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MACROECONOMICS 2017 PAPER - Coggle Diagram
MACROECONOMICS 2017 PAPER
4a)
Explain
the
causes
of
deflation
. [10]
Aggregate Demand and Aggregate Supply
Introduction
Deflation
definition
is the persistent fall in general price level.
caused
by
falling AD in an economy
rising AS in an economy
Body
Explain
factors
affecting
falling AD
that
causes deflation
.
fall in C
[ICWIPE]
due to
Interest rate increases
Consumer confidence decreases
Wealth decreases
Income redistribution decreases
Personal income tax increases
Expectations of future prices decreases
fall in I
[IBCT]
due to
Interest rate increases
Technological advancement
Business confidence decreases
Corporate tax increases
fall in X-M
[GRE]
due to
GPL of trading partners decreases with respect to domestic country
RNY of trading partners decreases RNY of domestic country decreases
Exchange rates of foreign currency weakens against local currency Exchange rates of local currency strengthen against foreign currency
Explain
factors
affecting
rising AS
that
causes deflation
.
Evaluation
deflation caused
by
falling AD
generally has negative effects
rising AS
generally has positive effects
4b)
Discuss
whether the use of
interest rates
to
address deflation
is
appropriate
. [15]
Singapore's economic growth forecasts were recently cut amidst concerns over
weakening global demand
. At the same time, the economic also faces a
labour shortage
exacerbated by restrictions on foreign workers.
5)
Discuss
whether
supply-side policies
are
more effective
than
exchange rate policy
for achieving
growth and employment
in Singapore. [25]