcs
MAcRoEcoNoMKs
-
v
The Singapore Scenario
Small MarketSize-Too small to influenceworld prices
Export Partners:
Malaysia, Hong Kong, lndonesia, China, US (in that order)
Small QuantiS of Resources - Price taker in Global Market,
follow prices dictated by global 5S and DD
Other Features
World Class lnfrastructure supporting manufacturing and
Open toTrade - Every Sl spent in Singaporg 51c leak out
as imports (High lmport Content of Goods)
tertiary sector
Skilled and Educated Work Force
lnternational Financial Centre - Open to capital flow
Difficult to target MS, hence Monetary Policy is lneffective
Eleorts have very high lmport Content
Rise in import prices might drive up our Export Prices
Aging Population
Vulnerable to lmport-Price Push lnflation
lmportant to have a low inflation rate
I
Surge in demand for goods and services for the elderly
Resources have to be diverted to such needs
KH
AN
Exports PED < 1
Erain Drain (Problem of Globalization)
Sinsapore losins zr-5
its population
High Value Added, Low Substitutes
T:ffi::130%of
lmports PED <1
We import everything, so no substitutes xD
Major Government Eteenditure
20 billion in Circle Llne
8 billion North South Expressway
Major lnvestments
LA
5 billion lntegrated Resorts
1.2 Billion Worlds Largest Biodiesel Plant - Finland3 Neste Oil
Heavily Reliance on Trade
KA
RI
(X+M) 3.5Times of GDP
Exports 2.5Times of GDP
M
BOP
Not external debt since 1 995
Heavily Relianton FDI
70% oftotal FDI
=> Stands most to gain from Globalization
A.
FTAs - Enhance trade and investment flows due to lower
tariffs, hassle free customs proceduret improved market
accest easier entry for businessmen, better terms for
investment in foreign countries
ElgortGoods:
Contributes >3096 of theWorld's HDD Output
Seagate has also put its Factory of the Future and future R&D
of its U-series HDD in Singapore
Leading Semiconductor wafer fabrication with 14 Fabs
Third Largest Oil Refining Centre in the World
largest Manufacturer of Jack-up Oil Rigs
Second largest aviation maintenance repair and overhaul
centre in fuia
Tourism
l& MICE (Meetingg lncentive Travel, Convention, Exhibitions)
Tourism lndustry
Regional Education Hub and Health Care Centre
CENFTDENTTAL DBtrUMENTsi oF ElENJAMTN Nc TzE WEE
Shared by Benjamin Ng
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