Diploma in Management Studies

DMSQF
October 2023 Semester

ECO2103 Macroeconomics

CA1 Individual Project

Submitted by:

Name: Purevsuren Bilguun

Student id: 10224342

Table of Contents
Chapter 1 – Introduction to Macroeconomics, GDP, and Economic Growth........................2

a. Source................................................................................................................................2
b. Summary...........................................................................................................................2
c. Analysis..............................................................................................................................2
Chapter 2 – Inflation & the Price Level................................................................................3
a. Source................................................................................................................................3
b. Summary...........................................................................................................................3
c. Analysis..............................................................................................................................3
Chapter 3 – Wages and Unemployment.............................................................................4
a. Source................................................................................................................................4
b. Summary...........................................................................................................................4
c. Analysis..............................................................................................................................4
Conclusion.........................................................................................................................5
References.........................................................................................................................6
Chapter 1 – Introduction to Macroeconomics, GDP, and Economic Growth

a. Source:
China's economic recovery on firmer footing as Q3 GDP growth beats expectations.
https://www.straitstimes.com/asia/china-economic-recovery-on-firmer-footing-as-q3-gdp-
growth-beats-expectations

b. Summary:
In Q3 2023, China’s economy showed indications of recovery, growing at a rate of 4.9%. The
first nine months had 5.2% growth, which was above the 5% target, according to prior
calculations. Despite the difficulties faced in the real estate market, many believed that China
could still achieve its year-end target with sustained policy efforts. Regardless of
consumption, retail sales, and industry output improvements, analysts are nevertheless
cautious and stress the importance of long-term recovery measures. This resulted in the
economy benefiting from the government’s policies, which included tax and reserve
reductions totalling over 500 billion yuan.

c. Analysis:

We can evaluate China's recent economic performance through the prism of

macroeconomics, the study of aggregate economic events. The story emphasizes how Q3
2023 growth exceeded economists' projections by 4.9%. This suggests that the second-largest
economy in the world is headed in the right direction, but it also makes us want to look more
closely at the underlying causes and economic data.

Recognizing the limitations of using GDP as the only indicator of economic health is crucial.
GDP has limitations even if it's an important measure. It does not account for income
distribution, environmental externalities, or non-market activities. Furthermore, it is unable to
capture the population's subjective well-being or quality of life. A comprehensive evaluation
of an economy should therefore consider a wider range of variables.

Considering economic recovery and growing rates, it is more likely that the GDP estimates in
the article represent real GDP. Inflation is considered in real GDP, which gives a more
accurate picture of economic performance. This distinction is essential because it guarantees
that the stated growth rates are modified to account for shifts in the level of prices, providing
a more accurate depiction of the actual state of the economy.

In light of the economic recovery and growth rates, it is more likely that the GDP estimates in
the article represent real GDP. Inflation is taken into account in real GDP, which gives a
more accurate picture of economic performance. This distinction is essential because it
guarantees that the stated growth rates are modified to account for shifts in the level of prices,
providing a more accurate depiction of the actual state of the economy.

The article's economic setting makes an expenditure method for GDP calculation reasonable.
This approach includes household consumption spending, business investment spending,
government spending, and net exports (exports less imports). GDP = C + I + G + (X - M) is a
formula that enables a thorough evaluation of the economy's performance throughout the
given time frame. It is consistent with the article's focus on government initiatives to
stimulate the economy, manufacturing output, and consumer spending.
Chapter 2 – Inflation & the Price Level

a. Source:
Pakistan looks to tame high inflation with fuel price cuts – PM
https://www.straitstimes.com/asia/pakistan-looks-to-tame-high-inflation-with-fuel-price-cuts-
pm

b. Summary:
Anwaar ul Haq Kakar, the acting prime minister of Pakistan, is combating inflation by
lowering fuel costs and enforcing price restrictions. This action follows an IMF loan that
stopped a debt crisis but came with requirements that made inflation control more difficult.
Prices for gasoline and diesel decreased by 40 and 15 Pakistani rupees, respectively, to
283.38 and 303.18 per litre. Experts caution that this lowering might only have a temporary,
limited impact on inflation. Curbing illicit FX transactions is essential to stabilizing the
currency. Furthermore, there could be dangers for the oil markets from the battle between
Israel and Hamas.

c. Analysis:
The continuous increase in average prices, or inflation, is a crucial economic indicator that
has significant effects on the state of a country's economy. Recent actions by the Pakistani
government, including lowering fuel prices, show that it is making a serious attempt to
combat the country's rising inflationary pressures. The Consumer Price Index (CPI), a
statistic that measures the average change in prices of a predetermined basket of goods and
services, is the fundamental tool used to measure inflation. This indicator provides a thorough
overview of consumers' purchasing power. There are two main ways that inflation, a complex
phenomenon, might appear: demand-pull and cost-push. A situation where increased
consumer demand exceeds an economy's potential for production is known as demand-pull
inflation. On the other hand, cost-push inflation is caused by rising manufacturing costs,
which are frequently brought on by factors like rising raw material prices and increasing
wages.

A representative basket of products and services is chosen, and their prices are then tracked
over time to calculate the CPI, which is a laborious operation. Through a comparison of this
basket's cost over various time intervals, analysts can identify changes in total price levels.
Although the article provides important information about changes in fuel prices, a more
thorough CPI estimate would require a wider range of products and services. But it's critical
to recognize the constraints that the CPI is based on. It might not fully take into consideration
improvements in quality, patterns of consumer substitution, or the introduction of new items.
Moreover, it does not consider changes in the spending patterns of consumers or take
regional variations in price swings into account. As a result, the CPI could overstate or
underestimate the real inflation rate.

It is crucial to distinguish between nominal and real quantities while discussing inflation.
Real values are adjusted for inflation and provide a more accurate representation of an item's
purchasing power than nominal values, which reflect actual prices at a specific moment in
time. Making sense of the economy and creating sensible policies depend on this distinction.
Chapter 3 – Wages and Unemployment

a. Source:
S’pore job vacancies fall in Q2, unemployment ticks up in July as the labour market
continues to cool. https://www.straitstimes.com/business/economy/s-pore-job-vacancies-fall-
in-q2-unemployment-ticks-up-in-july-as-labour-market-continues-to-cool
b. Summary:
Singapore's unemployment rate went from 1.9% in June to 2% in July, a tiny increase. In
July, the rate for citizens increased from 2.8% in June to 2.9%. While the citizens' long-term
unemployment rate dropped from 0.6% in March to 0.5% in June, there were 12% fewer job
openings in June, totalling 87,900. In Q2, the number of employees increased by 24,300,
which was less than in the previous quarter. Economists see varying labour demand across
industries notwithstanding these trends, with the healthcare and travel-related sectors
remaining resilient. In Q2, there were fewer layoffs, but the percentage of those returning to
work fell to 59.4%.

c. Analysis:
Recent labour market statistics in Singapore paint a complex picture. There has been a slight
increase in unemployment rates, with 2% recorded in July. Both citizens and permanent
residents are included in this; the latter saw an increase from 2.7% in June to 2.8% in July.
Residents' long-term unemployment rate improved somewhat, dropping to 0.5% in June,
indicating some degree of resilience.

Understanding the concept of unemployment is essential in the context of labour dynamics. It

describes those who are looking for a job right now but are not yet employed. This number
does not include disheartened workers or those who have given up looking for work because
they believe their chances are slim. The formula for calculating labour force metrics is
simple: Labour Force = Employed + Unemployed. Important data are produced, including the
labour force participation rate (Labour Force / Working-age Population) and unemployment
rate (Unemployed / Labour Force), which are important measures of the state of the
economy.

In Singapore's labour market, both the supply and demand for labour are changing. There has
been a change in the number of job openings for five quarters running, from 126,000 in
March 2022 to 87,900 in June 2023. This might be explained by things like post-Covid-19
business modifications. Still, there are almost two job vacancies for every jobless individual,
suggesting that there is a continuous need for competent workers.

Additional forms of unemployment also sculpt the environment. Transitional periods between
jobs cause frictional unemployment, but a mismatch in skills and open positions causes
structural unemployment. The cause of cyclical unemployment is downturns in the economy.
There are drawbacks to these forms, such as decreased productivity and possible societal
repercussions.

Singapore has implemented several measures to reduce unemployment. Programs for

retraining and skill development aim to address structural unemployment. The goal of labour
market flexibility is to lower frictional unemployment by allowing people to move between
jobs more easily. Proactive economic policies and investments in fast-growing industries also
aid in the fight against cyclical unemployment.
Conclusion
This analysis of Singapore's and China's macroeconomic foundations. China's strong 4.9%
GDP growth in Q3 exceeded forecasts, fuelled by deliberate government actions such as tax
cuts and reserve reductions. These actions show how important monetary and fiscal theories
are for maintaining economic stability. The way that fuel prices have been lowered in
Pakistan in reaction to inflation serves as an example of how demand-pull and cost-push
inflation theories interact. Furthermore, the emphasis on reducing illegal foreign exchange
transactions tackles currency stability, which is consistent with theories of balance of
payments. The subtleties of Singapore's labour market show the dynamics of supply and
demand for workers. Disappearing job openings and rising unemployment rates support
structural and frictional theories of unemployment. Retraining and skill development
initiatives from the government are like those designed to reduce structural unemployment.
Throughout, the limitations of GDP and CPI are present. Although vital, they only provide a
portion of the picture of the larger economic scene, leaving out qualitative components of
well-being and environmental factors. This examination concludes by highlighting the
fundamental significance macroeconomic theories and concepts play in navigating intricate
economic contexts. It highlights how important external factors, market dynamics, and
governmental regulations are in determining economic results. Making well-informed
decisions still requires an understanding of the complex interplay between different
economies and the application of relevant economic theories.

References
Wei, A. C. (2023, October 18). China's economic recovery on firmer footing as Q3 GDP
growth beats expectations. Retrieved October 2023, from The Straits Times:
 https://www.straitstimes.com/asia/china-economic-recovery-on-firmer-footing-as-
q3-gdp-growth-beats-expectations
The Straits Times. (2023, October 16). Pakistan looks to tame high inflation with fuel price
cuts - PM. Retrieved from The Straits Times:
https://www.straitstimes.com/asia/pakistan-looks-to-tame-high-inflation-with-fuel-
price-cuts-pm
Sue-Ann, C. (2023, September 14). S'pore job vacancies fall in Q2, unemployment ticks up in
July as the labor market continues to cool. Retrieved from The Straits Times:
https://www.straitstimes.com/business/economy/s-pore-job-vacancies-fall-in-q2-
unemployment-ticks-up-in-july-as-labour-market-continues-to-cool