Economic Growth Flashcards
What are the key measures to achieve sustained economic growth through investment in human capital?
Investment in Human Capital:
- Continuing Education Training (CET) Masterplan
- Workfare Skills Support (WSS)
- SkillsFuture
What are the key measures to achieve sustained economic growth through supporting investment in R&D and the adoption of new technology?
Supporting Investment in R&D and the Adoption of New Technology:
- Productivity Solution Grant (PSG)
- Tightened Foreign Worker Policies
What are the key measures to achieve sustained economic growth through other business/industrial policies?
Other Business / Industrial Policies:
- Enterprise Development Grant (EDG)
- Startup SG Founder
What are the key measures to achieve sustainable growth?
- Singapore Green Plan 2023 - Enterprise Sustainability Programme (ESP):
Help local businesses build up capabilities and seize opportunities in the green technology industry - Carbon Tax:
applies uniformly to all sectors; they have to pay $25 per tonne in 2024/2025 - Enhanced Industry Energy Efficiency Package:
Support SG companies in the manufacturing and power generation sectors to become more energy efficient and reduce carbon emissions -> they give grants to cover 70% of expenses for the industries to invest in energy efficient equipment / technologies
What are the key measures to achieve inclusive growth?
- Workfare Income Supplement:
Encourage eligible Singaporeans, especially older and less educated / lower skilled, to continue working and build up their CPF savings - Workfare Skills Support:
- encourage older lower wage workers to attend training to improve their skills by giving them training allowance and a cash rewards for completing training. - Progressive Wage Credit Scheme:
increase salaries for workers through skills upgrading and productivity improvements. - Silver Support Scheme
Supplement incomes of seniors who had lower incomes over their lifetimes and have less retirement support (targeted at bottom 20% of Singaporeans aged 65 and above)
How do changes in AD, SRAS and LRAS lead to actual/potential economic growth?
- an autonomous increase in any component of AD will lead to an unplanned fall in inventories, ceteris paribus.
- Firms will then increase their production level and hire more factors of production such as labour, causing an increase in derived demand for labour.
- Household incomes will increase and increase purchasing power and result in further increase in induced consumption.
- This leads to further increases in production and more factors of productions hired, resulting in another cycle of spending, creating a multiplier effect.
- Therefore AD will increase, resulting in actual economic growth.
- An increase in SRAS due to a decrease in the COP will shift the SRAS curve rightward. Therefore real GDP will increase, resulting in actual economic growth as well.
- At close to full employment, an increase in LRAS leads to a rightward shift of the LRAS curve. The full employment level also increases, achieving potential economic growth. Since the real GDP also increases, therefore an increase in LRAS can also lead actual and potential economic growth at the same time.
How is potential growth acheived and how can we do so?
By increasing LRAS.
We can increase LRAS by improving the quantity or quality of the factors of production.
Land: increase quantity through land reclamation. increase quality through application of fertiliser and other technology
Labour: increase quantity by increasing population. increase quality by investing in continuous skills training and technical education, or to incentivise skilled foreign talents.
Capital: improve quantity by subsidising the purchase of machinery. improve quality by improving the technologies used. e.g improving the speed power and functions of AI lead to higher work capacity and efficiency + invest in social capital such as roads, telecommunications, hospitals etc
Entrepreneurship: exploit the market opportunities and innovations,.
How is sustained growth achieved and how can we do so?
- An increase in AD will raise the real GDP and increase real output, therefore achieving economic growth.
- If AD alone increases, it will lead to general price level increasing with no change in real output, leading to an overheating of the economy and inflation.
- For sustained economic growth to occur, both actual and potential growth must be achieved. There should also be an increase in productive capacity where there is an increase in LRAS. When both SRAS and AD shifts rightwards, real output increases further. Since general price level falls, sustained/non-inflationary growth is achieved.
How is sustainable growth achieved and how can we do so?
It refers to a rate of growth that can be maintained without creating other significant economic problems, particularly for future generations. it implies positive and stbale growth rate over an extended period of time.
achieve it by:
- LT planning for resource utilisation
- use of renewable energy
- use of low carbon transport
- subsisdising firms to adopt green technology
How is inclusive growth acheived and how can we do so?
It refers to a rate of growth that is sustained over a period of time, is broad based across economic sectors and creates productive employment opportunities for the majority of the country’s population. (!!) In the case of Singapore, inclusive growth implies economic growth that takes income distribution into consideration and does not contribute to worsening income inequality (!!)
done so through:
- retraining and skills upgrading + education
- progressive tax system + transfer payments
- subsidies and grants + price ceiling on essential goods like healthcare and education etc
What are the benefits of economic growth?
- Higher SOL
It lead to higher MSOL as it increases real GDP and more final g/s are produced and made available. At the same time, the economy also has more resources due to increase in tax revenue collected. It can redistribute the growth to lower income group, reducing inequity and lower income inequalities. It also allows G to invest more money in green tech + renewable resources. It can also lead to improvements in NMSOL as the government is in a better financial position to allocate resources towards the improvement of public facilities and amenities such as national parks which can enhance the non-material aspect of life. - Increases Investment and Consumption
Economic growth improve confidence of consumers and producers and therefore C and I increases, further increasing AD and fuelling growth. Investment can also increase capacity, which increases quantity of FOPs, helping to achieve higher current and future SOL.
What are the costs of economic growth?
- Social + Environmental Costs
If higher growth is achieved due to cuts in higher rates of income tax, with little or no benefits trickling down to the poor, then economic growth can be widening income gap. The rapid rate of growth can also lead to skills becoming obsolete faster, leading to higher structural unemployment.
Higher growtah can also cause higher level of environmental damage. Industrialisation done at the expense of the environment results in water and air pollution and pose greater challenges for the economy in the future. - Conflict with other macroeconomic aims
If AD increases faster than AS, it could lead to demand-pull inflation. It can also cause an increase in spending on imports, which might lead to current account deficit and thus a BOP deficit.
What are the undesirable economic growth?
Persistently low / negative economic growth
undesirable economic growth
non-inclusive economic growth
