Macroeconomic Aims Additional Notes

Explanation that Economic Growth Clashes with Sustainability To increase production, firms would employ more factors of production resources such as land which refers to all natural resources used in production, as well as any minerals, water, forests, or other resources (e.g. precious metals, natural gas, coal, crude oil) that are found in or on the land. Therefore, with a higher level of production, more resources are depleted. Moreover, a higher level of production would also result in a higher level of pollution. This is especially true for countries that are unwilling to decouple growth, and thus still rely on non-renewable energy for production e.g. some oil-importing countries rely on oil as its main energy source for production thus carbon dioxide emissions remain substantial, thereby contributing to global warming, whose effects will be suffered by future generations. Explanation that Sustainability is difficult to achieve because sustained growth is difficult to achieve Countries may suffer negative economic growth if they promote sustainability. Declining export revenues (X) from oil will adversely affect their economic growth prospects and national budgets. This is because these countries will face a significant decrease in AD if they decouple from carbon and thus face a more than proportionate decrease in production and income via the reverse multiplier process, which is based on the proposition that a fall in expenditure leads to lower income, and lower income leads to a further fall in expenditure. Thus, these countries might not be willing to suffer a potential recession in the short term to achieve sustainable economic growth in the long term. Countries might not achieve sustainable economic growth also because their long run aggregate supply (LRAS) might not increase sufficiently to have the spare capacity to sustain the increase in actual growth. This might be because of the lack of investment in infrastructure and technology necessary to achieve higher productive capacity. As a result, high inflation might occur. When LRAS increases much slower than the increase in AD, despite the increase in real output, the general price level would increase significantly. This is because firms would still compete fiercely for the resources needed to increase production, resulting in higher cost of production thus would pass on the higher cost in terms of higher price to consumers to offset some of the higher cost and hence general price level is bidded up.

Arguments against Sustainability based on geopolitical factors Government budget constraints play an important role. If a country is facing serious budget constraint issues, then it might not be able to implement policy measures to, for instance, decouple growth in order to develop environmentally-friendly methods of production to achieve sustainable economic growth. Countries that want to implement expansionary fiscal policies with supply-side effects and a strong focus on sustainability might not be able to carry these out, and thus cannot achieve sustainable economic growth. Nevertheless, it must be noted that the extent of global cooperation matters too. For example, Singapore is a small country. ‘Tackling climate change requires global cooperation’ (Extract 7). This means that if other countries continue to generate growth via environmentally-unfriendly means, such as the comparatively higher carbon dioxide emissions in Singapore’s neighbouring countries, then future generations in Singapore may still suffer from the significant economic problems of climate change, even if Singapore is already doing her part. Singapore may still be vulnerable to the negative effects of climate change (many of which are transnational and irreversible), such as the damage to economic resources like land, and as such, whether its economic growth remains sustainable is heavily dependent on the extent of regional and global cooperation to tackle climate change. Case Studies for Sustainability Policies 1. China is leading in developing renewable energy, installing solar panels, wind turbines, batteries and electric vehicles. 2. Singapore’s government has a strong commitment to sustainability, ● Fiscal plans to finance long-lived major infrastructure with a strong focus on sustainability ● Carbon taxes implemented in Singapore to encourage firms and households to adopt energy-efficient practices ● The Zero Waste Master Plan was launched to better manage food waste, packaging waste and discarded electronic devices ● Buildings in Singapore are also designed to be environmentally friendly. 3. Countries like Russia and Middle East states that have net fossil exports taking up a large percentage of their GDP would face political and economic instability thus might not be willing to decouple from carbon fast enough “Average” should be a trigger word to indicate to you to write “income distribution”

Desirability of High Speed Economic Growth SOL: ● (+) Material SOL: To achieve high economic growth, there must be actual economic growth. Assuming no change in population, actual economic growth would result in higher real GDP per capita thus each individual would have access to more goods and services for consumption and hence have a higher material SOL i.e. high economic growth is desirable. ● (-) Non-material SOL via externalities: The production of goods and services needed to generate economic growth will inevitably result in the generation of waste materials. For example, the production of goods like metal and chemicals will often generate highly toxic by-products. Moreover, as the economy grows, income and consumption will rise, thus generating waste such as packaging as well as discarded older consumer goods which have been replaced by newer ones. The dumping of waste into landfills or the emission of waste into waterways and the atmosphere will result in land, water, and air pollution respectively. The increased pollution levels would have a negative health impact on residents in Singapore. The illnesses and health-effects would reduce their non-material SOL. ○ To evaluate, high economic growth may not necessarily deteriorate the environment as the technological progress may also result in cleaner and more efficient production, thus lower levels of pollution. This is most likely