Economics Tuition Helps In Better Understanding the Singapore Economy

Economics Tuition Helps In Better Understanding the Singapore EconomyAlthough Singapore became independent only in 1965, the economy has grown substantially over the last five decades. From a poor country with limited natural resources about 50 years ago, Singapore now has a gross domestic product per capita near the top of the world ranking, behind Qatar and Luxembourg. This may seem a miracle to a lot of people. However, with economics tuition Singapore from a good economics tutor, one will understand that the dramatic progress of the Singapore economy over the last 50 years has been in a large part due to the policies of the Singapore government.

Trade Policy: Increase In Exports

As the Singapore economy has a small domestic demand due to the small population and the high savings rate, it is more dependent on external demand. The external demand accounts for a large proportion of national income in Singapore. Therefore, it is more effective to achieve the macroeconomic objective of high economic growth through increasing external demand. In economics tuition Singapore, one will learn that the Singapore government uses policies to increase aggregate demand through increasing external demand. In this sense, the Singapore government uses appropriate polices to increase economic growth. Trade liberalisation has increased over the last few decades. In addition to the efforts of World Trade Organisation to reduce trade barriers, individual economies have also been actively reducing trade barriers through signing bilateral and multilateral free trade agreements. An experienced economics tutor conducting economics tuition Singapore is likely to include in their lessons the effects of trade policy on the economy. Signing more free trade agreements will increase exports as domestic goods and services will become cheaper in the member countries. As exports account for a large proportion of aggregate demand in Singapore, an increase in exports is likely to lead to a large increase in aggregate demand resulting in a substantial increase in gross domestic product. The use of trade policy by the Singapore government over the last few decades has enabled the Singapore economy to achieve sustained high economic growth and therefore a high gross domestic product per capita.

Trade Policy: Increase In Foreign Direct Investments

Trade policy will not only lead to an increase in exports Singapore which is likely to increase national output by a large extent, it will also lead to an increase in foreign direct investments. Firms in non-member countries which produce and export goods to the member countries and wish to get around the tariffs will in Singapore. Although the effect of an increase in investment expenditure on the Singapore economy may be limited compared to that of an increase in exports, an increase in investment expenditure will lead to a faster increase in the production capacity in the economy in the long run resulting in higher economic growth. The effect of an increase in investment expenditure on the economy can be learnt in great detail in economics tuition Singapore.

Exchange Rate Policy

An increase in exports, and to a lesser extent, an increase in foreign direct investments in Singapore will lead to an increase in the demand for Singapore dollars. However, when the Singapore dollar appreciates, export competitiveness in Singapore will fall. One can learn the link between exports and the exchange rate in economics tuition Singapore. A fall in export competitiveness will lead to a slower growth in exports resulting in lower economic growth. In order to cushion the decrease in export competitiveness, the Monetary Authority of Singapore intervenes in the foreign exchange market by selling Singapore dollars and buying foreign currency. The use of such an exchange rate policy since 1981 has helped Singapore achieve a rapid increase in exports which has resulted in sustained high economics growth over the last few decades.

Economics Cafe is an established tuition centre which provides economics tuition Singapore not only to students sitting for a major examination, but also to people who want to better understand the Singapore economy. Mr. Edmund Quek is the principal economics tutor at Economics Cafe.

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Economics Tuition Singapore @ Economics Cafe
Principal Economics Tutor: Mr. Edmund Quek