EAns Evaluation (J2)

CSQ eval B6 acquisition

1. Acquisition 

• Pharmaceutical main cost if R&D cost -> since FC is high, acquiring and increasing scale of production leads to a large extent of internal EOS -> leading to the risk of DEOS

  • NO MES if you can’t justify, large firm doesn’t mean producing at MES

In body eval for GINI, air quality, data collection (SOL indicators)

1. GINI data (BEFORE government transfer) 

• After taxation and subsidies, SG GINI may be lower than US -> lower income inequality instead 

2. Air quality 

• Cars of many culprits of air quality -> biggest culprit is dirty manufacturing 

3. Data collection

• SG small population size and stable accounting systems -> statistics likely accurate -> reliable representation of SOL

Effect of FDI (SG context) In-body eval

1. Effect of FDI (SG context)

• Strong economic growth, often driven by robust external demand, raises the EROR for multinational corporations operating in Singapore

• This encourages continued inflows of FD, which supports job creation, skills upgrading, and capital deepening.

• These effects strengthen both actual and potential growth -> improving SG capacity to finance redistribution and environmental initiatives for inclusive and sustainable growth.

Effect of GDP growth on sustainable growth (-ve) in-body eval

1. Effect of GDP growth on sustainable growth (-ve)

• Singapore is a major semiconductor manufacturing hub, and higher economic growth often leads to an expansion of industrial output in this sector.

• Semiconductor fabrication is highly energy- and resource-intensive, requiring large amounts of electricity and water -> carbon emissions and pollution may increase

Effect of GDP growth on inclusive growth (-ve) in-body eval

1. Effect of GDP growth on inclusive growth (-ve)

• Gini coefficient has remained relatively high despite sustained economic growth. 

• While the Singapore government has implemented supply-side policies such as the SkillsFuture Level-Up Programme to encourage reskilling and facilitate labour mobility, these measures take time to take effect

• SR: faster growth may worsen inequality 

• LR: If retraining programmes are effective and widely taken up, workers may successfully transition into higher-productivity sectors, reducing inequality and making growth more inclusive

Effectiveness of RIE2030 in-body eval

1. Effectiveness of RIE2030 

• SMEs face cost constraints, lack expertise, cannot adopt new technology 

• Not successful -> may not yield commercially viable outcomes 

Increase income tax rate to improve equity in-body eval

1. Increase income tax rate to improve equity 

• Government may not have sight on everything if country is big 

• Can lead to brain drain effect

Transfer payments in-body eval

1. Transfer payments 

• Overreliance -> ‘nanny’ state (government perceived to be overprotective and interfering, prevent personal responsibility)

Conflict with other macroeconomic goals in-body eval

1. Conflict with other macroeconomic goals (Imperfect info) 

• Contractionary policy, the Central Bank may increase IR too aggressively as that was what the Central Bank had forecasted was needed to bring inflation down

• Fall in AD and rise in UN is much greater than expected

• Because central banks are operating on lagging data, they frequently over-tighten interest rates, meaning that a significant conflict with economic growth and employment is almost inevitable when combating inflation

Sufficiency of SOL indicators final eval

• ALWAYS insufficient / Conclusive but additional data needed to supplement 

• There is a need for more data that captures non-material SOL to provide a more comprehensive and accurate analysis of the changes to SOL -> NM-SOL affected by many factors 

• Use HDI instead 

  • Context: SG crime rates lower than US / SG size of underground economy smaller than US / less leisure time 

• Give example for insufficient data for BOTH M/NM SOL 

  • Eg. High growth may lead to less leisure time 

  • Eg. Higher growth may not lead to higher MSOL if there is income inequality 

External VS internal AD factors significance final eval

• Without expansion in AD, actual growth will not occur and for sustained actual growth AS must increase 

• Among the AD factors, external factors like the EG of SG's trade partners would be more important than internal factors like the domestic interest rate (SG open and small) 

Rate of adoption of improved technology VS boost labour productivity AD factors significance final eval

• Among the AS factors, the rate of adoption of improved technology would be the most important. 

• The rate of adoption of improved technology is the more important AS factor because SG's economy is fast ageing

• In the current pandemic which is expected to last over the next few years, the scope for relying on foreign workers is also reduced due to travel restrictions

• SG needs to depend more on boosting labour productivity via adopting improved technology

• The discovery of new technology takes time and may not happen over the next few years -> BUT there is scope for adopting currently available improved technology over the next few years.

SG context final eval B7

SG: budget position is good (accumulate reserves) -> can implement mitigating measures to ensure structural unemployment is minimized -> time lag when upskilling (measure only effective in LR)

SG context B11 (depreciation)

• SG depreciation -> managed forex system, MAS will buy back to increase DD -> depreciation to low extent 

• BUT this will also cause fall in foreign reserves -> speculation (people lose confidence) -> poor economic outlook -> C, I decrease -> AD falls 

• Depreciation -> Pm increase in SGD -> Qd falls -> If PED < 1 -> UCOP increase -> AS falls -> GPL increase (cost-push inflation)

Effect of BOT deficit final eval

Effect of BOT deficit 

• Chronic long-term deficit stemming from structural loss of competitiveness (Eg. persistently high unit labour costs, lack of innovation) → reflects fundamental macroeconomic weakness → requires policy intervention → deficit is harmful VS 

• Short-term deficit driven by importation of productive capital goods & advanced technology → expands LRAS → future export-led growth → eventually reverses deficit → deficit need not be harmful

Conflict with other macro goals final eval

1. Conflict with other macro goals 

• DETAILED SUMMARY of whatever you already said

• Eg. Depends on cause of price instability and nature of policy