Learning and Expectations in Macroeconomics

Question: Discuss about the Learning and Expectations in Macroeconomics. Answer: Introduction This study has highlighted the entire economic performance of Singapore. This country has a highly developing and trade oriented market economy. In this study, the production output of the country would be discussed. The rate of purchasing power parity of this country would also be mentioned. On the other hand, the performance of the financial sector of Singapore would be described, which would be helpful to understand the financial position of the country can be understood. The structure of labour market of Singapore would also describe in this context. As a result, this labour market analysis would highlight the countrys unemployment rate. This study also provides the trend of price level of the mentioned country, which would be helpful to identify the inflation rate of the country. Production output As per the statement of Borio (2014), it can be mentioned that gross domestic product is a macroeconomic measurement, which estimates the value of the output of the country in terms of the change of the price level. Gross domestic product of a country can be reflected by the inflation or the deflation rate of the country. In this context, it can be added that due to inflation, the rate of gross domestic product of an economy would be increased. However, this would not control the real growth of the economy of a country. This is the reason, why the rate of inflation of an economy is subtracted from the gross domestic product in order to get the percentage of the real growth of that country. This is known as the real gross domestic product. It can be stated that the purchasing power parity of the economy of Singapore is at third position. This implies that the per capita income of the country is at good position. As opined by Mankiw (2014), it can be mentioned that the economy of Singa pore is the foreign direct investment outflow financier in the global economy. The GDP growth rate of Singapore: From the above figure depicted the gross domestic product of Singapore. This figure illustrated that the economy of Singapore has advanced 1.1 percent year on year at the third quarter of 2016. This rate was comparatively lower than the 2 percent expansion from the previous year. In the words of Evans Honkapohja (2012), the GDP annual growth rate of Singapore was averaged from the year of 1976 to 2016 and the rate was 6.72 percent. On the contrary, it can be mentioned that this rate was higher in the second quarter of 2010 and the rate was 18.90 percent. Gross per capita rate of Singapore: The above figure depicted that the gross per capita income rate of Singapore has been increasing with the rise in time. In the year of 2015, the gross domestic product per capita of this country was recorded at approximately 51855 US dollars. This was adjusted by the purchasing power parity. Burda Wyplosz (2012) added that gross domestic per capita purchasing power parity of the economy was averaged from 1990 to 2015. This rate was 56762 US dollars. In order to discuss the overall output of the country, it can be mentioned that the country is earning a large amount of revenue from the inward flow of foreign direct investment of the global investors. The country mainly exports electronics goods, chemicals as well as services. As opined by Borio (2014), it can be mentioned that Singapore has the largest trade to the gross domestic product ratio among the overall economy. On the other hand, Gandolfo (2013) cited that the financial performance of the country has been increasing with the rise in time. Presently, Singapore is supposed to be the major financial institutions within the world. In this respect, it can be stated that Singapores liquid capital markets are the major source of the funding of growth and development of the economy. In addition, it can be mentioned that the banks of Singapore offered the world class corporate account. On the other hand, it can be added that the economy of this country has highlighted assets with the help of Swiss banks. According to Brunnermeier, Eisenbach Sannikov (2012), it can be stated that tourism of Singapore is the major service sector of Singapore besides the financial sector of the country. Governmental measurements: In the point of Wray (2015), it can be mentioned that in order to control the countrys economic condition, the government of the country has performed a major role. Fiscal policy in Singapore is controlled by the support of the private sector of the country. This assures that the macro economy of the country is at stable position. Moreover, it can be stated that the government of Singapore is prudent as well as conservative on the budgetary policy. In this connection, it can be mentioned that the country has the balanced budget since last three decades. Moreover, it can be mentioned that the government of Singapore has followed clear rules and regulations. As a result, countrys government has given the permission to participate in the free trade and allow the importers to import goods and services freely. Therefore, it can be mentioned that there is no rules for tariff or quota. Likewise, it can be noticed that the government has set an effective business infrastructure, which can lo wer the cost of the business. This would in turn attract the investors to come to the country. Labour market analysis In order to understand the labour market analysis of Singapore, it is required to first understand the rate of unemployment of the country. The above figure shows the unemployment rate of the mentioned country. During the time of global economic recession, the rate of unemployment was highest. After that the rate of unemployment of the country decreased. Therefore, it can be mentioned that the rate of employment of the country has been increasing. As a result, it can be mentioned that wage rate of each of the employees has increased. Therefore, it can be stated that the number of jobless employees has decreased. As opined by Mankiw (2014), the rate of unemployment was averaged from 1986 to 2016. This average rate of unemployment was 2.46 percent. In this country, the seasonal adjusted jobless rate is 2.1 percent in the third quarter of 2016. This study also provides the types of unemployment of the country. Structural unemployment: Evans Honkapohja (2012) cited that this is the initial type of unemployment in an economy. It is known that Structural unemployment is depending upon the economic structure of a country. It results from due to the changing of market forces demand and supply. This differentiation in terms of the skills and knowledge distinction of the employees reflected the structural unemployment. In Singapore, countrys economic performance is depending upon the external demand of growth. Therefore, it can be inferred that countrys unemployment is of cyclical type. In this connection, it can be stated that if countrys export decrease, then aggregate demand would be decreased. Therefore, the overall outcome and the level of national income of the country would be declined. This situation can be illustrated with the help of following diagram. Cyclical unemployment: Borio (2014) opined that cyclical unemployment occurs due to the business fluctuation. In case of economic boom, countrys unemployment has decreased. On the other hand, in case of the economic recession, countrys unemployment rate would be increased. This occurs during the short term unemployment, which would be diminished in case of the recovery from the economic fluctuation. Scarth (2014) put that due to the change of technology from labour to the capital intensive economy, the country would suffer from the situation of structural unemployment. Government measurement to restrain full employment: There are two strategies, which can reduce the rate of unemployment and can improve the rate of employment of Singapore: Firstly, the government of the country can consider the demand side policies into the account. This would in turn reduce the cyclical unemployment due to the business cycle fluctuation. Secondly, government of Singapore can consider the mind supplies side policies. This would reduce the structural unemployment. As a result, the rate of employment of Singapore would be increased. According to Wray (2015), Singapore government has aimed to create many jobs by raising the wage rate. Therefore, it can be mentioned that the quality of employment will be increased. This will stabilize the economy of the country as well as the governmental fiscal policies. In this essence, it can be added that countrys rate of interest and the rate of inflation will be increased. As per the concept of Phillips curve, there is a negative relationship between the inflation rate and the unemployment rate. With the rise in the countrys inflation rate, the unemployment rate of the country will be decreased. On the other hand, government of Singapore has aimed to follow non profitability and the public employment activities. These programs will be helpful to get the people job, who are jobless. Furthermore, it can be mentioned that unemployment rate increased due to decrease in infrastructure and the investment. The government adopt loose the fiscal and the monetary policy to achieve the full employment. Reduction of corporate taxes can achieve the full employment. Price level analysis As per the statement of Mankiw (2014), it can be mentioned that if the price level of a country increase, then it can be stated that the rate of inflation of the country will be increased. Therefore, it can be mentioned that the money supply of the country will be increased. Inflation rate of Singapore: The rate of inflation can be discussed as the rate of estimating the inflation percentage. In this connection, it can be mentioned that consumer price index is the determinant to evaluate the rate of inflation of a country. More specifically, it can be stated that if the price level of the goods and services has been increasing over the period, then inflation rate of the country will be increased. On the contrary, Gandolfo (2013) argued that if the price level of a country has increased massively, then the country will suffer from the situation of hyperinflation. Moreover, it can be added that stagflation is the situation of stagnation along with the presence of higher unemployment. In the words of Burda Wyplosz (2012), demand pull inflation and the cost push inflation are the major factors, which reflect the inflation rate of Singapore. Due to the demand pull inflation, the aggregate demand curve will shift to the right. On the other hand, if the interest rate of the country will fall, then the aggregate demand curve will also shift to the right. Therefore, it can be concluded that consumers of Singapore will consume more, investment will also increase. On the other hand, it can be added that the cost push inflation is another important factor, which can raise the inflation rate of Singapore. This will in turn increase the cost of production. The wage rate of the employees will also increase. Approach of government for stable inflation rate: In this context, it can be mentioned that government can control the inflation rate of a country by improving the productivity of the organisations. The government will increase the price of the residential properties. On the other hand, it can be added that in order to control the inflation rate of Singapore, government needs to provide the grants of cash. Conclusion This study is helpful to identify the entire economic position of Singapore. In this connection, the overall output of the country has discussed. The GDP rate and the rate of per capita purchasing power have also mentioned. This has effectively highlighted the growth of the country. On the other hand, the rate of unemployment and the trend of price level of the country has also highlighted in this connection. References Borio, C. (2014). The financial cycle and macroeconomics: What have we learnt?.Journal of Banking Finance,45, 182-198. Brunnermeier, M. K., Eisenbach, T. 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Retrieved 9 December 2016, from https://www.tradingeconomics.com/singapore/gdp-per-capita-ppp Singapore Inflation Rate | 1962-2016 | Data | Chart | Calendar | Forecast. (2016).Tradingeconomics.com. Retrieved 9 December 2016, from https://www.tradingeconomics.com/singapore/inflation-cpi Singapore Unemployment Rate | 1986-2016 | Data | Chart | Calendar. (2016).Tradingeconomics.com. Retrieved 9 December 2016, from https://www.tradingeconomics.com/singapore/unemployment-rate Wray, L. R. (2015).Modern money theory: A primer on macroeconomics for sovereign monetary systems. Springer.