ACJC H2 Domestic Macro Issues Part 2

1 ©ACJC Econs Dept/2024/H2 Domestic Macroeconomic Problems ANGLO-CHINESE JUNIOR COLLEGE JC2 Economics H2 DOMESTIC MACROECONOMIC ISSUES (2) ECONOMIC GROWTH, UNEMPLOYMENT, & INFLATION Section Content Page Overview 2: Domestic Macroeconomic Aims and Problems 2 2 ECONOMIC GROWTH 5 2.1 Definition and Measurement 5 2.2 Types of Economic Growth 7 2.3 Causes and Types of Undesirable Economic Growth 19 2.4 Consequences of Undesirable Economic Growth 22 3 UNEMPLOYMENT 25 3.1 Definition & Measurement 25 3.2 Causes and Types of Unemployment 26 3.3 Consequences of High Unemployment 30 3.4 Limitations in the Measurement of Unemployment Rate 34 4 INFLATION AND DEFLATION 37 4.1 Definition and Measurement 4.2 Degrees of Inflation 37 38 4.3 Causes & Types of Inflation 39 4.4 Consequences of High Inflation 44 4.5 The Problem of Deflation 47 4.6 Limitations in the Measurement of Consumer Price Index 49 Annex and Learning Reflection 50

2 ©ACJC Econs Dept/2024/H2 Domestic Macroeconomic Problems Overview 2: Domestic Macroeconomic Aims and Problems In this set of notes, we will be studying the 3 domestic macroeconomic objectives and its related problems. For each macroeconomic problem, it is important to understand the (1) causes and the (2) consequences of the problem. We will learn the external macroeconomic problem and the respective policy tools used by governments to address these problems later in the term.

3 ©ACJC Econs Dept/2024/H2 Domestic Macroeconomic Problems Article: Singapore must prepare for economic challenges Amid the war in Ukraine and rising cost of living, Singaporeans must be prepared for more economic challenges, but the Government is doing all it can to cushion the impact on Singaporeans and alleviate the cost -of- living pressures. However, the Government also cautioned that despite the assistance, inflation will remain high and global growth will be weaker, and there may be a global recession within the next two years. There could be two contrasting scenarios Singapore could face in the coming months. If the global economy is able to grow despite some slowing down, Singapore’s economy might follow suit. In this scenario, the labour market would remain tight and unemployment rates low. On the other hand, a global recession could spell negative growth and higher unemployment rates for Singapore. Source: Channel NewsAsia (CNA) & The Straits Times, 1 May 2022 & 22 Jun 2022 (Pre-Lecture) Questions: What are some potential internal challenges that Singapore might face in the near future? (Hint: What components of the Singapore’s AD and AS could be affected by a global recession?)

4 ©ACJC Econs Dept/2024/H2 Domestic Macroeconomic Problems Overview: Root Causes of the Internal Macroeconomic Problems (AD-AS Analysis) Recall that a country’s domestic aims are (1) sustainable and inclusive economic growth, (2) low unemployment and (3) price