R A F F L E S IN S T IT U T IO N

Y EA R 5 H 2 EC O N O M ı
C S 20 16

LEC TU R E N O TES

m E c o n o m ic ın d ic a t o r s

m C O N TE N TS

:
) 1 . ı
n tro d u c t io n to M a c ro e c o n o m ic s

- 2 . E c o n o m ic P e r fo r m a n c e a n ď it s ın d ic a t o r s

3 . L iv in g S ta n d a r d s a n d its ın d ic a t o r s

4 . C o m p a r is o n s o f E c o n o m ic P e r fo r m a n c e

0 rd a rd
a n d L iv in g S ta s

5 . 0 v e r v ie w o f th e S in g a p o r e E c o n o m y

Z
0
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T h is s e rie s le d ' " s p ro . 】
d e s a n in s ig h t i n M e m acı
o e ca no m y - ¡ l i' " O d . c e s M e m a in

m a u o e c o n o . ìc a im s o f a c o u n u y a n d fc lc u s e s o n inte rpæg ke y i n d i c a o f e . N o m io

p e rfo rm a n c e a n d liv in g . h . D a td s .
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R A F F L E S IN S T IT U T ı
O N
Y E A R 5 H 2 E C O N O M IC S 2 0 1 6

K E Y E C O N O HM C IN D IC A T O R S

ın t r o d u c t io n t o M a c ro e c o n o m ic s
E c o n o m ic P e r fo r m a n c e a n d it s ın d ic a t o r s

2 1 E . c o n o m ic G r o w th

2 1 1 A
. . c tu a l a n d P o te n t ia l G ro w th

2 1 1 1 G ro
. . . s s D o m e s tic P ro d u c t
2 1 1 2 L im
. . . ita t io n s o f G D P

2 1 1 3 G
. . . ro s s N a tio n a l In c o m e
2 1 1 4 La
. . . b o u r P ro d u c tiv ity

2 1 2 S
. . u s ta in a b le G ro w th

2 1 3 In c
. . lu s iv e G ro w th

2 1 3 1 G in
. . . i C o e f fic ie n t
2 2 P . r ic e S ta b ilit y

2 2 1 In
. . fla tio n a n d D e f la tio n

2 2 1 1 C
. . . o n s u m e r P r ic e In d e x

2 2 1 2 L im
. . . ita t io n s o f C P I

2 2 1 3 1n
. . . f la tio n R a te
2 3 F . u ll E m p lo y m e n t

2 3 1 U
. . n e m p lo y m e n t R a te

2 3 2 L im
. . ita tio n s o f U n e m p lo y m e n t R a te
2 3 3 N
. . a tu ra l R a te o f U n e m p lo y m e n t
2 4 Fa . v o u ra b le P o s itio n o f B a la n c e o f P a y m e n ts
2 4 1 C
. . u rre n t A c c o u n t

2 4 1 1 T
. . . ra d e B a la n c e

2 4 1 1 1 G
. . . . o o d s B a la n c e

2 4 1 1 2 S
. . . . e rv ic e B a la n c e
2 4 1 2 P
. . . r im a ry In c o m e B a la n c e

2 4 1 3 S
. . . e c o n d a r y In c o m e B a la n c e

2 4 2 C
. . a p it a l a n d F in a n c ia l A c c o u n t

2 4 2 1 D ire
. . . c t ı
n v e s tm e n t / L o n g -
te rm C a p ita l F lo w s

2 4 2 2 P
. . . o rtfo lio In v e s t m e n t / S h o r t -

te rm C a p ita l F lo w s

2 4 3 0 ffic
. . ia l R e s e rv e s A c c o u n t

2 4 4 0
. . v e ra ll B a la n c e

2 4 5 E
. . x c h a n g e R a te s

L iv in g S ta n d a rd s a n d it s ın d ic a t o r s

3 1 M . a te ria l S ta n d a r d o f L iv in g

3 1 1 R
. . e a l G D P p e r C a p ita
3 1 2 L im
. . ita t io n s o f R e a l G D P p e r C a p ita
3 2 N . o n -
m a te r ia l S ta n d a rd o f L iv in g

3 2 1 W
. . e lfa re In d ic a to rs

3 2 2 L im
. . ita t io n s o f W e lfa re In d ic a to r s

3 3 C . o m p o s ite In d ic a to r s

C o m p a r is o n s o f E c o n o m ic P e r fo r m a n c e a n d L iv in g S t a n d a rd s

4 1 C . o m p a ris o n s o v e r T im e

4 2 C om .
p a į s o n s o v e ! S p a c e ( b e tw e e n c o u n trie s )

O v e r v ie w o f th e S in g a p o r e E c o n o m y
'

5 1 S in .
g a p o re s Eco n o m ic P e r fo rm a n c e
'

5 2 S in .
g a p o re s S ta n d a rd o f L iv in g

Econom i. D e p a r . Nt
 R e fe r e n c e s

Ba n k , W .
(2 0 0 6 ) W . o rı
d D e v e lo p m e n t R e p o rt 2 0 0 6 -

Equ o p m e nt
ity e n d D e v e ı . N e w
Y o rk W o rld B a n k O x fo rd U n iv e rs it y P re s s
C a v es , R . E .
,
F ra n ke ı
, J . A .
,
& Jo n e s ,
R . W .
(2 0 0 7 ) W . o rld T ra d e a M P a y m e n ts -

A n
In tro d u c tiio n . B o s to n P e a rs o n .

Co ı
m a n , D .
,
& N ix s o n , F (19 9 4 ) E
. . c o n o m jic s o f C h a n g e iin L e s s D e v e lo p e d C o u n tń e s .

C o v e n t ry H a rv e s te r W n e a ts h e a f .

F ra n k , R H .
,
& 日每m a n k e ,
B . S .
(2 0 0 9 ) P . rln c fp le s o f E c o n o m ic s ( ￠th E d ítio n ) .

B o s to n M c G r a w i l ı lr w ın .

M a n k iw , N G . .
, Q u a h , E .
,
& W ils o n , P .
(2 0 1 3 ) P h rn c f p le s . o f E c o n o m c is -
A n A s ia n

E d ei* o n ￠2 n d E d it ío n ) . S in g a p o re C e n g a g e L e a r n in g .

M in is tr y o f M a n o w e r S in a o r e
p ( g p ) .
(n d ) R . . . e trie v e d S e p te m b e r 2 0 1 6 , »om La b o u r
m a rk e t s ta u s tic a l ın fo r m a t io n : h tt //s ta ts
p . c o m .
go v . s
g /p a g e s /h o m e . a s
px
N agı e G , .
(2 0 0 5 ) D e . v e lq p m e n t . Lo n d o n H o d d e r M u ı
Ta y .

S ln g a p o r
p D e p a r e n t o f S t a t is t ic s .
(n d } s in . . .
g a p o re D e p a r t m e n t o f S t a ti s t ic s .

r e t r ie v e d s e p t e m b e r 2 0 1 6 , f r o m h « p
l /w w w . s ı
n g s ta t .
go v . s
g/
S lo m a n , J .
(2 0 0 6 ) E c o n o m . ic s ( 6 10 E d ld o n ) . E n g ı
a n d P e a rs o n .

T ra g a k e s (2 0 1 2 ) E c o n o m ic s fo r t h e Iß D ip lo m a S in C a m b r id g e
g a p o re
, E . .

u n iv e rs it y p re s s .

U n ite d N a tio n s D e v e ı n d
o p m e n t P r o g ra m m e R e trie v e d S e p te m b e r 2 0 1 6 .
( . .
) .
,
f r o m

h u m a n d e v e ıo p m e n t r e p o rts h ttp /lh d r dp g /e n /d a ta . u n . o r

W o rıd B a n k (n d W o r ld B a n k O lp e n D a t a R e t r ie v e d S e p te m b e r 2 0 1 6 ,
. .
) .
. f r o m

h ttp lld a ta . w o r ı
dba n k . o r
g/
(R e fe r e n c e s in b o ıd a re re c o m m e n d e d re s o u rc e s fo r th e A L e v e l s tu d e n t .
)

A t th e e n d o f t h is ı
e c t u r e s e r ie s , c a n d id a te s s h o u ıd b e a b ıe t o

U n d e r s t an d th e me a n i ng of .

o e c o n o m ic in te r m s o f a đ u a ıa n d
g p o t e n t ia l g r M h , s u s t a in a b le

gm h , a n d in c ıu s iv e
g ro w th
o p r ic e s t a b ilit y , in f ıa t io n a n d d e f ıa t io n

o fu ll e m p ı
o ym e n t, a n d d is t in
g
u is h b e t w e e n d iĦ e r e n t t
y p
e s o f
u n e m p ı
o ym e n t
o a f a v o u ra b le b a la n c e o f p a y m e n t, a n d e x
p la in ho w external
tra n s a c tio n s in th e c a p ita ı a c c o u n t , t h e c u r r e n w n a n c ia ı a c c o u n t a n d

th e o ffic ia ır e s e rv e s a re b a la n c e d in th e b a la n c e o f p a y m e n t
E x p ı ai n t he s i gn i fi c a n c e a n d ı i mi ta t i on s o f e a c h k e y e c o n o m i c i nd i ca t o r a s

m e a s u re o f e c o n o m ic p e rfo rm a n c e , including G D P /G N I . in f la t io n r a t e ,

u n e m p lo y m e n t ra te , b a la n c e o f
p
a
y
m e n t d e f ic it l s u r
p
lu s .

* U n d e r s ta n d th e m e a n in g o f s ta n d a rd o f ıiv i n a n d e x p la in h o w th e
g q u a n t it a t iv e a n d

q u a lita t iv e a s p e c ts m a y b e m e a s u re d
C o m p e o m i
a r e c o n c p e r f or m a n c e a n d l i vi n g
s t an
d a r ds o v e r t i me a n d o v e r s p
a c e

(b e tw e e n c o u n trie s )

R a M a s ın M h M n n 3
F- ic s D e p a ıe n t
 国
回
国
1 ı
N T R O D U C T Ïo N T O M A C R O E C O N O M ı
C S

M a c ro e c n n n m ic R is th e
ș tu
d y o f th e p e rf o rm a n ce o f n a tio n a l e c o n o m ie s a n d th e

p o lic ie s th a t g o v e r n m e n t s u s e to t ry to irn p ro v e th a t p e rfo rm a n c e ŕ ( F ra n k & B e m a n ke ) .

M a c ro e c o n o m ic s c o n c e r n s e c o n o m ic a g g re g a te s s u ch a s th e o v e ra ll le v e l o f o u t p u t .

p ń c e s a n d e m p lo y m e n t in th e e c o n o m y (S lo m a n ) .

In T tre m e 1 T ire a ıE c o n o m
C e n lı P ro b le m ,
w e q ï u r ıi p d ho w th e p ro b le m o f s c a rc ity
a n e c ts e c o n o m ie s . Beca u s e o f s c a rc ity ,
l im i te d r e s o u rc e s m u s t b e e f f ic ie n u y a u o c a te d
to d iĦe re n t m a rk e ts to m a x im is e s o c ie v s w e ı
fa r e . T he a im o f e v e ry s o c ie t y is
m a x im is a tio n o f s o c ie ta l w e l[a re . F ro m a m a c ro e c o n o m ic p e rs p e c tiv e , t h is is re fe rre d
to a s a ris e in ıiv i n g s ta n d a r d s . w h ic h c a n re s u lt f ro m im p m v in g e c o n o m ic
pe rfo r m a n c e ,

In T ħe m e 2 M a M e ts , w e s t u d ie d h o w t h e r o d u c t io n a n d c o n s u m t io n o f o o ds a n d
p p g

s e r v ic e s in is o la t e d m a rk e ts . M o d e ls o f re s o u rc e a llo c a tİo n w e re u s e d to d e te r m in e

p r ic e s a n d o u tp u t le v e ls o f s p e c ific g o o d s /s e r v ic e s . ı
n m a c ro e c o n o m ic s ,
w e a r e

s e rv ic e s
J
ı n * + ų \
tt i t ・ t w t \
p ro d u c e d in a ll m a rk e ts in a n e co n o m y . Fo r in s ta n c e ,
in s t e a d o f d e t e r m in in
g

th e p r ic e a n d q u a n t it y o f c a r s t ra d e d in d
S in g a p o r e ,
w e a r e c o n c e r n e w ith th e g e n e ra ı
p r ic e le v e i o f a ll g o o d s a n d s e r v ic e s in a n e c o n o m y , a s w e l l a s t h e t o t a l
p
r o d u c t i o n

o f a ll g o o d s a n d s e rv ic e s in a n e c o n o m
y r in \ u in \
L J

P r ic e o f c a rs G e ï ıe r a l p r iicc e ı
le v e l
n oņ h
-
ïï n
n q
q \
t ++
\ t a )=
/
个
Ť 。
Ss Ss *小 」
i
T
T l ( *o hh e h tt
T \i ha
T h u i h ,
/

K / þM f・\ h a h t ・ « \ ų h
4 tJ ł

Ä Pt c l

・
& \ * L n Ą
1
A D

・
Q u a n t it y , G ro s s & h ・ 3 \ h
f
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o f c a r s d o m e s t i c
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Y
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t e t ・h o h i c
r o d u c t
p b . . .
ı \ ņ
4
' \ h
M a rk e t fo r c a rs in S in g a p o re § ņ g a p o re s e c o n o m y
q h t t ų h

\ v ih
s 4 t d M # h b
F ig u re 1 C o m p a ris o n b e tw e e n m ic ro e c o n o m ic m a rk e t o u tc o m e s w ith m a c ro e c o n o m ic
'
o e rfo rm a n c e o f a n e c o n o m y

A ls o ,
in T h e m e 2 M a r* e l s ,
r e s o u r c e a H o c a t io n in th e f re e m a rk e t is th e r e s u lt o f

c o n s u m e rs a n d p ro d u c e rs a c tin g a s in d iv id u a l s e lf in te re s te d e c o n o m ic a g e n ts
-

, w h o s e

dem and a nd s u p p ly g iv e r is e to m a rk e t o u tc o m g s . G o v e rn m e n ts o n ly in te rv e n e to

in llu e n c e m a rk e t o u tc o m e s o n ly w h e n s p e c iħc m a r k e ts fa il . H o w e v e r, in

m a c ro e c o n o m ic s , g
o v e r n m e n t s a r e t h e k e
y
e c o n o m ic a
g
e n t s t h a t in t e rv e n e w ith
m a c ro e c o n o m ic p o lic ie s in o rd e r to a c h ie v e m a c ro e c o n o m ic a im s s uc h a s

e c o n o m ic g ro w th , p r ic e s ta b ility , lo w ra te o f u n e m p lo y m e n t a n d a fa v o u ra b le b a la n c e

o f p a ym e n t .

\n T h e m e 3 T h e N a tio n a l a nd rn te m a tio n a ï E co no m y , w e w N s t u d
y \ h e

m a n mo e c n n o m ic a im s , is s u e s a n d
p
o ıi c le s re la t in
g to
g
ro w t h , in f la t io n ,

u n e m p lo y m e n t , e x c h a n
g
e r a te s
,
b a la n c e f p a y m e n ts
o a nd in c o m e d is tr ib u tio n , w ith
rtic u la r re fe re n c e to th e S in g a p o re co n te x t W e w ill a ls o s t u d y th e im p a c t o f g ı
o b a ı
pa .

( e x t e r n a l) t re n d s a n d d e v e lo p m e n ts o n th e n a tio n a l, r e
g io na l a n d in te rn a t io n a l

e c o n o m ie s ,
a n d t h e ir im p h c a tio n s fo r p o lic y c h o ic e s a n d d e c is io n s o f g o v e rn m e n ts .

l
T h e A D -
A S m o d e l w il ı b e e x p la in e d in T h e m e 3 . ı ın c o m e a n d E in
p
to
y m
e n t D e l e r n łin a lio n .

R a n e s ı
n s titu t io n 4

Ec o n o m ic s D e p a rtm e n t
 t h v i \ o n \

A
e c o n o m
he a ı
th y
ı
c g ro w t h
e c o no m y

,
ı
o w ın f ı
is
a tı
o n
c h a ra c te ris e d

,
lo w u n e m
b y * u s h m

p lo y m
・d , *

e n t a n d a s u e ta ı
u s

n a b le
￠ı l n ・ b l・ a n d m

b a la n c e
c lu s lv *

o f
-
Tt.
in to h
T
p \・
t
ıï

\«
q \\

t \ ł

p a y m e n ts p o e ı
tıo n T h e s e a re
. th e m a c ro e c o n o m ic a im s th a t g o v e r n m e n t s se e k to
a tta in . T he se g o a ı
s s h o u ld b e a c h ie v e d w ith s ta b ilit y ( in s te a d o f w ild fı
u c tu a tio n s ) to

p re v e n t u n c e r ta in ty in th e e co n o m y . A c h ie v e m e n t o f t h e s e g o a ı
s c o n t rib u te e v e n tu a lly
to im p r o v in g s t a n d a r d s o f ıı
v ın g .

2 EC O N O M ı
C P ER FO R M A N C E A N D ı
TS ı
N D ı
C A TO R S

2 1 . E C O N O M IC G R O W T H

B ro a d ı
y , e c o n o m ic g ro w th o c c u rs w h e n th e re is a n ı
n c re a s e ı
n p ro d u c tı
o n o f g o o d s

a n d s e rv ı
c e s ın a n e c o n o m y a n d a c o n c u rre n t g r o w t h o f th e n a tı
o n a ıı
n c o m e . It is
th e in c re a s e in th e r e a l o u tp u t o f a c o u n try a c c o m p a n ie d b y a n in c re a s e in th e
'
c o u n tr y s c a
p
a c it
y
to p
r o d u c e
g
o o d s a n d s e rv ic e s . T h is g o e s to w a r d s t h e u ltim a te a im
o f ra ı
s ın g c o n s u m p t io n ı
e v e ı
s to ı
m p ro v e ıı
v ı
n g s t a n d a r d s o f s o c ie t
y . T ra d itio n a lı
y,
governments a im fo r s u s t a ın e d e c o n o m ı
c g ro w th , w h ic h is a n in c r e a s e in b o th th e
a c t u a ıa n d p o t e n t ia l ı
e v e ls o f p ro d u c tio n th e s o c ie t y a c h ie v e s /c a n a c h ie v e .

H ow e v e r ,
in c re a s in g p r o d u c tio n ı
e v e ls m a y n o t h e lp a s o c ie ty a c h ie v e b e « e r ı
iv in g
s t a n d a rd s ,
e s
p
e c ia ıl
y b lu n tly in c r e a s in g o u tp u t ı
e v e ls re s u ı
ts in u n ı
n te n d e d n e g a tı
v e
c o n s e q u e n c e s o n s o c ie ty . T he re fo re , t h e r e is a n e e d t o a ls o
p
r o m o te s u s t a ın a b ıııt
y

a n d ın c lu s ı
v e n e s s o f e co no m ic g ro w th .

2 1 1. . A c t u a ıa n d a ıG r o w t h
P o te n t ı

A c tu a l e c o n o m ı
c g ro w t h is m e a s u re d b y th e p e rc e n ta g e a n n u a l In c r e a s e in
n a tı
o n a ıo u tp u t ,
w h iı
e p o t e n tla ı e c o n o m ic g ro w th is m e a s u re d b y th e p e rc e n ta g e
a n n u a l ın c r e a s e ın th e e c o n o m y s c a p a c lly to p ro d u c e . A m o v e m e n t fro m a p o in t
in s id e th e P P C to a p o in t c ı
o s e r/o n th e P P C w iı
ıin d ic a te a c tu a l g ro w th a n d ca n re s u ı
t

R a M ie s In s titu b io n 5
Econom ic s D e w rı
m e n t
fro m g re a te r a n d m o re e f fic ie n t u s e o f e x is t in g re s o u r c e s . P o te n tia l e c o n o m ic g ro w t h
is illu s tra te d b y a n o tı
tw a rd s h ift o f t h e P P C in
, a n d r e s u lt s f r o m a n in c r e a s e
q u a n tiv
a n d / o r q u a lit y o f re s o u rc e s , a n d / o r t e c hn o lo g ic a l im p ro v e m e n ts .

G o o d X G o o d X
系

PPC 2

0 Y > G o o d Y
1 Y 2 Y s 0

& c tu a ı9 C O n o o c c u r s p iE th e lį E t e n ö a ıe c o ņ o m ic g t o w t h is
COmbinFrsmaoggand s e r v ic e s m F itTed iı
ıu s t r a te d b v a n 中 ,
u t w
ĝ Q s h iE d
įn Th ļ ę c o n o m y in c r e a s e s » o m m o r to C P P C lm
ļ Đ t m P P C o to P P C 1

F ig u re 3 Illu s tra tin g a c tu a l a n d p o te n tia l e c o n o m ic g ro w th u s in g p ro d u c tio n p o s s ib ility

c u rv e s

In m a c ro e c o n o m ic s , a c t u a ı e c o n o m ic
g ro w th c a n a ls o b e illu s t r a te d w it h th e
A g g r e g a te D e m a n d a nd A g g re g a te S u p p ı A S ) fra W he
(A D m e w o rk re t o ta l
-

y .

d e m a n d fo r a c o u n try
'
s
p
r o d u c t io n m e e t s t o t a l s u
p p
ı
y ,
a m a c r o e c o n o m ic e
q
u i ıi b r iu m is
re a c h e d in o rd e r to d e te rm in e t h e to ta ıo u t p u t o f g o o d s a n d s e rv ic e s a c tu a lı
y p ro d u c e d
in th e e c o n o m y W h ile t h is m e c h a n is m h a s s im ila ritie s w ith th e p r ic e m e c h a n is m in
.

m ic ro e c o n o m ic s , t h e r e a r e d if f e r e n c e s . O n e o f th e im p o rta n t d iffe re n c e s is t h e v e rtic a l

s e c tio n o f th e A S c u rv e th a t illu s tra te s th e f u ıl e m p lo y m e n t o u tp u t, w h ic h is t h e

m a x im u m o u t p u t t h a t c o u ld b e p ro d u c e d w h e n re s o u rc e s a re a ll f u ı
ly a n d e f fic ie n tı
y
u t iı
is e d . N o a c tu a l p ro d u c tio n ca n o cc u r b e y o n d th e v e rt ic a ı s e c tio n o f th e A S c u rv e ,

j u s t a s n o a c tu a ıp ro d u c tio n o c c u r s b e o n d t h e
y P P C .

G e n e ra ıp ń c e ı
e v e l G e n e ra ıp ric e ıe v e ı

Ą
4S ,
S ĄS 1 A
Ș2
Ĝ \

:Xti .
ĝ .
ı
ı
ı
ı

>
G ro s s

Tł d o m e s tic

. .
ť r, p ro d u c t

A c t u a ıF r n o m i c g r o w th o c c u rs w h e n P o te n tia ıe c o n o m ic Æ o w th įş ū ĹM
g ro ș s d o m e s tic p r o t a ı n H a ıh t w a r d s h ift d a q q m a te s u ų p
o f q o o d s a n d s e r v ic e s ) i n c r e a s e s u E m s u c h th a t a ļ e m ţ o u t g u
ţ t \z (P O t e n ū p r o d u c t io n if E s o u r c e s a re

in c re a s e s fro m Y h t o Y fz

F ig u re 4 llı
u s tra tin g a c tu a l a n d p o te n tia ıe c o n o m ic g ro w th u s in g m a c ro e c o n o m ic A D -

A S fra m e w o rk

W he n b o th a c tu a ı a n d p o te n tia l g ro w th a re a c h ie v e d , s u c h th a t th e p ro d u c tio n a n d
c o n s u m p t io n o f g o o d s a n d s e rv ic e s in a n e co n o m y in c r e a s e s b e yo n d w h a t w a s

R a n te . . s td u lio .
ı 6
Ec.n.M i. . N e p a rlm e n t
 o r ig in a lı
y p o s s ib ı
e ,
t h e e c o n o m
y
is s a id t o h a v e a c h ie v e d s u s t a in e d e c o n o m ic

g ro w th . W he n p o te n tia l g ro w th a llo w s fo r g re a te r a đ u a ı g ro w t h ,
e c o n o m ic
g
r o w t h is

s u s ta in e d .

In m e a s u r in g e co n o m ic g ro w th ,
w e a r e c o n c e r n e d w ith th e v a lu e o f th e to ta l

P r o d u c in a n e co n o m y - T h is is k n o w n a s th e N a t io n a ı P r o d u c t , a n d th is w ill b e

e q u a l to b o th th e to fa ı in c o m e e a r n e d [m M /o ık e ıs in a n e c o n o m y a s w e ll a s th e to fa l

e x p e n c lltu re s p e n Ł N s u m e r s in a n e c o n o m y . T he re fo re ,
t h e fu n d a m e n ta ı id e n tit y

o f n a t io n a l in c o m e a c c o u n tin g a lw a y s h o ı
d s

U
.

T N a t io n a l P r o d u c t N a t io n a ı ın c o m e N a t io n a ı E x p e n d it u r e

T o s e e w hy , firs t o b s e rv e th a t t h e v a ı
u e o f a ll g o o d s a n d s e rv ic e s p ro d u c e d in a g iv e n
p e r io d is b y d e lin itio n e q u a l to th e a m o u n t t h a t b u y e rs m u st s p e n d to p u rc h a s e th e m
S in c e th e va ı
u e o f g o o d s a n d s e rv ic e s a re a lw a y s t h e s a m e a s th e e x p e n d it u re o n th e

g o o d s o r s e rv ic e s p ro d u c e d , s o t h e n a t io n a l p ro d u c t a n d th e n a tio n a ıe x p e n d itu re m u s t

g iv e th e s a m e m e a s u re o f e c o n o m ic a c tiv it y .

N e x t, o b s e r v e t h a t w h a t t h e s e ıl e r r e c e iv e s m u s t e
qu a ıw h a t t h e b u y e rs s p e nd . T he
'

s e lle r s r e c e ip ts in tu m e q u a l th e to ta ı in c o m e g e n e ra te d b y th e e c o n o m ic a c tiv it y ,

in c ı
u d in g th e in c o m e s p a id to w o rk e rs a n d s u p p lie rs , t a x e s
p
a id t o t h e
go v e rn m e n t ,
a n d p r o f its (w h a te v e r is ı
e ft o v e r ) . T hu s to ta ı e x p e n d itu re m u s t e q u a l to ta l in c o m e

ge n e ra te d , im
p
ı
y
i n
g
t h a t t h e e x e n d it u r e a n d in c o m e a r o a c h e s m u s t a ıs o r o d u c e
p p p p

th e s a m e a n sw e r .

F in a ı
ly ,
a s b o t h n a t io n a ı
p
r o d u c t a n d n a t io n a ı in c o m e e
q
u a ı n a t io n a l e x
p
e n d itu re , t h e
y

a ls o m u st b e e q u a ı .

T h is g iv e s e c o n o m is ts a lte rn a tiv e m e th o d s o f m e a s u rin g e c o n o m ic g ro w th ,

b
y
m e a s u rin g e ith e r th e n a t io n a l p ro d u c t , t h e n a t io n a l in c o m e , o r t h e n a t io n a ı
e x p e n d itu re . T he d e ta iı
s o f th e s p e c ific m e a n s o f c a lc u la tin g n a tio n a l in c o m e s ta tis tic s
th ro u g h th e p ro d u c t a p p ro a c h , i n c o m e a
p p
r o a c h a n d e x p e n d it u r e a p p ro a c h is

g iv e n in A p p e n d i)c A . T he e x p e n d itu re a p p ro a c h w ill b e u se d fo r e x p la n a tio n s o f

e c o n o m ic g ro w th in T h e m e 3 . 1 In c o m e a n d E m p lo y m e n t D e te r m in a tio n .

W h ile th e re a re m a n y v a ria tio n s o f in d ic a to rs th a t m e a s u re n a tio n a l in c o m e , t h e t w o

m o s t w id e ly u s e d in d ic a to rs a re G r o s s D o m e s t ic P r o d u c t (G D P ) a n d G ro s s N a t io n a ı
2
ı
n c o m e (G N ı
) .

t￠
$
・ \ a \ ￠ s $ * ĺ u \t w m 4 s r. ļ . . * 4
t
2 1 1 1
. . . G ro s s D o m e s t ic p r o d u c t

G ro s s D o m e s t ic P r o d u c t ( G D P ) is th e w lu e o f a ]r l řn a l g o o d s a n d s e r v i c e s
p nod u c e d
w ith in th e g e o q a p h ic a ï b o u n d a r y o f a c o u n tr y d u rin g a g iv e n p e rio d o f tim e . \Ķ u n it o ĺ
m e a s u re m e n t is ty p ic a lly in t e rm s o f t h e c u r re n c y o f th e c o u n t ry SG D U S D ) Its
(e .
g .
, .

u s e s in c ı
ud e

M e a s u rin g e c o n o m ic g ro w th
In d ic a tin g liv in g s ta n d a rd s ( c o v e re d in S e c tio n 3 . 1 M a te ń a l S ta n d a rd o f L iv in g )
Com pa ra t iv e
.
A n a ly s e s ( c o v e re d in S e c tib n 4 C om p a ń so n s o f E co n o m h
P e rfo r m a n c e a n d L iv in g S ta n d a rd s )

It is im p o r ta n t to n o te t h a t r e a ıG D P v a lu e s ( a s o p p o s e d to n o m in a ıG D P v a lu e s ) m u s t
be u se d fo r c a lc u la tio n s th a t in v o lv e d iffe re n t y e a rs ,
s u c h a s th e c a lc u ı
a tio n o f
e c o n o m ic g ro w th ra te s . T he d iffe re n c e s b e tw e e n re a ı a n d n o m in a l v a lu e s w ilı b e
fu rth e r e la b o ra te d in S e c tib n 4 . 1 C om p a ńso n s o ve r T im e . Fo r n o w , it s u f f ic e s t o

2 ı ' ' '

G ro s s is in c o n t r a s t w it h n e t . Th e e x p ıa n a t io n is p r o v id e d in Å
p p e n d lx B .

R a m es Jn s b h ıtiio n
7
Econo m ic s D e p a r M e n t
u n d e rs ta n d th e id e a t h a t re a l v a ı
u e s a re v a lu e s o f G D P c a lc u ı
a te d a t c o n s t a n t p ric e s

(i . e . c a ı
cu la t in g c h a n g e s in q u a n t ity o f p r o d u c t io n w h ile t a k in g p r ic e s to b e th e s a m e
fro m y e a r t o y e a r) . Fo r in s ta n c e ,
b o t h
"
G D P a t 2 0 0 5 M a r k e t P e s
"

a n d
"
G D P a t 2 0 10
"
M a e t P ric e s f re a l G D P in c e th e y ta k e a t e it h e r
p r ic e s
a r e e x a m
p
le s o
, s
to b e f ix e d
th e 2 0 1 0 a n d 2 0 1 5 p r ic e le v e ls .

\o \ \ \. A
G D P a t 2 0 0 5 M a r k e t P r ic e s

Y e a r 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1

ı§D P (Ş $ m ) l đ0 5 9 ı
E 47 ,
1 6 9
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16 4 8 911 , 18 8 5 6 5 8 ,
2 9 9 624 ,

% G ro w th lm 8 9 .
1 7 .
lt m 14 8 . 4 9 .

S in g a p o re D e p a rtm e n t o f S ta tis tic s

to h
ł\ \
G D P a t 2 0 10 M a r k e t P r ic e s

ıle a r 2 0 1 0 lt m 10 12 2013 2 0 14 20 15
G D P {S $ © l 354 937
1 3 7 2 ,

區刃G r o w t h 旧歪憂多 6 2 .
1陲憂召 1匡百彐团团 長 憂多国国 1囫 =
S in g a p o r e D e p a rtm e n t o f S ta tis tic s

A s a m e a s u re o f e c o n o m ic a c tiv it , G D P fro m o n e
y y e a r to th e n e xt c a n b e c o m p a re d
to fin d o u t th e r a te o f e c o n o m ic
g ro w th ,
w h ic h is th e ra ie o f c h a n g e o f G D P E c o n o m ic
'
g ro w th r a te s a re th e d is
y e a r ye a r in c re a s e s in a n a tio n pu t, m e a s u re d in
- -
o n
s o u t a n

p e r c e n ta g e s (% » . ı
t is c a lc u la t e d a s

r e a l
C D P u r r e n t y e a r
-
r e a ıG D io u s y e a r
Eco n o m ic g r o w t h ra te c u r r m t y e a r
=
X 1 0 0 %
r e a l G D P r e » t o rłs y e a r
p

o r
T ea l G D P -
r e a lG D P _

-
g r .
X I u u v o
tw n e r e 9 v -
g
r o w t rı r a t e a n d n -
y
e a r
)
R e a ı G D p
= -
1

Re a l G D P g ro w th (% ) ,
u s in g 2 0 10 m a r k e t p r ic e s

16

14

12

10

k '
q . H t

200 5 200 6 2007 2008 2009 2 0 10 20 11 2 0 12 2 0 13 2014 20 1 5

-
2

F ig u re 5 R e a ıG D P G ro w th (% ) o f S in g a p o r e , u s in
g
2 0 1 0 m a r k e t
p
r ic e
(S in g a p o re

D e p a rtm e n t o f S ta tis tic s )

T he la r g e r th e G D P v a lu e (S $ m », t in e
g
r e a t e r t h e ie v e l o f
p
r o « ıu c t io n in a n e c o n o m
y
.

T he h ig h e r th e e c o n o m ic g ro w th r a te (% ), t h e fa s te r t h e ra te o f in c r e a s e ın th e

le v e l o f p r o d u c t io n in th e e co n o m y . A ls o n o te th a t a s lo n g a s g ro w th ra te s a re

R aÆes m s tiltÆ o n 8

Eco . o m ie s D e p a rlm "

 p o s it iv e ı
・
G D P is in c re a s in g . If g ro w th ra te s a re fa llin g , G D P is in c r e a s in
g
a t a s lo w e r

r a te . N e g a t iv e g ro w th ra te s in d ic a t e fa ll in G D P .

E m e rg in g e c o n o m ie s te n d to h ave lo w e r G D P v a lu e s b u t h ı
g h e r g ro w t h ra t e s

c o m p a re d to d e v e lo p e d e co n o m ie s . T h is is b e c a u se m a n y o f th e ir r e s o u rc e s a re s till

u n e m p lo y e d a nd u n d e re m p lo y e d ,
t h e re fo re th e a c tu a l p ro d u c tio n le v e ls a re lo w .

H o w e v e r b e c a u s e o f th e a v a ila b ility o f th e s e id le r e s o u rc e
,
s , e m e r
g in g e co n o m ie s c a n

in c re a s e p ro d u c tio n q u ic k ly w h e n th e y e x p e rie n c e ris in g a g g re g a te d e m a n d in th e ir

d o m e s tic e c o n o m y In d e v e lo p e d e c o n o m ie s p ro d u c tio n -
,
le v e ls a re h ig h b u t f u rth e r

g ro w th in p ro d u c tio n is d if fic u lt d u e to th e la c k o f s p a re c a p a c it y w h e n its re s o u rc e s a re

a lm o s t fu lly u tilis e d .

2 1 1 2
. . . Lı
m it a t io n s o f G D P

G D P m a y n o t a c c u ra te ly m e a s u re t h e n a t io n a ıo u t p u t b e c a u s e th e p ro d u c tio n o f s o m e
'
g o o d s a n d s e rv ic e s
g o e s u n re c o rd e d . T hu s , t h e G D P fig u re s u n d e r s t a t e th e n a tı
o n s

o u tp u t T h e re a re tw o re a s o n s w h y t h e s e ite m s a re n o t re c o rd e d

-
N o n -
m a r ke t a c tiv itie s
N o n m a r k e t a c t iv itie s re fe r to p ro d u c tio n o f g o o d s a n d s e rv ic e s t h a t a re n o t b o u g h t a n d
'
so ı
d in a m a rk e t . S uch p ro d u c tio n in v o lv e s th e u se o f s o c ie ty s r e s o u r c e s f o r t h e

p ro d u c tio n o f g o o d s a n d s e rv ic e s to m e e t w a n ts , b u t b e c a u s e t h e
y
d o n o t o c c u r in

m a r k e ts , t h e r e a r e n o t r a n s a c t io n s t ha t re c o r d th e p r ic e o f th e g o o d t h a t r e f le c ts th e

v a ı
u e o f th e p ro d u c tio n . A n e x a m p ı
e o f a n o n -
m a r ke t a c tiv ity is th e s e rv ic e o f

ho u s e w o rk d o n e b y h o m e m a k e rs . In c o n t ra s t , t h e s a m e s e r v ic e
p ro v id e d b y a p a id
h o m e ıe a n e r w o u ld b e re c o r d e d a s a t ra n s a c t io n in th e m a r k e t fo r h o m » e a n in g
c ı

s e rv ic e s T h e m e th o d
. o f s u m m in g u p re c e ip ts o f e x p e n d itu re o r th e in c o m e s o f

h o u s e h o ld s to o b ta in th e G D P /G N I in e v ita b ı
y e xc ı
u d e s th e v a ı
u e o f n o n -
m a r ke t
a c tiv it ie s .

ın d e v e ı
o p e d c o u n trie s , m o s t o f t h e a c t iv it ie s a n d
p
r o d u c t io n a r e m a r k e t e d c o m
p
a r e d

to th a t of ı
e ss d e ve ı
o p e d c o u n t r ie s . Fo r e xa m p ı
e , in r u r a l v i ıl a
g
e s o f d e v e ıo
p
in
g

c o u n tr ie s , p
e o
p le c o m m o n ly t ra d e s e rv ic e s w it h e a c h o t h e r o r c o o p e ra te o n v a r io u s

ta s k s w ith o u t e x c h a n g in g a n y m o n e y . Fa m ilie s in th e s e c o m m u n itie s a ı

so te n d to b e

a tiv e ly s e »
re ı
-
s u ffic ie n t th ro u g h s u b s is te n c e fa r m in g . T hu s , t he a c tu a ıa m o u n t o f g o o d s

d u c e d a n d a b le
a v a iı fo r its p e o p le to c o n s u m e in a ı
e s s d e v e ı
o p e d
p ro c o u n tr y m a y b e

u n d e re s t im a te d a s m a n y p ro d u c t io n a c t iv itie s a re n o n -
m a r ke d .

T he U S D e p a rtm e n t o f C o m m e rc e B u re a u of E co n o m ic A n a ly s is e s tim a te d th a t t h ė

G D P le v e l in 2 0 10 w o u ld ha ve ris e n by a bo ut 2 5 % s h o u ld n o n -
m a r ke t h o u s e h o ld

p ro d u c tio n s u c h a s h o u s e w o rk , c o o k in
g , o d d jo b s , g
a rd e n in
g , s ho p p in g ,
c h i ld c a re a n d
d o m e s tic t ra v e l b e in c lu d e d to th e n a tio n a l in c o m e s ta tis tic T h is fig u re is lik e ly m uch
h ig h e r in d e v e lo p in g c o u n trie s .

U n d e rg ıu u n d e c o n o m
y /

T he u n d e r g ro u n d e co n o m y re f e rs to u n re p o rte d t ra n s a c tio n s , in c ı
u d in g b o th ille g a ı
a c tiv itie s s uc h a s d e a ı
in g o f d ru g s a n d le g a ı a c t iv itie s lik e p riv a te h o m e tu itio n .

B e c a u s e th e s e tra n s a c tio n s a re h id d e n fro m g o v e rn m e n t re c o rd k e e p e rs . o u t

pu t * o m
s uc h a c tiv itie s is n o t in c lu d e d in G D P . B e tte r c o m m u n ic a t io n te c h n o lo g ie s a llo w
tra n s a c tio n s to o c c u r in fo rm a lı
y s u c h th a t p r o d u c tio n is u n re c o rd e d . T he in te rn e t
re v o ı
u tio n is e d h o w b u y e rs a re m a tc h e d w it h s e lł
e rs , s u c h t h a t t h e s a le f a o
p ro d u c t
do e s n o t h a ve to o cc u r in a g o v e rn m e n t lic e n s e d s h o p a n y m o re . T h is m a ke s it
in c r e a s in g ı
y d if fic u lt to a ss e ss th e to ta ı ı
e v e l o f p ro d u c tio n in b o th th e fo r m a ı a n d
u n d e r g ro u n d e c «»n o m y .

圆
R a M e s JH s titu b io n 9

圆 E c o n o m ic s D e p a r e n t
 国
の

2 1 1 3 . . . G ro s s N a t io n a l ı
n c o m e
e
G ro s s N a t io n a ı ın c o m e (G N ı
) m e a s u re s th e v a lu e o f a ll lin a ı o u t u t o f a n d
p g o o d s
s e r v ic e s p rod u c e d m i t i c fa c to r s g f p ro d u c tio n d u rin g a g iv e n p e ń o d o f tim e ,

u s in g th e in c o m e a p p ro a Æ L ik e th e G D P , its u n it o f m e a s u re m e n t is a ı
s o in t e rm s o f
th e c u rre n c y o f th e c o u n t ry . Beca use b o th G D P a n d G N ı a re alternative m e a s 나r e s o f
n a tio n a ı in c o m e . s e r v e s im ila r p u rp o s e s . H o w e v e r, G D P a n d G N ı a re n o t e q u a l To
e a c h o th e r b e c a u s e o f t h e re a re d iĦe re n c e s in w h a t (h e y m e a s u re .

D o m e s t ic p ro d u c tio n re fe rs to p ro d u c tio n
'
w ith in a c o u n tr
y s
g
e o
g
r a
p h ic a ıb o u n d a r ie s
re g a r d ı
e s s o f th e o ń
g in o f th e fa c to rs o f p ro d u c tio n , w h ile n a t i o n a ı
p
r o d u c t io n r e fe rs to
p ro d u c tio n fr o m fa c to rs o f p ro d u c tio n o w n e d by c itiz e n s o f a c o u n tr y re g a rd le s s o f th e
c o u n t r y in w h ic h p ro d u c tio n o c c u r s .

卜o r in s ta n c e f th e g o o d s a n d s e rv ic e s p ro d u c e d b y fo re ig n M u ltin a tio n a ı
, t h e v a ıu e o

C o m p a n ie s (M N C s ) lo c a te d in S in g a p o re w ill c o n trib u te to G D P b u t n o t G N ı. In
,

c o n tra s t , t h e v a l u e o f th e g o o d s a n d s e rv ic e s p ro d u c e d b y a S in g a p o re a n firm b a se d
a b ro a d w ill c o n tr ib u te to G N ı
, bu t no t G D P .

T he re fo re , in t he o ry , t h e r e ıa t io n s h i b e t w e e n G D P a nd G N I c a n b e e x p re s s e d a s
p

U t・
qLro\n e t
h * ų t n
t ı 4 f r " -
i h ￠ * h
f \. w h '
Ŕ í$ \ ih \ ・ ĺ o t e i h t ・・ h \ ・

H adł
e
3
GN I = G N P =
(w h e r e N F IA r e f e r s t o , s y
í a c to T
G D P + N F I A į ï ıc o M e f ö m T

N et fa c t o r in c o m e f ro m a b ro a d (N F ı
A ) re p re s e n t s th e d iffe re n c e th e d iffe re n c e
be tw e e n t h e in c o m e t h a t lo c a lly -
o w n e d re s id e n ts o r firm s h a v e re c e iv e d fro m a b ro a d
a n d th e in c o m e c la im e d b y n o n r e s id e n t s b a s e d ł
o c a lı N Fı
A he lp s u s c o m p a re th e
y .

G N P a n d G N ı in o rd e r to in d ic a te th e e x te n t to w h ic h a c o u n try
'
s n a t io n a ı i n c o m e is

d e riv e d f ro m a b ro a d . G N ıw ill b e le s s t h a n G D P if m u c h o f th e in c o m e f ro m a c o u n t ry
'
s

p ro d u c tio n f lo w s to fo re ig n p e rs o n s o r firm s , c o m
p
a r e d t o in c o m e s f lo w in
g
in fro m
do m e s t ic ı
a b o u r o r c a p ita l b a s e d o v e rs e a s -
th a t is , if t h e N F IA < 0 .

G N ıa s a m e a s u re m e n t o f n a t io n a ı in c o m e w ill s h o w a m o re a c c u ra te re ı
a t io n s h i p
w it h c o n s u m p t io n ıe v e ıs ,
c o m
p
a r e d t o G D P . T h is is b e c a u s e in c o m e s e a r n e d b y
lo c a ıfa c to rs a re m o re ı
ik e ly to b e s p e n t in th e d o m e s tic e c o n o m y . O n th e o th e r h a n d ,

so m e o f th e in c o m e s re f le c te d in G D P a re fo re ig n -
o w n e d a n d a re ı
e ss ı
ik e ly to
c o n tń b u te to d o m e s t ic c o n s u m p t io n . G DP w o u ld b e a b e tte r m e a s u re m e n t to u s e in
th e c a lc u ı
a tio n o f p ro d u c tiv ity in a c o u n tr y , o r w h e n fo re ig n in v e s to rs c o n s id e r s e ttin g
u p p r o d u c tio n fa c ilit ie s in t h e c o u n try .

N o n e th e ı
e ss , G D P is r e
p
o r te d m o r e f r e
q
u e n t l
y
a s it b e t t e r r e f le e t s t h e e c o n o m ic

e n v ir o n m e n t o f a c o u n tr y . ı
t ca n h e lp in v e s to rs d e c id e o n w h e th e r to in v e s t in a
c o u n tr y s in c e it re f ı ity o f r e s o u rc e s p h y s ic a lly a v a ila b le
e c ts th e q u a n tity a n d q u a ı in th e
c o u n t ry ,
a s w e ıl a s t he s ta te o f te c h n o ı
o g y th e c o u n t ry h a s a c h ie v e d .

2 1 1 4
. . . L a h o u r P ro d u c t iv it y
\ , 1 s ・ ・ + Łe = ī r . . \l % & .\ t -
ū \ . 4y

P r o d u c t iv it y g e n e ra lly re fe rs to th e o u tp u t p e r u n it o f m s o u m e . W Re n th e te rm is
used ,
it u s u a ll
y
r e f e rs t o la b o u r
p
r o du c t iv it y , w h ic h is th e a m oun t of g o o d s a n d
s e rv ic e s p r o d u c e d fo r e a c h h o ur o f a w o ń re ř s tim e In
. re a lity th o u g h , t h is is h a rd to
m e a s u re . Thus , m o s t s ta tis tic ia n s re p o rt t h e a m o u n t o f o u t p u t p e r la b o u r in s te a d o f p e r
u n it o f th e ir tim e . R a is in g la b o u r p ro d u c tiv ity h e lp s to a c h ie v e s u s ta in e d e c o n o m ic

g ro w th , a n d is th e s tra te g y o f m a n y g o v e r n m e n t s to a c h ie v e in c fu s iv e g r o w t h a s w e ll .

m e m e a s u r e m e n t u s in g th e p ro d u c t a p p ro a c h is re fe r r e d to as th e G ro ss N a ł
io n a t P r o d . u

(G N P ) , w h ic h e
q
u iv a le n t t o G N I . T he d if fe r e n c e b e tw e e n m e h v o is g iv e n i n A p p e n d ix B .

R a n es In s trlu tio n 1 0

Eco nom ic s D e p a r ° "

 V a lu e A d d e d p e r W o rk e r a t 2 0 1 0 M a r k e t P r ic e s

2010 l 2 0 14 2 0 15

4 2 3 . 6 1 8 8 9 . 6 174B0
11 6 . 2 3 . 0 3 . 0 5 . 0 5 .
-
0 1 .

S in g a p o re D e p a rtm e n t o f S ta tis tic s

P ro d u c tM ty ca n b e ra is e d b y In c r e a s in g th e s to c k o f p h y s lc a ı c a p it a l in a n

e c o n o m y . T h is is b e ca u se w o rk e rs w h o a re g iv e n e q u ip m e n t w iï ı b e a b ı
e to p ro d u c e
m o re th a n a w o rk e r w h o w o rk s w ith le s s p h y s ic a l c a p ita l .

Ed u c a t in g a n d t r a in in g th e ı
a b o u r fo rc e a ı
s o h e ı
p s to ra is e p ro d u c t iv ity le v e ı
s .

ı
n v e s tm e n ts m a d e to im p ro v e th e q u a ı
it y o f la b o u r a re re fe rr e d a s h u m a n c a p it a l

in v e s tm e n ts . Ed u c a tio n ,
t r a in in
g
a n d e x
p
e r ie n c e c o n t r ib u t e to h u m a n c a
p
it a ı
,
a n d

th e se in c ı
u d e s k iı
ıs a cc u m u ı
a te d t h ro u g h f o rm a ıe d u c a tio n o f s t u d e n ts a n d o n -
th e .

Jo b
tra in in g fo r t h e a d u ı
ts in th e ı
a b o u r fo rc e .

A n o th e r d e te rm in a n t o F ı
a b o u r p r o d u c tiv ity is t e c h n o lo g ic a ı k n o w ıe d g e th a t

in fıu e n c e s th e s ta te o f te c h n o lo g y in a n e co n o m y . Te c h n o lo g ic a l k n o w le d g e re f e rs to
ı
s o c ie ty s u n d e r s ta n d in
g
o f t h e b e s t w a
y
s t o
p
r o d u c e
g
o « » d s a n d s e r v ic e s . \t in c re a s e s
w ith s u c c e s s fu ı r e s e a r c h a n d d e v e lo p m e n t . W he n th e s ta te o f te c h n o lo g y in a
\

c o u n t ry is r a is e d , ıa b o u r a ıs o b e c o m e s m o r e
p ro d u c tiv e a s th e y no w p ro d u c e g o o d ś
4
a n d s e rv ic e s w it h m o re e ff ic ie n t m e th o d s .

2 1 2
. . S u s t a in a b ı
e G ro w th P W
ıQ .
h k h
3
t h m e n h t k \q \ łl
s
t q A q ł« e h

S u s t a in a b ı
e g ro w t h re fe rs to a r a te o f e c o n o m iċ g ñ D M /th th a ť il a n b e m a iitta in e d

w ith o u t c r e a tin g o th e r s ig n ific a n t e c o n o m ic p ro b ł

e m s , s u c lin a s d e
p
\e t e d r e s o u r c e s a n d

e n v iro n m e n ta l p ro b le m s , p
a r t ic u la r l
y
f o r f u t u r e
g
e n e r a t i o n s . ı
t im p lie s a p o s it iv e a n d

s ta b ı
e g ro w th ra te o v e r a n e x te n d e d p e r io d o f tim e , S u s ta in a b le d e v e lo p m e n t m e e ts

th e n e e d s o f p e o p ı
e to d a y w it h o u t c o m p ro m s in g
ı th e a b iıit y o f f u t u re

ge n e ra t io n s to m e e t t h e ir o w n n e e d s . It p ro m o te s c o n s is te n tly im p ro v in g q u a lit y o f
'

ife
ı ,
a n d m a in ta in s in t e r g e n e ra t io n a ıw e lfa r e o v e r tim e .

'

A n in c r e a s e in p r o d u c t io n e v e ls th a t c o n s tit u te s a
ı c o u n try s e c o n o m ic
g
r o w t h m a
y
b e

u n s u s ta in a b le it is a c h ie v e d .
R a
p id ı
y th ro u g h in d u s fń a lrs a fio n , u r b a n is a t io n a n d

in c re a s in g e x p o r ts o f n a tu ra l r e s o u r c e s a n d /o r a g riċ u ltu re . H ow th e s e e c o n o m ic

c h a n g e s r e s u lt in u n s u s ta in a b le g ro w th is d e s c r ib e d in A p p e n d ik C .
n 中 q
r
\ 4 × ß & L \ t - \ \ ły
.

A r g u m e n ts a b o u t th e s u s ta in a b ilit y o f e co n o m ic g ro w th r e m a in s ı
a r g e ly n o rm a t iv e ,

u n ı
ik e th o s e a b o u t s u s ta in e d g ro w th ,
w h ic h is m e a s u r a b ıe a n d t h e r e fo r e a l lo w s

po s it iv e a rg u m e n ts to b e m a d e . Eco lo g ic a l, s o c io lo g ic a l, a n d m o r a l a s p e c ts a re

c o n s id e re d a lo n g s id e e co n o m ic a s p e c ts o f s u s ta in a b le g ro w th . A s m a n y a s p e c ts

n e e d to b e c o n s id e re d in a s s e s s in g s u s ta in a b ility o f g ro w th ,
a n d m a n y o f th e s e

a s p e c ts a re a ls o q u a lit a t iv e (n o n
-

q u a n t it a t iv e ) in n a tu re , t he re is n o s in g ı
e in d ic a to r

o f s u s ta in a b le g ro w th . N o n e th e le s s , c o u n t r ie s ıi k e C h in a a n d ın d ia w h o a r e a t t h e

th re a t o f u n s u s ta in a b ı
e g ro w th h a ve a d o p te d th e u s e o f th e g re e n G D P to a s s e s s th e

s u s ta in a b ility o f th e ir e c o n o m ic a c tiv it y . T he g re e n G D P is a n In d e x o f e c o n o m ı
c

4
S o m e ty p e s o f te c h n o lo g y a re c o m m o n k n o w l e d g e w h ile o t h e r s a r e
p r o p r i e ta r y . Fo r in s ta n c e ,

th e d e v e ıo p m e n t o f a ssem b ly l in e s b y H e n ry F o rd th a t s t a r t e d t h e i n d u s t r ia l r e v o ıu t io n is a f o r m

o f t e c h n o lo g y t h a t q u ic k ı
y b e c a m e c o m m o n t h r o u g h o u t s o c ie t y . H o w e v e r, t h e t e c h n o lo
g
ic a l

'
kn o w le d g e b e h in d A p p ıe s M a c b o o k is
p
r o te c te d b
y p
a te n ts , a n d w ill h a v e ıe s s e r im
p
a c t o n

'
s o c ie ty s s l a te o v e r a ll s ta t e o f t e c h n o ıo
g y
. N o n e th e le s s , p
a te n ts w i ll e x
p
ir e a l ıo w in
g
t h e r e s t o f

s o c ie t y t o a s s e s s t h is te c h n o lo g ic a l k n o w ıe d g e .

R a M as h s titu tib n

Econom ic s D e p a e n t
g h th a t f a c t o r s in e n v ır o n m e n ta ı c o n s e q u e n c e s a s s o c ia t e d to th e g ro w th .

R e s e a rc h o n th e m e a s u ń n g th e g re e n G D P o n ı
y g a in e d tra c tio n in th e 1 9 8 0 s , a n d t h e

m e th o d o lo g y is s tiı
ıc o n s ta n tı
y b e in g re v ie w e d a n d re f in e d to d a y .

2 1 3. . ı
n c ıu * ı
v e G r o w th

\n c \u s lv e g r o w th re ĺ e ts to a ra te o f g ro w th th a t is s u s ta in e d o v e r a Ķ
p e r io d o f tim e ,

b ro a d 4 )a a M a c ro s s e c o n o m ic s e c to rs iv e m e n t
, a n d c r e a t e s
p
r o d u c t e p ı
o y m
'
o p p o r t u n ıd e a fo r th e m a jo rit y o f th e c o u n tr To a c h ie v e in c lu s iv e
y g ro w th
s o u ıa t io n .
p p ,

ı
n c o m e d is t r lb u t ı
o n h a s to b e in to a c c o u n t a n d g rM h m u st n o t w o rs e n in c o m e -

/ hp
ro w s

in e q u a ı
it y . iM o 凱 电

! v q h
q \
T
Aı
th o u g h g th a t is u n s u s ta in a b le is o fte n a ls o n o n -
in c lu s iv e t h e t w o r e f e r t o
,

d iffe re n t th in g s . The fo rm e r fo c u s e s o n e n v ir o n m e n ta ı d a m a g e s th a t a f le c t f u tu re
generats , w h ile t h e la t t e r f o c u s e s o n is s u e s o f e q u a ı
it y a n d e q u it y in o p p o rtu n itie s
a n d d is t rib u tio n . ı
nd u s iv e g ro w th is im p o rta n t b o th fo r p h iı
o s o p h ic a ı a n d e c o n o m ic
re a s o n s . E x p e r im e n ta l e v id e n c e s h a v e s u g g e s te d th a t h u m a n b e in g s fu n d a m e n ta lly
be h a ve in w a y s c o n s is te n t w ith a c o n c e r n fo r f a i r n e s s , in a d d it io n t o c a r e a b o u t t h e ir

o w n in te r e s ts . The re fo re , s o c ie t
y
c a n b e s a id t o v a ıu e f a ir n e s s .

F ro m th e p e rs p e c tiv e o f e c o n o m ic s , in e
q
u a lit
y
c a n le a d t o a ıım a t l v e ın e f ıl c ıe n c a n d
y

a ı
so lım lt t h e ı
o n g -
ı
ne q ua ı
itie s in in c o m e w e a ı
t e r ın
g
r o w t h o f a n e c o n o m
y
.
a n d th
tra n s ı
a te in to u n e q u a l a n d in e q u ita b le o p p o rtu n itie s fo r c itiz e n s in te rm s o f a c m s s to
e d u c a ti«»n a n d tr a in in g o r b e n e r jo b s . A s a re s u lt , t h e
p
r o d u c t iv e
p
o t e n t ia ı o f w o r k e r s is

fo
'

◆ o ne s u c H t h a t s o c ie t y s
p
o t e n t ia ı w e ıf a r e is n o t m a x im is e d . O n th e o th e r h a n d ,

ı
o n g
-
te rm g m h is lim ite d b e ca use iq c o m e in e q u a ı
ity is o fte n a s s o c ia te d w it h u n e q u a l
d is tr ib u t io n o f p o w e r th a t re s u lts in fo rm a t io n o f in s titu tio n s t h a t p e rp e tu a te in e q u a litie s
in p o w e r, s t a t u s a n d w e a ıt h . N o t o n ly d o e s th is p e r p e tu a te th e in e q u a lity , t h is a ls o h a s

im p ı
ic a tio n s o n in v e s tm e n t , in n o v a t io n a nd ńsk -
ta k in g w h ic h u n d e rp in lo n g -
te rm
g h . T h is is b e c a u s e t h e re w o u ı
d b e a ı
a c k o f a c c e s s to c a p ita l a n d in c e n tiv e fo r t h e
m a jo rit y o f th e p o p u la tio n t«» in v e s t a n d in n o v a te if t h e s o c ie t y is p ı
a g u e d b y in e q u a lity
'
a n d in e q u ity . In to d a y s w o r ıd , s o c ia l u n r e s t a r is in
g
f r o m d is s a t is f a c t io n o v e r u n e
q
u a ı

a n d in e q u ita b ı
e d is t r ib u tio n h a s a ı
s o re s u ı
te d in m u c h lo s s o f ı
a b o u r h o u rs , d e s t r u c t io n

o f p h y s ic a l c a p ita l, a n d in c r e a s e in
g
o v e r n m e n t e x
p
e n d it u r e t o c o n t r o ı t h e u n r e s t .

T he s e g r e a tly lim it th e a b iı
ity o f t h e e c o n o m y to e xp e ńe n c e lo n g -
te rm g ro w th .

T he re fo re . It is im
p
o r t a n t t o e n s u r e t h a t e c o n o m ic
g
r o w t h o f a c o u n t r
y
is n o t e x c lu s iv e .

Eco n o m ic g ro w th in th e f re e m a rk e t e c o n o m y h a s t h e te n d e n c y to e x a c e r b a t e ın c o m e
ı
n e q u a ıit y t h a t c a n le a d to ın e q u ı
ty . T h is w a s c o v e re d in 7 tre m e 2 3 M a ık e t F a H u re .

O th e r s o u rc e s o f u n e q u a ıg ro w th a re d e s c r ib e d in A p p e n d i × C .

'
S in g a p o re s M in is t r
y
o f F in a n ce m a d e in c lu s iv it y o f e c o n o m ic g ro w th a k e y p rio ń ty in

2 0 10 B u d g e t ,
a n d h a s c o n t in u e d t o e m
p
h a s is it s m o v e t o w a r d s in c l u s iv e
g
r o w t h s in c e

th e n Its o e c.
t iv e is to p ro v id e S in g a p o re a n s w it h b e tte r o p p o rtu n itie s a n d m o re
fu ıfillin g liv e s , a n d it s s t r a t e
g y to a c h ie v e t h is is t h ro u g h r a is in g p r o d u c t iv ı
ty .

2 1 3 1
. . . G ı
n l C o e f f ic ı
e n t

'

T he G in i c o e ff ic ie n t re p re s e n t s ın c o m e d is t r ib u t io n in a m o n g a c o u n tr y s c it iz e n s a n d

m e a s u re s ın e q u a lı
ty . T he c o e ffic ie n t ra n g e s fro m z e ro to o n e . T he h ig h e r t h e

c o e Ħic ie n t , t h e m o r e u n e
q
u a ı t h e d is trib u tio n o f in c o m e . D e ta iı
s o f th e c a lc u ı
a tio n o f
th e G in i c o e m c ie n t w a s c o v e re d in 7 tre m e 2 3 M a rk e t F a ilu re .

R a m es ıh M ,h n . 12

F. n n m . . Ĥ e p a rb n e M
 G in i C o e f Fic i e n t in S in g a p o r e S in g a p o r e G ro w th R a te s . % (2 0 1 0 m a rı
çe t p ri c e s )

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A f 》 r a c t o w ı i n ı 沁 G o w m m e 伐 t r a m ł ı n ・ 位 環 s -
2

F ig u re 6 C o m p a rin g G in i c o e ffic ie n t w ith G D P in c lu s iv e n e s s o f

g n » w th r a te s to a s se ss

g ro w th ( S in g a p o r e D e p a rtm e n t o f S ta tis tic s

)

If e c o n o m ic g r o w th a n d th e G in i c o e Ħic ie n t o v e r th e ı
o n g te rm s h a re a p o s it i v e
re ı
a t io n s h i p , it is l ik e ly th a t g ro w t h is n o t in c lu s iv e . Id e a lı
y , in c lu s iv e g ro w t h o c c u rs
w h e n p o s itiv e g ro w th ra te s a re re la te d w it h fa lı
in g o r c o n s ta n t v a lu e s o f G in i

c o e f fic ie n t ı
n th e ca se o f S in g a p o r e o ve r th e bo th th e in i
p e ńo d o f 1 5 y e a rs , G
«x ) e Ħ ic ie n t a n d G D P g e n e ra lly in c re a s e d ( s in c e G D P g ro w th ra te s w e re m o s tly

p o s it iv e ) ı
t is . d iffic u ı
t to s p e c ify a n d e la b o ra te o n th e e « e c t o f e c o n o m ic g ro w th o n
in e q u a lity b y c o m p a ńn g v a lu e s o f G in i c o e ffic ie n t w it h g rM h ra te s ye a r b y y e a r
be c a u se U ı
e in e q u a ı
it y e m e rg e s o v e r th e ı
o n g -
te rm a s e c o n o m y g ro w s .

2 2 . c E S TA B ı
pR ı U TY

P ric e s ta b iı
ity re s u ı
ts fr o m a lo w ra t e o f In f ı
a tı
o n . T h is m e a n s th a t p ric e s in g e n e ra ı
do n o t c h a n g e in w ild a n d u n p re d ic ta b le m a n n e rs . S ta b ı
e p ric e s a id th e p ro c e s s o f
e c o n o m ic d e c is io n m a k in g th a t fa c ilita te s e c o n o m ic g ro w th a n d ris in g ı
iv in g s ta n d a rd s .

2 2 1. . ı
n f la t io n a n d D e f la t io n

ı
n fı
a tio n is a 封 山 a tio n w h e re th e re is a d j n c re a s e itr ttre g e n e ra l p ric e le v e / . ı
f
th e in f la tio n r a te is a t a n e x tre m e ly h ig h le v e l. w ith p ń c e s c h a n g in g fre q u e n tly (p o s s ib ı
y
e v e n ily ) , t h e e c o n o m
y
t e n d s t o f u n c t io n
p
o o r ı
y , lim it i n
g
e c o n o m ic
g ro w th . H ig h
in fı
a tio n a ls o m e a n s th a t th e p u r c h a s ın g p o w e r o f m o n e y e ro d e s q u ic k ly , w h ic h

a ffe c ts c «»n s u m p tio n a n d s a v in g patterns s in c e p e «» p le w ilı s p e n d th e ir in c o m e s a s

s o o n a s th e y re c e iv e i\ b e fo re th e v a lu e o f th e ir m o n e y d im in is h e s .

D \s \n ll a ü o n re fe rs t o a s u b s ta n tia l re d u c tio n in th e ra te o f in fla tio n . G o v e rn m e n ķ a im

fo r d is in f la t io n w h e n in fla tio n ra te s a re k x » h ig h . T he re fo re ,
w h e n t h e r e is d is in fı
a tio n ,

p r ic e s a re s till h s in g , bu t a t a s lo w e r ra te .

D e f ıa t io n , o n t h e o t h e r h a n d , is a s itu a tio n in w h ic h th e p ric e s o f m o s t g o o d s a n d

s e r v ic e s a ıe l a llin g o ve r time so th a t th e ra te o f in f la t io n ı
s n e g a t iv e , D e fı
a tio n is
ty p ic a ııy a s sm ia te d w ith th e c o n tra c tio n o f a n e c o n o m y , a n d a f f e c t s t h e c o n f id e n c e o f

in v e s to rs T h e . re w ill b e s u b s e q u e n t im p a c ts o n th e le v e ıo f in v e s tm e n t a n d e c o n o m ic

g ro w th .

R e s In s * itu tiio n
a ñı 1 3
= m i e s D e p a rtm e n t
 2 2 1 1
. . . C o n s u m e r P r ic e ın d e x

T he C o n s u m e r P r ic e In d e x ( C P ı) m e a s u re s th e p ric e o f ä lix e d b a s k e t o f g o o c fs a n d
s e r v ib e s co m m o n ly p u rc h a s e d b y a ty p ic a ı h o u s e h o ı
d ı
t is in d e x
. a w e ig h t e d p r ic e ,

m e a n in g e a c h ite m in th e b a s k e t o f g o o d s a n d s e rv ic e s is w e ig h t a c c o rd in g to
g iv e n a
its im p o rta n c e .

T he ty p e s a n d s p e c ific a tio n s o f t h e
g o o d s a n d s e rv ic e s in th e C p ıb a s k e t a s w e ll a s
th e ir q u a n t itie s a re k e p t c o n s ta n t a t th e b a s e p e rio d W he n c h a n g e in
p r ic e s
.

s u b s e q u e n t y e a rs , t h e r ic e o f t h e b a s k e t a n d t h e r e fo r e t h e C P ı c
p h a n e s a lt h o u h t h e
g , g

m a ke up o f th e g o o d s a n d s e rv ic e s in th e b a s k e t re m a in s th e s a m e . T h is e n s u re s th a t
a n y c h a n g e s in th e in d e x r e fı
e c t s o le ı
y p r ic e c h a n g e s o v e r tim e .

T he p r ic e o f th e b a s k e t in th e b a s e p e r io d is a s s ig n e d a C P ı v a ıu e o f 1 0 0 . T he
p ńc e s in o t h e r p e rio d s a re s h ow n a s p e rc e n ta g e s o f th e p ńce in t h e b a se p e rio d . Fo r
e x a m p ı
e he b a s e y e a r is 2 0 0 0 a n d t h e
, if t
p ńce o f th e b a ske t h a d in c r e a s e d b y 5% in
200 1 , t h e n t h e C P ı in 2 0 0 1 w o u ıd b e 1 0 5 .

Be s id e s th e o v e r a lı in d e x th a t m e a s u re s g e n e ra l p ric e ı
e v e ls o f a n e c o n o m y -
s u b
,

in d ic e s f o r t h e C P I a re
g iv e n a t g ro u p ı
e v e ıa n d fo r s e ı
e c te d ite m s . Fo r u s e rs w h o w is h
to kn ow th e e x te n t o f p ric e c h a n g e fo r s p e c ific g ro u p in g s o f ite m s t h e n t h e a r o r ia t e
, p p p

s u b -
in d e x s h o u ld b e u s e d . H o w e v e r, w e c a n n o t c o m
p
a r e d if f e r e n t t e s o f i n d ic e s
y p

to in fe r a b s o lu t e p r ic e ıe v e ı
s . Fo r e x a m p le ,
if t h e in d e x f o r c lin ic c o n s u lta tio n fe e s is
8 7 7 in . 2 0 15 a n d th a t fo r p e tr o l is 9 5 . 3 , t h is d o e s n o t m e a n t h a t e t r o l is m o r e
p

e x p e n s iv e th a n c lin ic c o n s u lta tio n . W hat it m e a n s is t h a t th e p ric e o f p e tro ıfe lıf ro m th e

ba se y e a r 2 0 14 to a le s s e r e x t e n t c o m p a re d to th e f e e s fo r c lin ic c o n s u ı
ta tio n . T he C P I
v a lu e s fo r s u b c a te g o rie s h e lp to id e n tify th e s o u r c e s o f in f la t io n ・
tt \ \ h \ ・ ţ

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R ļ II [
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L {0 an . 1= 0 2 . 31
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1 88 5 . 92 8 . 96 8 . 100 0 . 99 6 .

R a te o f c h a m [ ] 上 【a )】 L 】 L ı I = R O
pe t ro ı 84 3 94 0 L 97 0 1 99 4 100 0 95 3
. . . . .
L .

R 3) © 6)
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. -
.

T e r tia r y ın s t it u t io n F e e s
L 8 6 . 4 90 2 . 93 6 . 97 0 .
100 0 . 102 7 .

R a te o f c h a n g ę L ĺ ı] j . 3) I (3 8 ) .
L e 6) L {W (2 7 ) .

S in g a p o r e D e p a rtm e n t o f S ta tis tic s

C P Im e a s u re s t h e t r 나e c h a n g e in p ric e o f th e re fe re n c e b a s ke t o f g o o d s a n d s e r v ic e s .

H o w e v e r, t h is m e t h o d o f d e r iv in
g
t h e C P I c r e a t e s a lim it a t io n f o r C P T a s a n in d ic a t o r o f

th e c o s t o f liv in g . T hu s ,
w h e n C P I r is e s
, t h e
p
r i c e o f t h e b a s k e t h a s r is e n
, b u t t h e

c o s t o f liv in g m a y n o t h a v e n e c e s s a ń ly r is e n t o t h e sa m e e x te n t . T he r e a s o n s a re

Su b s titu tio n b ia s

W he n th e p ric e o f a g o o d ris e s ,
c o n s u m e r s t
y p
ic a ll
y
s w it c h t o c o n s u m in
g
r e la t iv e l
y

le s s e x p e n s iv e a lte r n a tiv e s o f th e g o o d T he m e a s u re m e n t o f C P T d o e s n o t a c c o u n t fo r
\ °* h 3 t
.

th is s u b s titu tio n e ffe c t w h ic h m a k e s th e fix e d b a s ke t o f g o o d s a n d s e r v ic e s a le s s

c \ q * ţ
ıA ıw
a c c u ra te re f le c tio n o f c h a n g in g c o n s u m p tio n p a tte r n s . Fo r in s ta n c e ,
c o ffe e a n d te a
ı F ir \ l* o \ d

m a y b o th b e in c lu d e d in th e b a s ke t o f g o o d s a rì d s e r v ic e s u s e d fo r th e m e a s u re m e n t

o f C P ı . If p ric e o f c o f fe e ris e s m o re th a n th e ris e in th e p ric e o f te a ,

c o n s u m e r s w o u l d

s w itc h f ro m c o n s u m in g c o « e e to c o n s u m in g te a in o rd e r to k e e p t h e ir c o s t o f liv in g

R . m e . S M . «o . M
Eco , o m ic s D e p ' " e n t
 ıow e r . H o w e v e r, t h e w e i
g h t g iv e n to c o « e e a n d to te a w ilı n o t b e a d ju s te d w h e n th e
fix e d b a sk e t o f g o o d s a n d s e rv ic e s a re u s e d to c a ı
c u ı
a te th e in fı
a tio n ra te . The re fo r e ,

th e C P I o v e rs ta te s th e in c re a s e in th e c o s t o f liv in g l ro m o n e y e a r to t h e n e x t .

h * r ı« \ h x ￠4 \q ł \J
Q u aMbr a u s t m e n t b i i a s
T he p ric e o f a g o o d ńse s w h e n its r e a l v a lu e in c re a s e s ,
s u c h t h a t a b e t t e r
q
u a ıi t
y

v e rs io n o f a g o o d is m o re e x p e n s iv e . Fo r e xa m p ı
e ,
t h e
p
r ic e o f s u r g ic a l p ro c e d u re s
m a y in c r e a s e b e c a u s e th e s u rg ic a l m e th o d o ı
o g y a n d s u c c e ss ra te h a s in c re a s e d .

H o w e ve r ,
w h e n s u r
g ic a l p ro c e d u re s a re in c lu d e d in th e r e fe re n c e b a s k e t o f g o o d s a n d
s e rv ic e s , t h e in c r e a s e in
p ric e is c a p tu re d n o m in a lly s uch th a t C P I ris e s , s e e m in
g
t o

im p ly th a t c o s t o f IM ng ha s in fı
a te d . Aı
th o ug h e ffo rts a re c o n tin u o u s ı
y b e in g m a de to
d is tin g u is h b e M re e n c h a n g e s in th e u n d e rly in g p ric e o f g o o d s a n d s e rv ic e s a n d
c h a n g e s in
q u a lity , t he d is tin đ io n r e m a in s d if ic u ı
t to m a k e .

N e w p ro d u c ts
W n e n a n e w g o o d is in tro d u c e d , c o n s u m e r s h a v e t h e o
p
t io n o
fconsum in g th e ne w
g oo d a s a n a ı
te m a tiv e to w h a t th e y c u lT e n tly c o n s u m e , a n d t ńis ty p ic a lı
y re s u lts in
th e m s p e n d in g ı
e s s to m a in ta in th e sa m e s ta n d a r d o f liv in g . Fo r in s ta n c e t h e
,

in tro d u c tio n o f a s m a rt p h o n e a lı
o w s c o n s u m e rs to m a k e p h o n e c a ı
ls , a s s e s s t h e

in te m e i a n d e v e n ta k e p h o to g ra p h s so th a t th e y d o n
'
t h a v e t o u r c h a s e a t r a d it io n a ı
p

m o b iı
e p ho n e , a n d c o m u t e r a n d a c a m e r a w h ic h w o u ld h a v e c o s t e d t h e m m o r e .
p ,

H o w e v e r, n e w
p
r o d u c t s t h a t h e ı
p
t o r e d u c e t h e c o s t o f ı iv in g a re n o t im m e d ia te ly
in c lu d e d in to th e fı
xed b a ske t o f g oo d s a nd s e rv ic e s . T h e re fo re , t he C P ıd o e s no t
c a p t u r e th e r e d u c tio n in c o s t o f liv in a ttrib u te d to d e v e ı
o p m e n t o f n e w
g p ro d u c ts .

T o o v e rc o m e th e s e ı
im ita tio n s , t h e c o m
p
o s it i o n a n d w e ig h tin g p a t t e r n fo r th e b a s k e t is
r e v is e d e v e ry f ı
v e y e a rs to re fle c t c h a n in
g g c o n s u m p t io n p a « e m s in S in g a p o re .

2 2 1 3
. . . ı
n fı
a t io n R a te

T he in f ı
a t io n ra te m e a s u re s th e c h a n g e in p ric e le v e l lio m y e a r to y e a a n d is
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国 国 4 6 .

回国园 园
S in g a p o re D e p a rtm e n t o f S ta tis tic s

'

S in g a p o re s in f la t io n r a t e s w e r e
g
e n e r a ıl
y p
o s ıt i v e
,
in d ic a t in
g ge n e ra l ris e in p r ic e s .

t e in lla tio n ra te s im p ı
y in g d e fı
a t io n in w a s re c o rd e d in 2 0 15 , w h e r e e n e r a l
g

p ric e s fe lı A ı
. so , s i
g
n if i c a n t d i s i n f ıa t i o n w a s o b s e r v e d in 2 0 0 9 a n d f r o m 2 0 1 1
-
2 0 14 ,

w h e re th e ra te o f in fla tio n s lo w e d d o w n .

R a s In s t it u Ðio n
1 5
E con o m ic s D e p a e n t
 ・
S in (B a s e p C o n su m e r te m
ı s (2 0 1 4
g a p o re ın f ı
a t io n R a te Y e a r = 2 r ic e
. % 0 1 4 ) In d ic e s o f S e le c t e d

? JD

ıO S O
6 0
1 00 月

Ľ
J 2 00 5 2006 20 0 7 2 00 9 200 9 2 0 10 20 1 ı 20 12 2 0 ı3 20 14 2 0 15

L O - - - - -
M e d i c a l & D e n t a ı T r e a t Ħ ıe n t

- p e tro ı

― ― n iw n it l e s
T u i t io n F e e s F n r p o l e c h n i c s & L o c a l U
w

F ig u re 7 C o m p a rin g In fı a tio n R a te w ith p r ic e s o f s e le c te d g o o d s to d e te r m in e p o s s ib ł

e

s o u rc e s o f in fı
a tio n ( S in g a p o r e D e p a r t m e n t o f S ta tis tic s )

T he fa ll in p e t ro ı p ń c e s in 2 0 15 m a y h ave c o n t rib u t e d to th e d e fı
a t io n in 2 0 1 5 . A ı
so ,

th e d is i n f la tio n in 2 0 0 9 a n d b e tw e e n 2 0 1 1 -
2 0 14 c a n a ls o b e a tt rib u te d to th e f a ll in

p e trc»l p ń c e s in 2 0 0 9 ,
a n d t h e s ıo w e r r a t e o f in c r e a s e in p e t ro l p ń c e s f ro m 2 0 1 1 -
2 0 14 .

'
W e ca n in fe r th a t c h a n g in g p e tro l p ń c e s a ffe c t S in g a p o re s
g
e n e r a l
p
r ic e le v e l
s ig n ific a n t ı
y , t h e r e f o r e h s in
g p
e t r o l
p
ń c e s w o u ıd b e a k e
y s o u rc e o f in fla t io n .

W h ile th e c h a n g e s in p ric e s o f g o o d s a n d s e rv ic e s w ill a ffe c t th e C P ıa n d th u s th e

in a t io n
fı ra te , a n o t h e r fa c to r to c o n s id e r is th e w e ig h tin g p a tte r n fo r th e C P I . In
S in g a p o re ,
h o u sin g a n d itie s
u tiı ite m s h a s th e g re a te s t w e ig h t ( 2 6 . 3% ) , f o llo w e d b
y

fo o d ite m s (2 1 . 7% ) a nd t ra n s p o r t ite m s (1 8 . 8 % ) S in c e . th e c h a n g e in p e tro l p ric e s

la r g e ıy a ffe c t p ńce o f t ra n s p o r t ite m s ,
it s e f f e c t s ill s h o w
w u p m o re s ig n ific a n tı
y w h e n
m e a su ń n g in fla tio n .

2 3 . FU LL E M P LO Y M EN T

F l e m
u ı p lo y m e n t o f re s o u rc e s is a m a c ro e c o n o m ic a im b e c a u s e w ith f u lıa n d e f fic ie n t

is a t io n
u tiı o f r e s o u rc e s , s o c ie t
y ca n p ro d u c e th e m a x im u m a m o u n t o f g o o d s a n d

s e r v ic e s fo r its c itiz e n s to e n jo y . Fu r th e rm o re , w it h o u t fu ll e m p ı
o y m e n t, g
o v e r n m e n t s

m a y h a v e to o ffe r u n e m p lo y m e n t b e n e fits f o r o in o o r tu n it ie s f o r o t h e r
, g g p p

in te rv e n tio n s . H o w e v e r, fu ı o ym e n t d o e s n o t m e a n
le m p ı t h a t th e e n tire p o p u la tio n o f a

c o u n t ry is e n g a g e d in p ro d u c tio n . T e c h n ic a lly , it r e fe r s t o t h e a c h ie v e m e n t o f a n a t u r a ı

ra te o f u n e m p lo y m e n t, a ıs o k n o w n a s a n o n
-
a c c e ı
e ra t in g in f ı
a t io n r a te o f

u n e m p ıo y m e n t ( N A IR U ) .

2 3 1. . U n e m p ı
o y m e n t R a te s

U n e n t o f la b o u r re fe r s to th e s it u a t io n w h e r e p e o p ı
e w h o a re w illin g a n d a b ı
e
e m p lo y m
to w o rk a n d a re a c t iv e ı
y s e e k in g w o rk ca n n o t fin d jo b s . T he be st -
kn o w n
5
o y m e n t is th e
m e a s u re m e n t o f u n e m p ı u n e m p lo y m e n t ra te

N o . o
f u T te m p Įo y e
d p e r s o rts
u n e m p to y m e n t r a r e = A ıu u Y D
L a b o u r
f o r c e

5
N th o u g h u n e m p l o y m
o te th a t a ı e n t r a t e is m e a s u r e d in % , it is n o t a r a te o f c h a n
g q u n l ik e

eco n o m ic g r o w th r a te a n d in f la t io n r a te .

R a M e s Irï s titu tio n

Eco n o m ic s D e p a e n t
国
の

In S in g a p o re . u n e m
p
ıo
y
e d
p
e r s o n s r e f e r t o
p
e r s o n s a
ge d 1 5 y e a rs a n d o v e r w h o

w e r e w it h o u t w o r k d u ń n g th e s u rv e y re fe re n c e p e r io d b u t w e re a v a ila b le fo r w o rk a n d
6
w e re a c tiv e ly lo o k in g fo r a jo b , c o n
v e r s e ly . E m p
l o
ye d p e rs o n s re fe r to p e rs o n s a g e d

15 ye a rs a n d o v e r w h o w o rk e d fo r o n e h o u r o r m o re e ith e r f o r p a y , p
r o l rt o r f a m il
y

g a in s d u rin g th e re fe re n c e p e rio d

T he ı
a b o u r f o rc e re f e rs to p e rs o n s a g e d 1 5 y e a rs a n d o v e r w h o w e re e it h e r e m p lo y e d

o r u n e m p ı
o y e d d u r in g th e re f e r e n c e p e r io d . T h is g ro u p is a ls o k n o w n a s th e W ・* t t ・ t t t

t \q \
. h
e c o n o m ic a lly a c t iv e p o p u la t io n . E c o n o m ic a ıı
y i n a c t iv e p e rs o n s re fe r to th o s e w h o + t
・ .

u n w ił
lin g a n d To r u n a b le to w o rk , a n d w e r e n o t ło o k in
g
f o r a
jo b d u ńn g th e re fe re n c e

pe ńo d . Fu ll
-
tim e s t u d e n ts ,
u n
p
a id h o m e m a k e r s ,
r e t ir e e s ,
a n d pe o p le u n a b le to w o rk

be c a u se o f d is a b ilitie s a re e x a m p ı
e s o f e c o n o m y in a c tiv e
ic a lı p e o p ı
e . ı
n o th e r w o rd s ,

th e u n e m p ı
o y m e n t ra te m e a s u re s th e r a t io b e tw e e n th e n u m b e r o f u n e m p lo y e d b u t

e c o n o m ic a ı
ly a c tiv e p e rs o n s a n d th e to ta l n u m b e r o f e c o n o m ic a lly a c t iv e p e rs o n s .

a
U n e m p ıo y m e n t ra t e , a v e r a
g
e a n d s e a s o n a ıı
y
a d
į u s te d
Y e a r 2 0 1 0 2 0 1 1

' " "

= ı m l
四川ı
■国 = ■
2 2 .

国1
°' "
0

蠶置
・'
'
2 2 . 2 1 .

团团回 !

S in g a p o r e D e p a rt m e n t o f S ta tis tic s , M in is t r
y
o f M a n
p
o w e r

on
2 00 5 200 6 2 0 07 2 00 8 2009 20 10 2 0 11 2 0 12 20 0 2 0 14 20 15

― ― - - - -
O v e r a ı C i t ız e n R e 5 id e n r

'

F ig u re 8 C o m p a ńn g S in g a p o re s o v e ra ll u n e m
p lo y
m e n t w it h t h e c it i z e n a n d r e s id e n t

u n e m p lo y m e n t ( M in is tr y o f M a n p o w e r)

'
S in g a p o re s o v e r a ıı u n e m
p
lo
y
m e n t r a t e is
g
e n e ra ll
y
lo w e r t h a n t h e c it i z e n a n d r e s id e n t

e n t ra te b e ca u s e a h ig h e r p ro p o rtio n o f o u r e m p lo y m e n t is a ttr ib u te d to
u n e m p lo y m
e m p lo y m e n t o f fo re ig n e m p lo y m e n t p a s s h o ld e r s .

6
n e m e d e r s o n s in c lu d e rs o n s w h o w e re n o t w o r k in g b u t w e r e e ith e r t a k i n g s t e p s to
U p lo y p p e

s t a r t t h e ir o w n b u s in e s s , o r a r e a b o u t t o ta k e u
p
a n e w
jo b o f re r a fte r t h e r e f e r e n c e p e ń o d .

7
T h is in c lu d e s p e o p l e w h o h a v e a j o b o r o w n a b u s in e s s , b u t w e r e t e m
p
o r a ń ı
y
a b s e n t .

8
s e a s o n a ııy a d j u s te d u n em p lo y m e n t r a t e ta k e s in t o a c c o u n t th e f lu c t u a t io n in d e m an d fo r

c e r ta i n t y p e s o f ıa b o u r d u r in g d i f r e r e n t p e r io d s ( s e a s o n s ) o f th e y e a r .

R a ñ ıe s Itī s t itu t io n 1 7

圆
圆
 回
国
の
2 3 2
. . l i mi t a ti o n s o f t ln e m p !o y m e n t R a te 国
U n e m p lo y m e n t ra t e s m a y n o t m e a s u re th e u t i liz a t io n o f o u r la b o u r r e s o u r c e s w e ll の
be c a u s e c h a n g e s in t h is ra te c o u ld re s u lt f ro m c h a n g in g s iz e o f th e la b o u r f o r c e .

の
Fo r in s ta n c e ,
u n e m
pı
o ym e n t ra te s ile c ıln e w h e n u n e m p ı
o y e d p e rs o n s s to p lo o k i n g

fo r Jo b s a n d ıe a v e th e ıa b o u r f o r c e , e ith e r to g o f o r lu r th e r e d u c a tio n a n d fıa in 加 g o r

to r e tiÆ . T he y m a y a ı
s o p o s s ib ly b e to o d is c o u ra g e ď to c o n tin u e t o s e a rc h f o r j o b s .

ţ
ţ\
・le In h * h \ . . ł m ų
b o th
*
W n e n th a t h a p p e n s , th e n u m e r a to r a n d d e n o m in a to r o f t h e u n e m p lo y m e n t r a te l y

fa lls but th e n u m e r a to r f a lls to a ı

tin g in a fa ı
l in u n e m e n t r a te
《\ q *
w
w e h if 如 名. L ţ t
, ı
a r g e r e x te n t , r e s u
p lo y m

th a t d o e s n o t im p ı
y b e tt e r u t iliz a t io n o f re s o u rc e s .
￠m
w j ıin * h \ « k 4

い 4 。 。八 io 饥
\・\ 如 łレ 習

U n e m p lo y m e n t ra te s a ls o r is e w h e n th e re is a n in c re a s e in th e s iz e o f th e la b o u r fo rc « ł\t ・
ı
q ı
in e bt u łt

be c a u se o f n e w e n tra n ts o r re -
e n tr a n ts to th e la b o u r m a rk e t w h o a re n o t *ĺ m ・* e h Q n \S ib \ * q h 4
im
'

m e d ia te ly e m p lo y e d b u t w ill n e e d to s e e k j o b s firs t . W he n th is h a p p e n s , b o t h t h e ņ 》 、 o f 帆￠ t以 。由 ￠自 守弋 e
冒

n u m e ra to r a n d th e d e n o m in a to r o f t h e u n e m p ı
o y m e n t ra te ris e s , b u t t h e n u m e r a t o r

ńs e s to a la r g e r e x te n t . T he re fo re , t h is r e s u ıt s in a r is e in u n e m
p
ıo
y
m e n t r a t e t h a t

s h o u ı
d no t b e in te rp re te d a s p o o re r u s e o f re s o u rc e s in a n e c o n o m y .

2 3 3 . . N a t u r a ıR a t e o f U n e m p lo y m e n t

7 he n a tu ra l ra te o f u n e m p lo y m e n t is a n o n -
z e r o r a te o f u n e m p lo y m e n t th a t is

a ttr ib u t e d to s t r u c tu r a l a n d f r ic tio n a l u n e m e n t lt is a ls o k n o w n a s th e n o n
p lo y m
-

a c c e ıe r a t i n g i n f la t io n ra te o f u n e m p lo y m e n t ( N A ıR U ) . T h is ra te p r e v a ils w h e n

c y c ı
ic a l u n e m p lo y m e n t is z e r o T h e d iff e r e n t t y p e s o f u n e m p lo y m e n t w ill b e c o v e re d in

Th e m e 3 . 2 M a c r o e c o n o m jc A im s a lT d is s u e s . Fo r n o w , it S u Ħic e s to h a v e a n

u n d e r s t a n d in g th a t t h e re w ill a lw a y s b e a n o n ・
z e r o u n e m
p lo y m e n t ra t e in th e

e c o n o m b e c a u se u n e m p lo y e d p e o p le m a y n o t h a v e th e r ig h t s k ills fo r th e jo b s
y
a v a ila b le in t h e e c o n o m y ,
o r n e e d t im e t o s e a r c h f o r
jo b s .

2 4 . F A V O U R A B L E P O S IT IO N O F B A L A N C E O F P A Y M E N T S

A ll c o u n tr ie s t r a d e w it h a n d h a v e f in a n c ia l d e a lin g s w it h th e re s t o f t h e w o r ld . In o th e r

w o rd s , a tl c o u n t r ie s a re o p e n e c o n o m ie s . T he B a la n c e o f P a y m e n ts (B O P ) is a

r e c o ï id o f a c o tın tr y s İ n te m a f ro n a ı t r a l T s a c t n s , i . e . Flo w s o f m o n e y b e tw e e n r e s id e n t s

o f a c o u n t ry a n d th e re s t o f t h e w o rld . T he B O P c a n b e in a d e f ic it o r s u r p lu s A B O P

d e f ic it o c c u r s w h e n a c o u n t n { S re s id e n t s s p e n d in g o n f o r e ig n r e c e ip t s o u t w e ig h w h a t

it is e c o n o m h e re a s s u r p lu s o c c u rs w h e n th e n e t in f lo w
re c e iv in g fr o m th e f o re İ g n y ; w

o f r e c e ip t s f ro m f o r e ig n e c o n o m ie s is p o s it iv e . M o n e ta r y in f lo w s in t o a c o u n t ry a re

c a lle d c r e d it s a n d a ll o u t flo w s to fo re ig n c o u n t r ie s a r e c a lle d d e b it s .

T he d e fin itio n o f a fa v o u ra b ï e B O P p o s it io n m a y d iff e r f ro m c o u n try to c o u n t ry

de th e g o v e rn m e n ť s tra d e p rio rit ie s fo r m a n y c o u n trie s n o n e th e le s s it

p e n d in g o n .
,

re fe r s to th e a v o id a n c e o f la r g e o r p e rs is te n t B O P d e f ic its o r h a v in g a n im p ro v e d B O P

s u rp lu s .

Internatî onal m o n e y f lo w s c a n o c c u r fo r m a n y re a s o n s ,
b u t t h e m a in r e a s o n s a r e f o r

th e p u rp o s e o f im p o rtin g a n d e x p o rtin g g o o d s a n d s e rv ic e s ,
a s w e ll a s t h e
p
u r
po s e o f

m a k in g in te rn a tio n a l in v e s tm e n ts T h e s e t r a n s a c tio n s a re o r g a n is e d ìn th e tw o o f th e

9 ° '
T h is g r o u p o f p e o p le a re c a lle d th e d is c o u r a
g
e d w o r k e r s a n d s o m e s t u d ie s o f u n e m
p
l o
y
m e n t

a r g u e t h a t d is c o u r a g e d w o r k e r s s h o u ld b e in c l u d e d in th e
.
N u m be r o f u n em p lo y
e d .

R a n e s In s lltu tio n 1 8

Ec o n o m ic s D e p a r e n t
 B O P -
th e c u r re n t a c c o u h t, a n d t h e c ä
p
i t a ı a n d

s o f th e
th re e m a in c o m p o n e n t
is t h e o f f ic ia ı r e s e r v e s a c c o u n t .

fin a n c la ı a c c o u n t T h e t h ir d c o m p o n e n t

2 4 1 C u r r e n t A c c o u n t (C A )
. .

4 \ « 4 \ \・ų & « h 4 ıh t e h Q ￠\ * u &

o o d s a n d s e r v s
iIJRg a n d
eèR9î o f g ,

p a y m e n ts f o r
The c u rr e n t a c c o u n t r e c o rd s '

ttifers o f m o ne y in to a n d
'

a nd o u t o f th e c o i f r y s n e

pı
ıu
u s h c o m e s f lo w in g in to , p

o f a lıth e fo u r
a n c e is th e o v e ra ll b a ı
a n ce
o u t o f th e c o u n t ry T he c u rr e n t a c c o u n t b a ı
A
.
'

e xce e d d e b its c u r re n t q u o
h o ıin o u \

w h e re c re d its
.

A c u r r e n t a c c o u n t s u rp ı
u s is
s u b d iv is io n s
h \
.

ħı Ļ 瓯 t e \ . * t ・*
a c c o u n t d e fic it is w h e re d e b its e x c e e d c re d its .
1

ih u
ţ v t i o h

2 4 1 1
. . . T a n c e
ra d e B a ı
n d e x p o rts T r a d e c a n o
c c u r
b a la n c e b e tw e e n im p o r ts a
.

T he a n ce
t ra d e b a ı re fe rs to th e
r e a s o n s t h e re is ı
ittle
fo r e x c h a n g e o f g o o d s o r fo r e x c h a n g e o f s e rv ic e s F o r p
ra c tic a ı ,
.

e s e rv ic e b a ıa n c e a n d it is
la n c e a n d th ,

n e e d to d is t in g u is h b e tw e e n th e g o o d s b a
d e b a ı
a n c e W h e n th e re is a tra d e
t ra
y re fe r to b o th j y a s th e
o in t ı
.

c o m m o n t o s im p ı
e
b a ıa n c e s u rp ıu s , it m e a n s th a t n e t e x p o r ts a re p o s itiv
.

2 4 1 1 1
. . . . G o o d s B a ı
a n c e
re s u lt in a n in f ı
o w o f
p h y s ic a l g
o o d s Ex p o rts
T h is r e c o rd s im p o rts a n d e x p o rts o f .

o w
o u tfı o f m o n e y a n d a re
Im re s u lt in a n
m o n e y a n d a re th e re fo re a c re d it ite m .
p o rts

th e r e fo r e a d e b it ite m .

2 4 1 1 2
. . . . S e rv ic e B a ıa n c e
t r a n s p o rta tio n ıa n d
(s u c h a s t r a v e

T h is r e c o rd s im p o rts a n d e x p o rts o f s e rv ic e s ,

ıd b e a d e b it , s in c e it
T hu o ıi d a w o u
in
i n h
s u ra n c e ) . s , t h e p
u r c h a s e o f a f o re
g y

a n o v e r s e a s r e s i de n t o f a
r e p re s e n t s a n o u tflo w o f m o n e y ,
w h e r e a s t h e
p
u r c h a s e b
y

c re d it to t h e S in g a p o re s e rv ic e s a c c o u n t
in g a p o r e in s u ra n c e p o ıic y w o u ıd b e a
.

2 4 1 2 . . . N e t In c o m e fro m A b ro a d
t in in to a n d o u t o f t h e c o u n t r
y
. Fo r
c o n s is t o f iiv a g e s
f lo w
T he se r e s t a n d r o f it s g
, in t e p

fo re ig n re s id e n t f r o m s h a re s in a S in g a p o re c o m p a n y
e xa m p ı
e ,
d iv id e n d s e a r n e d b y a
in a ls o
・

T he n e t co m e f ro m a b ro a d is
b e a n o w
o u tfı o f m o n e y (a d e b it ite m ) .

w o u ı
d °

y in
" "
ı'
t h e r i m a r c o m a n c e
e b a ı .

kn o w n a s th e
m e f ıo w o r
n e t f a c t o r In c o p

N e t T r a n s fe r P a y m e n t
2 4 1 3 . . .

to a n d r e c e ip ts f ro m in te r n a tio n a ı
n t c o n t rib u tio n s
T he s e in c lu d e g o v e rn m e
in d iv id u a ls a n d firm s
d in te rn a tio n a l t ra n s fe r s o f m o n e y b y p riv a te
.

o r g a n is a t io n s ,
a n

c o u n tr y (e g y se n t
T ra n s f e rs o u t o f th e c o u n try a r e d e b its T . r a n s fe rs in to th e . . M o n e

in S in g a p o r e ) w o u ld b e a c re d it ite m
fro m G re e c e t o a G re e k s tu d e n t s tu d y in g
.

T h n e t tra n s f e r p a y m e n t is a ı
so k n o w n a s
d ifts o f m o n e y ) e
(ın c ıu d in g re m itta n c e s a n g
.

"
"
i
"

th e fe r b a la n
°
c e t r a
h e n s
n c o m o r t s e c o n r
y
a n c e
e b a ı .

Ħ n a n c ia l A c c o u n t ( K A )
" ĺ ・ \
4 辄 . W *n Q b \& f \o h Ų \ \ ・ \ f\ o u &

2 4 2 . .
C a p it a l a n d

c a p ita l a c c o u n t re c o rd s th e f lo w s o f f u n d s in
a n d o u t o f a c o u n t ry fo r t h e p u rp o s e
T he
a s s e ts ( g
e fa c tu rin g p la n t o r p lo t o f u
a rb a n
o f a c q u iM g o r d i s p o s i i n g Ilx e d
a m a n u
. .

rd s c ro s s b o rd e r c h a n g e s in t h e
la n d f o r d e v e lo p m e n t) T h a n c ia l a c c o u n t re c o -

e f in .

The
h o ld in g o f s h a re s . p
r o
p e r ty , b a n k d e p o s its a n d lo a n s ,
se c government u r itie s ,
e t c .

f in a n c ia ı a c c o u n t b a ıa n c e is th e o v e ra ll b a ı a n c e o f a lı c a p ita l a n d
c a p it a ı a n d
"
fın a n c ia ıt ra n s a c tio n s a c ro s s b o rd e r s .

ıo
t h e ir B O p d if k r e n t ly So m e c o u n t r ie s m ay s e p a r a t e th e C a p it a l
D if fe r e n t c o u n t r i e s c a t e g o ń æ
.

A c c o u n t fr o m th e F i n a n c i a ı A c c o u n t .

ıı
o th e r c o m o f t h e C a p ita ı a n d F in a n c ia ıa c c o u n t
-
F in a n c ia l D e r i v a đ v e s
T h e re a re 2 p o n e n ts
E co n o m ic s s y l ıa b u s
a n d O th e r I n v e s tm en t . Th e y e x c lu d e d a s t h e y a r e n o t e s s e n t ia ıto th e H 2 .

19
R a frle s ın s titu tio n
Eco n o m ic s D e p a r b n e n t
2 _ 4 . 2 1 . D ir e c t ın v e s lm e n t c \ e 4 \ 41\\
b ire c t in v e s tm e n t c a n r e fe r m f o r e ig n d ir e c t in v e s t (F D ı
) in n o w s o r F D ı o u tf ı
o w s .

FD Io u M o w s a re a ls o k n ow n a s d ire c t in v e s t m e n t a b ro a d . F D ï o c c u rs w h e n a fo re ig n
c o m p a n y in v e s ts m o n e y fro m a b ro a d in o n e o f its b ra n c h e s o r a s
s o c ia te d c o m p a n ie s
in S in g a p o re T h is re p re s e n ts a n In llo w o f m o n e w h e n th e in v e s tm e n t is m a d e a n d is
_

y "
th u s a c re d it ite m D IA is th e fix e d c a p ita l e x p e n d itu re o f S in g a p o re c o m p a n ie s
.

a b ro a d . A n d r e
p rp q p n łs a n o u M o w o f m o n e y . It is th u s a d e b it ite m . N o te th a t d ire c t
in v e s tm e n t is t h e a c q u is itio n o r s a te o f fix e d c a p ita l a s s e ts s t i c h a s th e p u rc h a s e o f a
,

白 ◆ o ry o r th e ta k e o v e r o f a w h o le ı
irm n o t t he im p o rts o r e x o rts o f e u i m e n t D ire c t
,
p q p .

in v e s tm e n t is a ls o k n o w n a s
'
lo n g -
te rm c a p it a ı
"
d x e d c a p it a l in v e s t m
a n
e n ť .

2 4 2 2
. . . p o r tf o ıio In v e s tm e n t
ı
n . i ın ıh ļ h ln . H e k ta q . .ţ s

P o r« o lio in v e s tm e n t r e fe r to th e h o ld in
g o f p a p e r a s s e ts , s u c h a s s to c k s a n d b o n d s A .
・
S in g a p o re re s id e n t b u y i n
g s h a r e s in a n o v e rs e a s c o m p a n y c o n s titu te s a n a s s e t to
S in g a p o re ( a n d a lia b ility to th e o v e rs e a s c o m p a n
・
'

y ) H o w e v e r, t h e a c q u i s i t i o n o f t h e a m ・ h t
. " "
\
j
a ss e t is a n o u tı
lo w o f m n d s ī h e n c e it is a d e b it ite m . T h e re fo re , a s s e t s in t h e
h ' " ı t . a
"
po rı
f o lio in v e s tm e n t a re o u t flo w s lia b ilitie s a re in flo w s p o rıfo lio ţ L \
in v e s t m e n t is \ . ° -
4
w h i le
, . ・
'
a ls o k n o w n a s te ' '
rm c a p ita f a n d
y
-
s h o r t
.

2 4 3 0 m c ia ı R e s e r v e s
.
A c c o u n t q . . "
N.4.ha \h h ł・ A . h s

" - ' - _ ' ' '

a u m o n u e s s p e c iï ı
c a rry to r th e p u rp o s e o f m a n a g in g th e b a ı
a n c e in b o th th e C A
a n d K A T he re fo re it show s
ln . 4. L
a c . h \ \ . \
.
, h o w th e m o n e ta ry a u ìh o ń tie s h av e d e a n w ith o r
,
\4
a c co m m o te d , t he n e t c u rre n c y n o w . T h e o ffic ia l re s e rv e s a c c o u n t is a ls o k n o w n a s
°
th e o f f ic i a ı f i n a n c i n
g
a c c o u n ť . T he o f fic ia ı r e s e rv e s is a m o u n t o f lo Æ Jg n c u n e n c y
m ' " q e Ĥ .
ţ
h e ld th e c e n lra ıb a n k
'
fo re ı
g n e x c h a n g e re s e r v e s
°

ļ
, a n d is a ls o k n o w n a s t h e

ı
f th e re is a p o s iı
iv e c u m n cy n o w ha t m e a n s t h e d o m e s tic e c o n o m
y is s e llin g to m o re
, t

th a n it is bying fr o m th e e x te rn a l e c o n o m y , s u c h t h a t c u r r e n c
y
is n o w in in . A s s u m in g
g
"
e x c h a n g e ra t p is fu ce d , ıh is c u r r e n c
y
w i ll b e a d d e d t o t h ė o f fic ia l re s e rv e s . In c re a s in g
th e a m o u n t o f f o re ig n c tı
r re n c y in th e o f fic ia l re s e r v e s is re c o rd e d a s a d e b it in th e
o f fic ia l r e s e rv e s a c c o u n t .

W nen d e b its o u tw e ig h c re d its in th ė c u rre n t a c c o u n t a n d c a ita l a n d fin a n c ia l a c c o u n t

p ,

th e re is n e g a t iv e c u r r e n c y f lo w A g a in a s s u m in g fix e d e x c h a n g e ra te s , t h e c u r r e n c
y
.

o u tn o w w ilı re s u lt in a d ra w d o w n o f o f fic ia l r e s e rv e s , r e c o d in a c r e d it in t h e o f f ic ia l
g

re s e rv e s a c c o u n t .

ı2
w ħi le m o n e y f ıo w s f o r t h e p u r p o s e o f F D Ķ a n d D ıA s a r e r e c o r d e d in th e C a
p it a l a n d
F in a n c ia l A c c o u n t , t h e m o n e t a r
y
r e t u r n s t o s u c h i n v e s t m e n t i s r e c o r d e d in th e C u ı
T e n t A c co u n t

(P r im a ry In c o m e A c c o u n t) . Th e r e t u r n s a r e c o n s id e r e d t h e in c o m e m a d e b y th e c a
p it a ı f a c t o r .

13 "
It m ig h t n o t b e in t u it iv e t o t h in k o f a s s e t s a s o u t f ıo w s b e c a u s e th e t e i l ıl
"
a s s e t s i v e t h e
g

im p r e s s io n th a t t h e c o u n tr y is m a d e r ic h e r . T h e re fo re ,
it is d if fic u lt t o r e c o n c ile t h a t a s s e t s

c o n s t it u t e o u t f ıo w s . H o w e v e r, in c r e a s in
g
a s s e t s w i lı e v e n tu a ıı l e a d t o e a t e r t o t a l
y g r i n f lo w in t o

th e B O P . T h is is b e c a u s e w h e n a s s e ts a r e s o ld b a c k to f o r e ig n e n t it i e s t h e r e w i ıı b e a n i n
, f lo w

ba ck in t o th e C a p ita l a n d F in a n c ia l a c c o u n t . O n to p o f th is , th e d iv id e n d s m a d e f r o m th e

ho d in g o f a s s e ts c o n s t itu t e p ń m
ı a ry in c o m e , a n d t h e r e f o r e c r e a te s a n in f lo w i n to th e C u r r e n t

A c c o u n t to o .

ı4
C u rr e n c y f lo w r e fe rs to th 引 R o w o f m o n e y b e c a u s e o f i n t e r n a t i o n a l t r a n s a c t io n s m a d e b y
c it iz e n s in th c c u ix e ıı
t a c c o u fit a n d th e c a W
p ita ı a n d f irı
a n c i a ı a c c o u fı . n e s th e r e i s a p o s it iv e
c u rT e n c y f lo w , t h e r e a r e o v e r a ıl m o r e c r e d its th a n d e b it s i n t h e t w o a c c o u n ts .

ls
t h e o f fic ia ı r e s e r v e s o n ly c h a n Th
g e i f t h e e x c h a n g e r a te is f i x e d . e e x p la n a t io n fo r th is w i ll
be gį
v e n \n T h e m e 3 . 2 M a cro e c o n o m ic A im s a n d Is s u e s .

R aM es m s titu tib n
Econo m ic s D e p a rb n e n t

回
国
 *

T he o v e ra ı
ıb a la n c e o f th e B O P c o m p r is e s o f th e c u r re n t a c c o u n t , c a
p
it a ı a n d f in a n c ia ı

a c c o u n t, a n d t h e o f f ic ia ı r e s e r v e s . A ll tra n s a c tio n s in th e c u lT e n t a n d c a p ita ı a n d

fın a n c ia l a c c o u n t a re c a ı
ıe d a u to n o m o u s t r a n s a c t io n s . O n th e o th e r h a n d s ,

tra n s a c tio n s in th e o ffic ia l re s e rv e s a re c a lle d a c c o m m o d a t in g t r a n s a c t io n s . The

p o s it io n o f B O P d e p e n d s o n th e a g g re g a te b a la n c e o f a u to n o m o u s t ra n s a c tio n s , a n d

c a n b e re c o rd e d a s a d e fic it o r s u r p lu s . T he o ffic ia l re s e rv e s m a y a c c o m m o d a te th e
B O P d is e q u ilib ń u m b y fin a n c in g it , s o t h a t t he B O p w iııe v e n t u a lıy b e b a la n c e d .

白i \Į \ r i . ıin \ ł \ A \ h t e
B O P d e f ic it C A ◆ K A < 0
l
q

B O P s u r p ıu s C A ◆ K A > 0

O v e r a ıl B O P B a ı
a n c e C A ◆ K A ◆ O f f ic ia ıR e s e r v e s = 0

T he re a s o n w h y th e B O P m u s t b a ı
a n c e is b e c a u s e th e B O P a c c o u n ts u t iı
is e th e
dou b ı
m n tr y b o o k k e e p in g s y s te m w h e re e v e ry in te r n a tio n a l tra n s a c tio n is re c o rd e d
tw ic e , o n c e a s a c r e d it a n d o n c e a s a d e b it
,
i . e . Th e re c o rd in g o f a n in te r n a t io n a ı
tra n s a c tio n ı
e a d s to tw o -
o ffs e ttin g e n trie s ,
t h e t r a n s a c t io n it s e lf a n d ho w it w a s p a id
fo r .

\tq h ı« A i・* ł
D O B a ıa n c e B
v e ra ı
ı -

18 15 0
A C u ı
T e n t A c c o u n t B a la n m 7 9 6 3 2 . 5 (A &u \
t
\ ・ ￠
,

G o o d s B a la n c e 1 13 , 456 7 .

S e rv ic e s B a la n c e 5 , 304 7 .

P ńm a ry In c o m e B a la n c e 18 , 974 4 .

S e c o n d a ry In c o m e B a ı
a n ce -
9 54 5 1 , .

'

B C a p it a ı& F in a n c ia ıA c c o u n t B a ı
a n c e 7 7 ,
0 5 2 . 4 ţ h J * t ￠ t *
D ire c t In v e s tm e n t 4 0 , 938 8 .

Po rtfo ı
io In v e s tm e n t 7 5 ,
3 14 9 .

F in a n c ia l D e riv a tiv e s 2 7 ,
324 9 .

O th e r In v e s tm e n t 7 0 , 001 2 .

C N e t E rr o r s & O m is s io n s
l ll E 7 9 . 4
e @ e s e rv e a s s e ts

'
F ig u r e 9 S in g a p o re s B O P f o r Q 2 ,
in m illio n d o lla rs ( S in g a p o r e D e p a ń m e n t o f
S fa tis t re s ) t *
\s
"
2 4 5. . ı
n tro d u c t io n t o E x c h a n g e R a te s

A n e xc h a n g e ra te is th e r a te a t w h ic h o n e c u rre n c y e x c h a n g e s fo r a n o t h e r , o r t h e

p r ic e o f a u n it o f a c u r re n c y in te rm s o f fo r e ig n c u r re n c ie s . Fo r in s ta n c e iĺ \ S G D , can
e x c h a n g e fo r 0 , 73U S D , t h e n t h e
p
ń c e o f S in g a p o re
'
s c u r r e n c is 0 . 7 3 U S D /S G D .
y

A n a p p r e c ia t io n o c c u rs w h e n a u n it o f c u rr e n c y c a n e x ch a n g e lo r m o re fo re ig n
c u r re n c ie s ,
w h ic h m e a n s th a t th e r e is a n in c re a s e in te
tł v a lu e o f a c u r re n c y . T h is
"
o c c u rs if 1 S G D c a n n o w e xc h a n g e fo r 0 . 8U S D . A de p re c ia t io n is w h e n a c u r re n c y
e x c h a n g e s fo r ı
e s s fo re ig n c u r re n c ie s , s u c h a s t o 1 S G D fo r 0 . 7U S D .

]6
E x c h a n g e ra te s y s te m s w ill b e fu ıı
y c o v e re d in T h em e 3 . 2 M a cr o e c o n o m ic A im s a n d j s s u e s .

\7
A n a p p r e c ia t io n c a n b e th o u g h t o r a s a r is e in
p r ic e o f a c u rre n c
y m e c ts u r e d i n f o r e i g n te r n 】
s .

P r ic e o f c u rr e n c y w o u l d Tta v e r is e n j l
-
o m 0 7 U S D G D Io
. 0 . 8 0 SD /S G D . L ik e w is e d e p r e c ia t i o n .

R a M e s In s titu tiio n
E co n o m ic s D e p a rü n e n t
 It is a ls o w o r th n o ü n g th ı
a t w h e n w e m e a s u re th e v a ı
u e o f S G D in te rm s o f U S D ,
t h e n

c h a n g e s in th e e x c h a n g e ra te re fe r to a p p re c ia tio n o r d e a g ĝ in s t
ı ı y p re c ia tio n
U S D . ı
fSG D a Ħ »re c ia te s a g a in s t U S D . t h e n U S D
depreciates a g a in s t S G D .

C ha ng e s in th e B O P a re re ı
a te d to c h a n g e s in e x c h a n g e r a te . N Te n cy
e t c u ı in f ı
o w s
re s u ı
tin g f ro m B O P s u rp ı
u s e s w iı
l c a u se s a n a p p r e c ia tio n , if t h e m o n e t a r a u t h o r i t ie s
y

do n o t c o n tr o ı th e e xc h a n g e r a te . C o n v e rs e ı
y , B O P de fic its th a t ı
e a d to n e t c u rre n c y
o trtfı
o w s w iı
ıp u t p re s s u re o n th e e x c h a n e ra te to d e p re c ia t io n
g .

S e c t io n a ı S u m m a N

T he e c o n o m ic p e r fo rm a n c e o f a n e c o n o m y re fe rs to h o w it fa re s in t e rm s o f

a c h ie v in g m n o m ic g ro w th . p
ń c e s t a b il ity , f u ll e m
p
ıo
y
m e n t a n d a fa v o u r a b le
ba la n c e o f p a y m e n ts .

■
E c o n o m ic ro w t h is s u s t a in e d w h e n a c t u a ı a n d o te n t ia ı ro w th is a c h ie v e d
g p g .

ho w e v e r, i t m a
y
o r m a
y
n o t b e s u s t a in a b le o r in c ıu s iv e .

A c tu a ıe c o n o m ic g ro w th is in d ic a te d b y th e r e a ıG D P o f a n e c o n o m y -

P ńc e s ta b ility is in d ic a t e d b y th e in fı
a t io n ra te , w h ic h is t h e r a t e o f c h a n
g
e o f
th e C P ı .

=
F u H e m ıo m e n t o c c u r s w h e n th e N A IR U is a c h ie v e d w h e r e t h e
p y .

u n e m p ı
o yı
Tıe n t r a te m e a s u re d is o w
ı .

=
T h e b a la n c e o F a m e n t s is a n a c c o u n t o f a ll in t e m a t io n a ı t ra n s a c t io n s m a d e
p y

be tw e e n a c o u n tr y a n d th e e x te m a ıe c o n o m y . ı
t is æ te g o riz e d in to th e c u lT e n t
a c c o u n t. A n d c a
p
it a l a n d f i n a n c ia l a c c o u n t , a n d t h e o f f ic ia ı r e s e r v e s a c c o u n t .

=
T h e b a ıa n c e o f a e n ts s i t io n c a n a ff e c t e x c h a n e ra te s
y m o .
p p g

3 U V ı
N G S TA N D A R D S A N D ı C A TO R S
T S IN D ı

T he u h im a te g o a ıo f a ı
ıe c o n o m ie s is to ra is e liv in g s ta n d a rd s to e n jo y in g in c re a s in g

ıe v e s o f w e tfa re
ı . S ta n d a rd o f ı
iv in g re fe rs b o th to m a t e r ia l a n d n o n -
m a te r ia l s ta n d a r d

o f ı
M n g .

3 1 . A L STA N D A R D O F Lı
M A TE R ı V ı
N G
M a te ria ıs ta n d a rd o f ı
iv in g re fe rs t o th e q u a n t it y o f g o o c fs a n d s e r v ic e s c o n s u m e d b y

th e a v e r a g ę p e ıs o ıt in th e e c o n o m y in a g iv e n t im e p e ń o d .

3 1 1
. . R e a ıG D P p e r C a p it a

T he re a ı G D P p e r c a p it a th e m o st c o m m o n ı
y u s e d m e a s u re to a s se s s th e m a te ria l

s t a n d a rd o f liv in g . The re a l G D P p e r c a p ita is a a fu s le d lo r In l?a tio n a n d P o p u l a t n

cha n g e s . U s in g th e re a l G D P h e ı
p s to e lim in a te th e e ffe c ts o f in f la tio n w h e re ris in g

p r ic e s o v e s t a t e th e v a lu e o f th e g o od o r s e rv ic e p ro d u c e d a n d e n jo y e d b y

c o n s u m e rs . D iv id in g th e re a ıG P D b y th e p o p u ı
a tio n s iz e g iv e s u s th e a v e ra g e v a lu e s

fo r e a c h c itiz e n . T he m e t h o d o lo g y f o r c a lc u la t in g re a l G D P a n d p e r c a p ita v a ı
u e s w iı
l

b e c o v e re d in S e c tio n 4 C o m p a ris o n s o f . E c o n o m ic P e r fo rm a n c e a n d L iv in g S ta n d a rd s .

3 1 2
. . L im it a t io n s o f R e a l G D P p e r C a p it a

ı
t is im p o rta n t to n o te th a t re a l G D P p e r c a p ita b e st m e a s u re s m a te ria ı w e ı
fa r e ,

a lth o u g h it m a y a ls o b e a p ro x y fo r a s s e s s in g n o n -
m a te ń a l w e lfa re a s th e tw o ca n

s o m e tim e s b e re la te d to e a c h o th e r . N o n e t h e le s s , e v e n
p u re ı
y as a m e a s u re o f

m a te ria l w e lfa re , its u s e is lim ite d e m s a ris in g f ro m

b y p ro b ı

R a Æ e s m s M t,Ih . 2 2

F" " ic s D e p a rlm ' "

 In c o m e d is tr ib u tio n

G D P m e a s u re s th e to ta ıq u a n tń y o f g o o d s a n d s e rv ic e s p ro d u c e d in a n e c o n o m y b u t it

co nv e ys n o in f o rm a t io n a b o u t w h o g e te to ・n jo y th o s e g o o d s a n d s e rv ic e s . ı
fgm h
o c c u rs in a n u n e q u a ım a n n e r , t h e d is t r ib u t io n o f
go o d s a nd s e rv ic e s to c o n s u m e rs w iı
ı

a ls o b e u n e q u a ıa n d in e q u ita b le . In th is ca se , t h e u s e o f a v e ra g e v a lu e s Ilk e th e re a l

G D P pe r ca ￠
»ita be co m e s a w e a k m e a s u re o f th e c o n s u m p tio n o f a n a v e ra g e
"
in d iv id u a ı. The re fo re , t h e h i
ghe r th e G in i c o e ffic ie n t , t h e ıe s s w e c a n t r u s t re a ı

G D P /c a p ita a s a m e a s u re o f m a te ria ıw e ı
fa re .

Co
'
G D P does n o t a c o o u n t fo r th e c o m p o s it io n o f a n e co no m y s o u t
p
u t a s
p
r o d u c t ıo n

dm a not a ı
w a y * e q u a l c o n s u m p tı
o n . R ıth a t G D P
e ca ı m e a s u re d b y th e e x p e n d it u re
m e th o d includes o n s u m p t i o n , in v e s t m e n t ,
g
o v e r n m e n t s
p
e n d in
g
a n d n e t e x
p
o r t s . If
G DP ris e s b e c a u s e , government s p e n d in g o r n e t e x p o rts ,
o f in v e s tm e n ts t h e r is e m a y
'

n o t b e d ire c t
v re la te d w ith a n in c re a s e s in c o n s u m e r p tio n ıe ve ı s s c o n s u m .

R is in g in v e s t m e n t o c c u rs w h e n m o re fa c to r ie s a n d p la n ts a re p ro d u c e d . T h is w ilın o t
'
ra is e c o n s u m e rs m a t e r ia ı w e « a re in th e c u rre n t p e r io d . N o n e th e ı
e ss ,
b e c a u s e

in v e s tm e n t c o n tń b u te s
'
fu tu re m a y
to p o te n tia l g ro w t h , c o n s u m e r s w e ıf a r e in
p e rio d s
be ra is e d to h ig h e r ı
e v e ı
s w h e n G D p r is e s b e c a u s e o f in v e s tm e n t .

How th e in G D P a tt rib u te d to a ffe c ts m a te r ia l w e lf a re

g h g o v e rn m e n t e x p e n d itu re
depe n d s o n w h a t th e g o v e rn m e n t s p e n d s o n . If th e e x p e n d itu re is o n p ro v is io n o f

pu b ı
ic g o o d s , it w o u ld b e r e la t e d t o im
p
r o v in
g
m a t e r ia l w e lf a r e . H o w e v e r, i f it is spe n t
o n d e fe n c e g o o d s , it is u n l ik e l
y
t o
p
r o d u c e a n
y
t a n
g
ib le im
p
r o v e m e n t s in ı
iv in g
s ta n d a rd s o r m a te ń a l w e ll -
be in g o f th e p e o p le .

ı
r in c r e a s in g n e t e x p o r ts is th e s o u rc e o f G D P g rM h , t h e n t h e
g ro w th o f p ro d u c t io n is
n o t e n jo y e d b y th e d o m e s t ic c o n s u m e rs , bu t b y fo r e ig n c o n s u m e r s in s te a d .

The re fo re , s i n c e G DP m e a s u re s p ro d u c tio n in s te a d o f co n s u m p tio n , r e a l G D P

p
e r

c a p ita d o e s n o t p re c is e ly m e a s u re th e q u a n t it y o f g o o d s a n d s e rv ic e s e n jo y e d b y a n
a v e ra g e c itiz e n .

3 2 STA N D A R D o F Lı
vıN G
N O N A T E F ıA L
.

N o n m a te ria ı s ta n d a rd o f liv in g re fe rs to th e q u a ılta t ı

v e a s p e c ts o f w e lfa re , in c ıu d in
g
he a ı
th , s t r e s s le v e ls , e d u c a t io n a n d s e c u r it
y a m o n g o th e rs a s p e c ts .

3 1 1. . W e ı
f a re In d ı
c a t o rs

R e a l G D P p e r c a p ita m a y fu n c tio n a s a n in d ire c t p ro x y fo r n o n -

m a te ń a ıw e lfa re , a s a

ń s e in a v e ra g e in c o m e ı
e v e ls a llo w c o n s u m e rs to e n jo y m o r e
g o o d s a nd s e rv ic e s th a t
e n h a n ce t h e ir n o n m a te ria l w e lfa re . Fo r in s ta n c e , h ig h e r in c o m e s a lı
o w c o n s u m e rs to
a c c e s s q u a lit y h e a ı
th c a re a n d e d u c a tio n , o r t o e n
jo y m o re ı
e is u re a c tiv itie s .

H o w e v e r, U ıe re a re a ls o p o s s ib le s o u rc e s o f te n s io n b e tw e e n G D P a n d no n -

g r h
m a te ń a l w e tfa re . ı
f re al G D P g ro w th co m e s a t th e e xp e n se o f w o rk in g b n g e r h o u rs ,

le ss le is u re tim e is a v a ila b le fo r fa m ily o r f o r c u ltu ra l a n d e d u c a tio n a i p u rs u its . T h is

c o m p ro m is e s n o n m a te ria l w e lfa re . Fu rth e rm o re , G D P c o u ld
g r o w in a n u n s u s t a in a b le

m a n n e r a s d is c u s s e d in S e c tib n 2 . 1 2 Su. s ta in a b le G ro w th , r e s u ı
tin g in e n v iro n m e n ta l
p ro b ı
e m s th a t c o u ı
d a ffe c t th e h e a lth a n d w e ı
l -
be in g o f c itiz e n s .

ıı
W n e n in q u a ıit y is r a m
p a n t, a v e r a
g
e i n c o m e v a ıu e s m a
y
b e c a l c u l a t e d u s i n
g
t h e m o d e a n d

'
m e d ia n a s w e ıı in o r d e r t o
B e t a b e tt e r p ic t u r e o f a c o u n tr y s ıe v e ı o f m a te r ia l w e lf a r e .

R aM e s In s titu tio n
23
E c o n o m ic s D e p a r tm e n t
T he re fo re , o t h e r m e a s u r e s a r e u s e d to d ir e c t l
y
m e a s u r e a s
p
e c t s o f no n -
m a te ria ı
w e ı
fa re . D iffe re n t in d ic a to rs m a y a im to p ro x y th e sa m e n o n -
ta n g ib le a s p e c t o f
w e ı
fa re . T he se In d ic a to rs a re u s u a lı
y m e a s u re d th ro u g h a p o p u ı
a tio n ce n s u s . T he lis t
is n o t e x h a u s tiv e , b u t c o m m o n a s
p
e c ts o f w e ıf a r e m e a s u r e d in c lu d e

H e a ı
th c a re
C o m m o n m e a s u re s o f h e a ı
th c a re in c ı
u d e ılf e e x p e c ta n c y ra te s a s w e ı
ıa s ı
n fa n t
m o r t a lı
ty . T he se ca n in d ic a te th e q u a lity o f h e a lth c a re a v a ila b ı
e in th e c o u n t ry . T he
ra tio o f th e n u m b e r o f d o c t o rs , d e n t ıs t s a n d n u rs e s to t h e
p
o
p
u ıa t io n m a
y
in d ic a te

th e q u a n tity o T h e a ı
th c a re a v a iı
a b ı
e to o .

E du c a tio n
L ite ra c y ra te s , m e a n
y
e a r s o f s c h o o l in
g
a n d th e h ı
g h e s t q u a ıif ı
c a t io n a t ta ın e d b y
th e p o p u la tio n c a n a ı
s o b e m e a s u re d to in d ic a te th e q u a n tit y a n d q u a lit y o f e d u c a tio n .

p o ııu tio n
D iffe re n t c o u n trie s h a v e d iĦe re n t a ır q u a ıit y in d e x s in c e th e ir a ir m a y b e p o lı
u te d b y
d iffe re n t ty p e s o f p o ılu ta n ts In . S in g a p o r e ,
t he t ra d itio n a l p o ııu t io n s ta n d a rd ın d e x

(P S ı ) is u s e d D u r in g th e h a z e .
p e rio d ,
t h e P M
2 . 6
c o n c e n tr a t io n is a ı
s o u se d a s it
b e tte r in d ic a te s t h e e x te n t o f th e h a ze .

S tre s s L e ve l

D a ta o n th e n u m b e r o f h o tłr s w o rk e d p e r w e e k o r a n n u a lly c a n b e m e a s u re d to

p ro xy s tr e s s le v e ls , a lt h o u
g
h it is c le a r a ls o t h a t w o r k in
g
lo n
g
e r h o u r s m a
y
n o t

n e c e s s a ń ly m e a n g r e a t e r s tr e s s le v e ls . A lte r n a tiv e ly , Jo b s a t is f a c t io n s u rv e y s c a n b e

u sd d to q u a lify t h e le v e l o f s t re s s .

s e c u rit y
C r im e r a te s m a y g iv e a n in d ic a tio n o n th e p h y s ic a ıs a fe ty fe ı
t b y c itiz e n s o f a c o u n try .

The c o r r u p t io n p e r c e p t io n ın d e x c a n b e u se d to in d ic a te th e c o n f id e n c e c itiz e n s

ha v e in th e ir g o v e r n m e n t s .

The re la tio n s h ip b e tw e e n re a l G D P p e r c a p ita

'
a n d n o n -
m a te ria ı w e ı
fa re is u n c le a r

be ca u se re a ı G D P p e r c a p ita m a y b e p o s itiv e re la te d w ith c e rta in a s p e c ts o f n o n -

m a te ria ıw e lfa re , but a te d w ith o th e r a s p e c ts

n e g a t iv e re ı .

3 1 2. . L im it a t io n s o f W e ı
fa r e ın d ic a t o r s

W e lfa re in d ic a to rs a re h ig h ry lim ite d b eca use fu n d a m e n ta lly w e lı

a re can n ot b e

q u a n tifie d . P ro x ie s m a y n ot b e a c c u ra te . Fo r in s ta n c e , m e a s u r in
g
t h e n u m be r o f
do c to rs im p lie s n o th in g a b o u t t h e q u a lit y o f h e a lth c a re , o r h o w a c c e s s ib le it is to th o s e

w h o n e e d it . T he re fo re ,
t h e
y n ee d to b e c o n s ta n tly re v ie w e d a n d re fin e d in o rd e r to

is o la te th e e ffe c t t h e y m e a n to m e a s u re . U s in g v a rio u s in d ic a to rs to m e a s u re a n
a s p e c t c o u ld a ls o p ro v id e a b e tte r p ic tu re . If a ı
l in d ic a to rs o f h e a lth c a re su g ge st

im p ro v e m e n ts , it is lik e l
y
t h a t t h e c o u n t r
y
is in d e e d e x
p
e r ie n c in
g
b e tte r h e a lt h c a r e .

3 3 . C O M PO S ı N D IC A T O R S
TE ı

G iv e n t h a t b o th re a l G D P p e r c a p ita a n d in d iv id u a ı w e lfa re in d ic a to rs a re ı
im ite d in

th e ir a b ility to a s s e s s s ta n d a rd o f liv in g , c o m
p
o s it e in d ic a to rs t h a t c o m b in e s m a t e r ia ı

a n d n o n -
m a te ń a ım e a s u re s w e re d e v e ı
o p e d to g iv e a m o re c o m p ı
e te p ic tu re o f th e

ı
e v e ıo f h u m a n w e lıb e in g -
.

H u m a n D e ve
The H u m a n D e ve ı
o p m e n t ı
n d e x ( H D I) is th e m o st w id e ly u se d in d ic a to r a n d it
m e a s u re s th e a v e ra g e a tta in m e n t o f a lo n g a n d h e a lt h y ıif e ,
k n o w ıe d
g
e a n d a

R a N e s I n s t i t u l ıt
E c 口门口rn ic s D e p a 击 n e n t
 de c e n t m a t e r ia ı s t a n d a r d o f ıiv in g . ı
t in c lu d e s m e a s u re m e n ts o f life e x p e c ta n c y a t

b ir th , m e a n o f ye a rs o f sc h o o ı
in g fo r a d u ı
ts a n d e x p e c te d y e a rs o f s c h o o lin g fo r

s tu d e n ts ,
a n d a ls o t h e P P P d j u s t e d re a ıG N I p e r c a p ita .

M e a s u r e o f E c o n o m ic W e lfa r e

T he M e a s u re o f E c o n o m ic W e lfa r e (M ( W ) a d ju s ts m e a s u re s o f to ta ı n a tio n a ı o u t p u t
s u c H a s G D P o r G N ı to b y a d d in g th e v a lu e o f ı
e is u r e a n d o f t ra n s a c t io n s in th e

u n d e rg ro u n d e c o n o m y . ı
t a ls o d e d u c ts th e c o s t o f e n v ir o n m e n ta ı d a m a g e . it
in v o ı
v e s th e d iffic u lt ta s k o f a s s ig n in g m o n e ta ry u e s
v a ı to n o n -
m a r ke te d g o o d s .

In d e x o f S u s ta in a b le E c o n o m ic W e lfa re
The ınd e x o f S u s ta in a b le E c o n o m ic W e lfa r e (ı
s ( W ) b a ı
a n c e s th e G D P w ith in c o m e

d is t r ib u t io n d to p o llu t io n
c o s t s r e ıa t e e n v i r o n m e n t a ı d a m a e a n d r e s o u r c e
, , g

d e p ıe t io n . ı
t w a s d e v e lo p e d w ith th e in te n t io n to re p la c e G D P in o rd e r to m e a s u re
s u s t a in a b le e c o n o m ic g ro w th . It la te r d e v e lo p e d in to th e G e n u in e P ro g re s s In d ic a t o r ,
w h ic h is in c re a s in l a c c e
g y p te d a s a m e a s u re o f s u s t a in a b ility .

O E C D Yo u r B e tte r L ife ı
n d e x
The O r g a n iz a tio n fo r E c o n o m ic C o o e ra tio n a n d D e v e ı o p m e n t ( O E C D ) h a s d e v e lo p e d
p
'
th e
'
Y o u r B e t t e r L « e in d e x w h ic h a tte m p ts to m e a s u re w e lfa r e b a s e d o n w h a t p e o p ıe
pe rc e iv e d to b e im p o rta n t to th e m . It m e a s u re s th e lo w in g
fo ı 1 1 a s p e c ts in c o m e ,

e m p ıo y m e n t, h o u s in , h e a ıt h s o c i a ı r e la t io n s h i s e d u c a t io n , e n v ir o n m e n t , t h e
g , p ,

a d m i n is t r a t io n o f in s t it u t io n s , s e c u r it
y , g
e n e r a ı s a t is f a c t io n a n d w o r k
-
ı
ife
b a ı
a n c e . T h e in te ra c t iv e w e b s ite a llo w s th e in d ic a to r to b e e a s ily a d ju s te d to c h a n g e

th e r e la tiv e im p o r ta n c e o f d iffe re n t a s p e c t . T h is is to a c c o u n t fo r d iffe r e n t p e r s p e c tiv e s

o f w h a t c o n s t it u te s w e lfa re .
I

W h iı
e co m p o s ite in d ic a to rs ta k e in to a c c o u n t b o th m a te r ia ı a n d n o n -
m a te r ia l a s p e c ts
o f s ta n d a r d o f ı
iv in g , t h e
y
m a
y
a ls o b e lim it e d b e c a u s e b
y
t h e d if f ic u lt o f de te rm in in g
th e w e ig h t a g e o f e a c h a sp e ct . Fo r in s ta n c e , a c o u n t r
y
m a
y ra n k lo w ly u s in g th e O E C D
Yo u r B e tte r L if e ın d e x b e c a u s e o f a ı
a c k o f s o c ia l re ı
a tio n s h ip s . H o w e v e r, t he r e s id e n ts
in th ec o u n t ry m a y n o t v a ı u e s o c ia l r e la tio n s h ip s a s m u c h a s a n o th e r c o u n t r ,
y a n d m a
y

e n j o y m o re h a p p in e s s if t h e y h a d m o re p r iv a c y in s te a d T h e s u b je c t iv ity . o f w h a t
a s p e c ts d e te rm in e o v e ra lıw e lfa re lim its t h e u s e o f c o m p o s ite in d ic a to rs .

S e c t io n a l S u m m w
・

S ta n d a rd o f liv in g is co m p o se d o f b o th m a te r ia ıa n d n o n -
m a te r ia l s ta n d a rd o f
liv in g .

M a te ria ı s ta n d a rd o f ı
iv in g r e fe rs to th e q u a n tit y o f g o o d s a n d s e rv ic e s
c o n s u m e d b y a n a v e ra g e in p e rs o n in a n e c o n o m
y , a n d c a n b e m e a s u r e d w it h

re a l G D P p e r c a p ita .

H o w e v e r, t h e u s e o f r e a ı G D P
p
e r c a
p
it a is lim it e d in c o m e in e q u a lit y a n d o th e r
ı
im ita tio n s .

No n te ń a l s ta n d a rd o f liv in g re fe rs to th e q u a ı
-
m a
it a t iv e a s p e c ts o f w e lfa re .

R e a lG D P p e r c a p ita is n o t a g o o d m e a s u re o f n o n -
m a te ria ıs ta n d a rd o f liv in g .

T hu s ,
o t he r in d ic a to rs th a t c a n p ro x y w e lfa re a re u se d . T he se in c lu d e ı
ife
e x p e c ta n c y ,
l it e r a c
y
r a te s a n d a ir
q
u a ıi t
y
in d e x .

C o m p o s ite in d ic a to rs s u c h a s th e H D I a llo w s ta n d a rd o f ı
iv in g to b e m e a s u re d
m o re h o lis t ic a lly a n d c o m p re h e n s iv e ı
y .

圆
圆
剧国良 R aN es In s 》tu tiio n
25
= Econo m ic s D e p a rtm e n t
In d ic a to rs o f e co n om ic p e rfo r m a n c e a n d liv in g s ta n d a r d s a re a lre a d y lim ite d in t h e ir
Ķ t \ \. \ ・ \ e
1
ow w a ys L im ita tio n s o f in d ic a to rs in c ı
u d in g th o s e in S e c tio n 1 1 2 L fi
n ita lio n h ı Ł・ \
2 s o f 4
Ħ
.
. . .

G D P a nd S e c tib n 2 2 1 . 2 L im ita tio n s o f C P I s h o u ld a ls o b e a p p lie d w h e n m a k in g

cam p a ris a n s o v e r e a nd sp a ce . O n to p o f th e s e , f u r t h e r lim it a t io n s e m e r g e w h e n

p e r fo rm in g c o m p a ıa tiv e a n a ly s e s .

4 1 . C O M PA R ı
S O N S O V E R Tı
M E

N o m in a ıa n d R e a ıC o n c e p t s

N o m in a ı v a lu e s a re m o n e y v a ı
u e s m e a s u re d a t c u m n t p ric e s , w h ile r e a ı v a lu e s a re
m o ne y v a lu e s c o tr e c te d to e ıim in a t e th e e f fe c t s o f ın f ı
a ti o n b y u s in g b a s e y e a r
p ric e s F o . r in s ta n c e , if th e p r ic e o f a lu n c h p a c k is $ 5 to d a y . Th e n o m in a ıe x p e n d it u re o n
10 p a c k s o f ric e is $ 5 0 ıf th e p ń c e o f a lu n c h p a c k is $ 2 in th e b a s e fo
y e a r, r in s ta n c e
.

in 2 0 0 5 , t h e n t he re a l e x p e n d itu re o n 1 0 p a c k s o f ric e is $ 2 0 .

The p u rp o s e o f m e a s u ń n g G D P is to m e a s u re p r o d u c t io n le v e ı
s . T y p ic a lly , if G D P
g ro w s o v e r t im e , it m e a n s t h a t
p
r o d u c t io n ıe v e ı
s a re in c re a s in g . H o w e v e r, b e c a u fs e o

th e w a y G D P is m e a s u re d , c h a n
g
e s in
p ric e th a t o c c u r w ith o u t a n y c h a n g e in
"
p ro d u c t io n c o u ı
d in c r e a s e G D P a s w e lı . T h e re fo re , n o m in a l G D P s c a n n o t b e u s e d t o

c o m p a re p ro d u c tio n ı
e v e l o v e r tim e . R e a ıG D P m u s t b e u s e d to a s se s s e c o n o m ic
s r o w th a c ro s s tim e .

T h is w o u ld e n a b le u s to se e h o w m u c h re a l G D P h a d c ha n g e d fro m o n e y e a r to \b ◆ . \ i.
\ k t . ・ $ .
a n o th e r . ı
n o th e r w o rd s ,
it w o u ld e l im in a te in c re a s e s in n o m in a l G D P th a t w e re m e r e ly
&

du e to a n in c re a s e in p ric e s B y re m o v in th e e ffe c t o f in lla tio n th e re a l G D p tń e s to

k . H \ . \ \+ \ .
.
g
m e a s u re th e a c tu a l in c re a s e in g o o d s a nd s e rv ic e s p ro d u c e d . T hu s , c ha n g e s in re a l
ı
ıu ı q \ \° t .. k . Rn i c

G D P is used to g a u g in g s ta n d a rd o f liv in g ov e r a p e rio d o f t im e ra th e r th a n n o m in a l s t. ・ \L

G D P .

In b o th th e c o m p a ń s o n o f e c o n o m ic p e rfo rm a n c e a n d o f liv in g s ta n d a rd s a c ro s s tim e ,

th e re a ıv a lu e s o f G D P a nd G D P p e r c a p ita m ust b e use d .

m
In th e e x a m p ı
e a b o u t t h e lu n c h p a c k s , th e e x
p
e n d it u re o n ıu n c h
p
a c k s i n c r e a s e d f r o m $2 0 to
$ 5 0 fro m 2 0 0 5 to p r e s m tı
y . H o w e v e r. T h e in c re a s e w a s p u re ly d u e to i n c r e a s e in p r ic e , r a th e r

th a n in c r e a s e in ・ x p e n d iłw e . T he sa m e c o n c e p t a p p lie s t o c o m p a r i n g G D P a c ro s s ti m e .

t- 4 . \ . \

R aM as s M t Æo .
E co no m ic s D e p ' " m e n t
 P o p u ı
a tı
o n G ro w th

R ia ln g a t io n
p o p u ı is a g ro w th fa c to r , a n d in c re a s e In
p o p
u ıa t io n n a t u r a ll
y
le a d s t o

g re a te r p ro d u c tb n a s m o re a b o u r re s o u rc e s a re
ı a v a iı
a b le . T he re fo re , t h e r e ls no n e e d
to e ıim in a te th e e fre c ts a tio n
o f p o p u ı g ro w th w h e n w e u se G D P to a s se ss a g g re g a te

m n o m lc p e rfo r m a n c e o v e r tim e .

H o w e ve r , 9 h In G D P a ttrib u te d to in c re a s in g a t io n
p o p u ı d o e s n o t tr a n s la te to
ın c r e a s ın g m ・t e r ıa ı w e ı
fa re fo r t h ・ c ı
tız e n . f p ro
ı d u c tio n ı
e v e ls ris e w ith a
ı
a rg e r r fs e in p o p u ı
a tio n , t h e s h a r e o f go o d s e f o r c o n s u m p tio n f o r
a n d s e rv ic e s a v a ila b ı
a n a v e ra g e c it iz e n ls a c tu a ı
ıy b w e r T h is
. is w h y p e r c a p ita v a lu e s a re u sed in th e
m e a s u re m e n t o f m a te r ia ıs ta n d a rd o f liv in g in S e c tib n 3 . 1 M a te ń a l S ta n d a rd o f L i v ih g .

R e a lG D P p e r c a p ita is m e a s u re d In $ lc a p ita , a n d ls s im
p ly

R e a l G D P
c u r r m t y * a r
R e a l G D p p er C a p t t r r ・n t y ・a r
=

Pop u la t io n s lz e cu r r m r y ıa r

ı
r re a l G D P o f a c o u n tr y in c re a s e s b u t lts in c re a s e s b y 10 % fo r t h e
by 5 % p o p u ı
a tio n

ye a r, t h e n r e a l G D P pe r c a p ita d e c re a s e s , s in c e t h e n u m e r a t o r r is e s s lo w e r t h a n t h e

de n o m in a to r . T h is in d ic a te s a fa ll in s ta n d a rd o f liv in g . It w o u ıd b e in c o rre c t to s a y th a t
th e 5 % e c o n o m ic g ra M h re s u ı
te d T h e re fo re In c o m p a rin g
in g re a te r w e lfa re .
, h o w
m a te ria l w e tfa re c h a n e s o v e r t im e
g ,
w e m u s t a c c o u n t f o r
p
o
p
u la t io n c h a n
ge s a s w e ı
ı .

4 2 . C O M PA R ı
S O NS O V ER SpAC E

P u rc h a a ı
n g P o w e r P a r ıt y

P u rc h a s in g p o w e r p a rity ( P P P ) is a th « »r y o f e xc h a n g e r a te s w h e re b y a u n ı
t o f a n y

gı
v ・n c u rre n c y * h o u ıd h a b ı
e to b u y th e s a m e q u a n tı
ty o f g o o d s ın a ıı
c o u n t r ıe a . T he re ls n o p u r c h a s in g p o w e r p a rit y if 1 S G D c a n u s e d to p a y fo r a b u s rid e
in S in g a p o re b u t c a n p a y fo r u p to 4 b u s rid e s in M a la y s ia .
PPPdjusted e xc h a n g e
l c o n v e rt 1 S G D
r a te s w lı to a va ı
ue in M a la y s ia R in g g it ( M Y R ) t h a t a ı
ıo w s it to p a y fo r 1
b u s rid e In M a la y s ia to o . T hu s , pu rc h a s in g p o
lw e r
p a
r it
y
w i ıı n e e d to ta k e In t o a c c o u n t

th e p re v a lı in g e xc h a ng e ra te s ( o r th e n o m ın a ı e x c h a n g e r a t ・) , a n d a d
ju s t th e m fo r
dı ffe r e n c e * ın c o l t o f ı
ıv ın g .

f 1S G D
ı ca n e xch a n g e fo r 3 M Y R a t th e m o n e y c h a n g e r, t h e n t h e n o m in a ıe x c h a n g e
2o
ra te l$ 3 M Y R /s G D . H o w e v e r, If 1 s G D c a n b e u s e d to
p
a
y
fo r e x a c tı
y o n e b u s rid e in
M a la y s ia w h ic h ls w o r th 0 . 7 5 M Y R In M a ı
a y s ia ,
t h e n th e P P P
-
a
q u s te d e xc h a n g e ra te
la 0 . 7 5 M Y R /S G D . P u rc h a s in g p o w e r is a c h ie v e d w h e n th e P P P -
a d ju s te d e xc ha n g e
ra te la u se d s in c e 1S G D ca n n o w p a y fo r o n e b u s rid e re g a rd le s s o f w h e th e r th e
co n s u m e r ı n S in g a p o re o r In
s ı

T he ra tio n a le fo r u s in g P P P -
a d ju s te d e x c h a n g e ra te s to c o n v e r t G D P fig u re s ı
le s In t h e
n e e d to a c c o u n t fo r d if fe re n c e s ı
n c o s t o T llv ln g w h e n c o m p a rin g fa re
m a te ria l w e ı
b e tw e e n c o u n t rie s . If th e re a l G D P p e r c a p ita ı
n S in g a p o re is h ig h e r th a n th a t o f
'

łn d ia ı , a n a v e r a
ge S in g a p o re a n m a y e a m a h ig h e r in c o m e b u t m a y n o t n e c e s s a rily
ha v e a b e tte r s ta n d a rd o f liv in g c o m p a re d to a n a v e ra g e 4 n d ia » . T h is ls b e c a u s e h e
m a y no t be a b ı e to a ffo rd a s m a n y th in g s d e s p ite a h ı
g h e r In c o m e s in c e c o s t o f liv in g ls
h ig h e r In S in g a p o r e T h e re fo re , w e ıf a r e m e a s u r e m .
e n t s c o n c e r n t he p u rc h a s in g p o w e r

2o
T h iı e x c h a n g e r a t e c a n a ls o b e e x p re s s e d a s 0 .
3 3 S G D Ķ w h ic h w o u ıd b e t h e
p r ic e o f
+n d im r ıĦ p » in m e a s u re d in S G D .

'

'
R ım r m r øt u t io n
2 7
o f in c o m e s m a d e b y c itiz e n s r a th e r th a n its ı
e v e l, r e
q
u ir in
g
t h e u s e o f P P P
-
a d ju s tm e n t
to e ı
im ln a te d iĦe re n c e s in c o s t o f liv in
g b e tw e e n c o u n tr ie s .

40000

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ın - - - - - - - _ _
đ ı U n i t e d S t a t e s ı n d i a p p p u n ń e d s t
I ) a t e s p p p
( )

F ig u re 10 C o m p a rin g G N ı p e r c a p ita b e tw e e n U S a n d ın d ia , u s in b o t h n o m in a ı
g

e x c h a ng e ra te a n d P P P -
a d ju s te d e x c h a n g e ra te

W ne n P P P - a d ju s te d re a l G D P p e r c a p ita is u se d , t h e d if f e r e n c e s in m a t e r ia ı s t a n d a r d

o f ı
iv in g b e tw e e n d e ve ı
o pe d a nd d e v e ı
o p in g e c o n o m ie s te n d to se e m ı
e s s s ta rk s in c e
co st of ı
M n g in d e v e lo p in g c o u n tr ie s is m u c h lo w e r .

T he u se o f P P P d j u s t e d re a l G D P p e r c a p ita in m a k in g c o m p a ris o n s a b o u t m a te ria ı

w e ı
fa re a c ro s s s p a c e is ı
im ite d b e c a u se o f th e w a y it is d e riv e d . T he id e a is to
c o m p a re th e p ric e s o f th e sa m e b a ske t o f g o o d s a nd s e rv ic e s in tw o d iffe re n t
c o u n tń e s , a n d u s e t h e r a t io o f th e p ric e s a s th e e xc h a n g e ra te . H o w e v e r, l» M ro à

ç o u n t r ıe s c a n p ro d u c e th e e x ac t s a m e b a s kq w h ic h a « e c ts t h e a c c u ra c y o f th e
c o m p a ris «»n s . Fo r e x a m p le , if 1 S G D a ıl o w s S in
g
a
p
o r e a n s t o
p
a
y
f o r a b u s r id e e it h e r in

S in g a p o r e o r in 4 n d i* w e c a n n o t s a y th a t 1 S G D b r in g s to c o n s u m e rs th e sa m e ı
e v e lo f
w e ı
fa re re g a rd ı
e s s o f c o u n tr y b e ca u se th e q u a lity o f th e b u s rid e in S in g a p o re a n d in
In d ia w o u ld b e d iĦe re n L H a v in g p a r ity o f p u rc h a s in g p o w e r is la r g e ı
y a th e o re t ic a l
id e a l F u rth e
. rm o re , It is a ls o d i f f ic u ıt t o d e t e rm in e t h e c o m
p
o s ıt ıo n o f t h e b a s k e t ,

s in c e th e ba ske t sh o u ı
d r e fle c t c o n s u m p tio n patterns o f c o n s u m e rs . Y e t, t h e

c o n s u m p tio n p a tte rn s a r e d iĦe re n t a c ro s s c o u n tr ie s .

D ı
Ħe re n c e ın p o p u la t ı
o n

In m a k in g c o m p a ris o n s o v e r s p a c e , d if fe re n c e s in p o p u ı
a tio n m u s t b e a c c o u n te d fo r . A
c o u n tr y w ith a s m a lı
e r p o p u la tio n n a tu ra ı
ıy h a s ı
o w e r p r o d u c tio n ı
e ve ı
s . T h is d o e s no t
m e a n th a t th e y e n jo y le s s m a te ria l w e lfa re . T he re a s o n s a re s im ila r to w h y w e ta k e

po p u la tio n c h a n g e s in to a c c o u n t w h e n m a k in g c o m p a r is o n s o v e r tim e .

D ı
ffe re n c e ı
n c o n s u m p t io n p a tte r n s b a s e d o n c o n te x t o f c o u n t r ı
e s

G oo d s co n su m e d in a n y tw o c o u n trie s m a y no t b e id e n tic a l d u e to c o n te x t u a ı
d iffe re n c e s ,
in c lu d in g im a te
c ı . Fo r in s ta n c e , in t e m
p
e r a t e c o u n t r ie s s u c h a s G e rm a n y ,

c o n s u m e rs s p e n d m o re o n w o o lle n c lo th in g a nd o n h e a tin g d u ńn g w in te rs com p a re d

to c o n s u m e r s in tro p ic a l c ı
im a te s w h e re c o n s u m e rs s p e n d ı
e s s o n c h e a p e r b in a n d
 The
'

c o tto n c ı
o th in g ,
a n d d o n o t e x
p
e r ie n c e w in t e r s . re fo re , G e rm a n y s
g re a te r

e x p e n d itu re w iı
l b e re fı
e c te d in its h ig h e r G D P . H o w e v e r, t h is d o e s n o t im p ly t h a t its

c ń iz e n s a re m p a re d to c itiz e n s in tro p ic a ıc o u n tr ie s
b e tte r o f r m In p ra c tic e .
, it is a ı
m o st

im p o s s ib ı
e ı
o a d u s t n a tio n a l in c o m e fı
g j
u re s fo r th e s e s o rts o f d iĦe re n c e s .

D iffe re n c e ın a c c o u n t in g p ro c e d u r e
s

T he re is n o in te m a tio n a ı
ıy a g re e d m e th o d o f m e a s u ńn g n a tio n a ı in c o m e so n o t e v e ry

c o u n tr y u s e s th e sa m e b a s is fo r th e ir f ig u re s . A c c u ra c y in d a ta c o lle c tio n a ls o v a rie s .

Thus ,
n o t t he sa m e va ńa b ı
e s a re m e a s u re d fro m F o u n tr y to c o u n tr y , a n d e v e n t h e

s a m e v a ria b le s m a y b e m e a s u re d to d iĦe re n t d e g re e s o f a c c u r a c y .

$ectionalEmmal
w
n e n c o h p ań s o n sa
' ma de , r
ther limi tat ion s ar ise on t op of thq limi tat ion s
th a t in d ic a to rs a ı
re a d y e x
pe rie n c e .

=
W h e n m a k in
g
c o m
p
a r is o n s o v e r t im e ,
it is im p o r ta n t to u s e re a ıv a lu e s o f G D P

in o r d e r to e lim in a te th e e ffe c t s o f in f ı
a tio n .

ı r a c e
W h e n m a k in c o m a r is o n s re a rd in w e tf a r e b e tw e n c o u n t r ie s o v e s p ,
g p g g p

th e G D P sho u ı
d b e a d j u s te d w ith t h e P P P -
a d ju s te d e xc ha n g e ra te in o rd e r to

a «x x »u n t fo r d iĦe re n c e s in c o s ts o f liv in g .

■ s
O th e r d iĦ e re n c e s s u c H a s o u ıa t io n s iz e a n d c o n te x t a ls o c r e a te l im it a t io n
p p

fo r c o m p a ra tiv e a n a ly s e s .

5 0 V E R V IE W O F T H E S IN G A P O R E E C O N O M Y

' '
S in g a p o re is a m o n g th e Fo u r A s ia n T ig e rs p
r a is e d fo r its ra p id e c «»n o m ic g ro w th a n d

im p ro v e m e n ts in s t a n d a rd o f ı
iv in g . M o s t s tu d ie s a tt rib u te th is to th e H n d u * * ıa lı
s a tı
o ıd

in fro m th e 1 9 6 0 s to 19 8 0 s ,
a n d t h e r e s t r u c t u r in
g
o f t h e e c o n o m
y
t o fo c u s o n m n .

ı
a nd W u m d d « * e c to r* » o m th e 1 9 9 0 s o n w a rd s . W n ile e c o n o m ic p ro g re s s

is e v id e n t , n e w is s u e s s u IT o u n d in
g *
,

u s ta ı
n a b ı
ııty . ın c ıu a ıv e n e
ņ , a n d b e ı? q h a v e

a ris e n to o . It is d iffic u lt to m a ke a g e n e ra ıs ta te m e n t a b o u t h o w o u r s ta n d a rd o f liv in g

'

c h a n g e d . . T hu s , a t t e m
p ts to a n a ly s e S in g a p o re s e c o n o m
y
m u s t be c o m p re h e n s iv e .

'
5 1 . S IN G P O R E S E C O N O M ıC p E R F O R M A N C E

c p l (2 0 1 4 B a S e
m ı 77 .

ı
n fı
a t io n ra te % 0 . 5

u n e m p ıo y m e n t ra te ,
3 1 .

%
B a ıa n c e o f P a y m e n ts
2 0 3 96 7 Ð a
$m
. .

po s it io n ,
illlo n

In 2 0 15 , p ro d u c tio n a n d in c o m e le v e ls in c re a s e d f ro m th e p re v io u s y e a r b y a b o u t 2 % ,

s u g g e s tin g a n e x p a n s io n o f th e e c o n o m y . It is lik e ly th a t th e in c re a s e in G D P is

R a Ħh . H S » h n 2 9
Econo. Ic s D e p ' " e n t
a c c o m p a n ie d b y ris in g e m d p y m e n t le v e ls , b u t a b s o lu te e m
p
lo
ym e n t le v e ls a re n ot
z1
N o n e th e le s s , t e r m ī ik e
'

re lle c te d in th e s e in d ic a to rs .
U o e m p lo )w n t ra te , l ly

c lo s e to th e N A IR U . S in g a p o re e x p e rie n c e d d e fla tio n fo r th e firs t tim e in th e la s t te n

y e a rs , w h e r e
p
r ic e s
g e n e ra u y fe ll b y a b o u t 0 . 5% . T h is m ay b e a c a u s e o f c o n c e r n fo r
th e S in g a p o re a n g o v e rn m e n t F in a lly , t h e E a .
B æ ı , w h ic h m e a n s th a t
o n th e w h o le , S in
g a p o re s o ld m o re to th e fo re ig n e co no m y th a n it b o u g h t fro m it .

T he re w o u ld h a v e b e e n

ıt is c le a r h ic h
'

th a t th e re is # §Ð i Ħ c g r w h a n d lo w e r b n e m p !Q V M e ı
ıt e v e ry 5 y e a rs , w

in d ic a te s C h a n g e s in in fla tio n a n d
'

m Ę c o n o m ic p rı B O P
q g M g m e n t p ņ w q .

po s itio n w ill n e e d to b e f u rth e r a n a ly s e d b y lo o k in g a t o th e r d a ta , a n d e x

p
la in e d w ith
m a c ro e c o n o m ic th e o ry th a t w ill b e c o v e re d in T h e m e 3 . 2 M a c r o e c o n o m ic A im s an d
Is s u e s N o n e th e le s s ,
.
:t Ħ ü § s h o u ld n o t t h m ņ o Ħ b e m is t a k e n ly in te r p re te d a s
-
'

æ g qţ #m iņ tra d e a g t i ￠ıS . It o n ly m e a n s th a t l t §r e iiħ re .

īI1IĠïÝt b ii ãĦ§ê t liĦ
1 m \ e n t ßQ į iĘlļ?m
-

m Q ą î į ! t ! -ĝ l? ġ ċ ia t A c c c E * a r t h o u g h
g m g ņ w H a s a re s u lt 0 '
international
transacti
'
5 2 . S IN G A P O R E S S T A N D A R D O F L ıV ıN G

'
S in g a p o re S S M g n ım Æa g H '
v a lu e fo r 2 0 1 4 is o . 9 12 ,
o u t o f a m a x im u m

o f 1 . T h is p u ts S in g a p o r e a t a p o s itio n o f 11 o ut of 188 c o u n t r ie s . M uch o f th e

im p ro v e m e n t o f th e H D I f ro m 19 8 0 a n d 2 0 14 is a ttrib u te d to im p ro v e m e n ts ĺ n m a te ria l
w e lfa re , a s t h e G DP in c re ased b y a b o u t 3 0 0 % th a t p e rio d . O th e r n o ta b le
im p ro v e m e n ts in w e lfa re in c lu d e th e in c re a s e in life e x p e c ta n c y a t b irth b y 1 1 y e a rs ,

a n d a n in c re a s e in m e a n y e a rs o f s c h o o lin g b y a b o u t 7 y e a rs .

T he S in g a p o re g o v e rn m e n t a ı
so s ta rte d to d o c u m e n t th e t re n d o fg F q u a ıı
ty ın d ı i

s in c e 2 0 0 7 in ı
ig h t o f g ro w in g c o n c e r n s o v e r a ir p o llu tio n . T o ta ıg r e e n h o u s e e m is s io n s
in c re a s e d a b o u t 2 0 % b e tw e e n 2 0 0 7 a n d 2 0 14 . T he a n n u a ım e a n o f P M 2 . 5 pa rtic ı
e s
ra n g e d a ro u n d 19 m ic ro g ra m p e r c u b ic m e t re th e s a m e p e r io d , a lt h o u
g
h t h e r e w a s a

s ta rk in c re a s e to 2 4 m ic ro g ra m p e r c u b ic m e tre in 2 0 15 , ıi k e ı
y
c o n t r ib u t e d b
y
t h e

' '
w o rs e n in g h a z e s itu a t io n . T he re w e re d a y s w it h g
o o d a n d m o d e r a t e a ir
q
u a ıi t
y
8 7 . 5%
o f th e tim e in 2 0 1 5 , w h e r e a s b e t w e e
n
2 0 07 a n d 2 0 14 , t h is v a lu e r a n
g
e d a r o u n d 9 8 % .

A c c o r d in g to s ta t is t ic s f ro m th e M in is try o f M a n p o w e r , t he to ta l
paidWiöūTRií*ieP pe r
e m p lo y e e p e r w e e k h a s c o n s is te n tı
y b e e n a ro u n d 4 6 h o u rs fro m 2 0 0 6 to 2 0 15 . T he
pa id o v e rtim e h o u rs is a ls o b e tw e e n 3 -
4 ho u rs w e e k ı
y . T h is m a ke s u p a n a v e ra g e o f

a b o u t 9 -
10 h o u rs a d a y g iv e n a fiv e d a y w o rk w e e k . C o n c e rn s o ve r o u r ı
o ng w o rk

ho u rs a n d h ig h s t re s s le v e ls a re n o t n ew , a n d a re g ro w in g a s o u r e c o n o m y

p ro g re s s e s . S u c h lo n g w o r k h o u rs c o u ı
d g re a tly re d u c e o u r s ta n d a rd o f ı
iv in g .

S in g a p o re h a s b e e n d o in g w e lt m a te ria lly s in c e its in d e p e n d e n c e , q u ic k ly

a tta in in g th e s ta tu s a f a d e v e lo p e d c o u n try w ith in 5 0 y e a rs .

'
S in g a p o re s d e s ira b le e c o n o m ic p e rfo rm a n c e w a s a k e y fa c to r in flu e n c in g th e
im ro v e m e n ts in s ta n d a rd o f liv in g H o w e v e r , t h e r e a r e n o w g ro w in c o n c e rn s
p .

g
o f s u s ta in a b ilit y , in c lu s iv e n e s s a n d o th e r n o n -
m a te ria l a s p e c ts o f w e lfa re .

ņ
Em p lo y m e n t le v e ls h a d r is e n b y 3 2 ,3 0 0 th a t
y
e a r . T h is is th e d if fe r e n c e b e tw e e n th e n u m b e r
o f p e o p le e m p lo y e d b y t h e e n d o f th e y e a r in 2 0 1 4 a n d 2 0 1 5 . In o th e r w o r d s , a n e t to ta l o f

3 2 ,3 0 0
p
e o
p
le fo u n d w o r k .

R am e. . S b l u n
ı 3 0
Econom ic s D e p a rM ent
 A pp e n d ix A -
M e t h o d s o f C a ıc u ıa t in g N a t io n a ı In c o m e

The n a tio n a l in c o m e id e n tity d s b e c a u s e

h o ı o f t h e lċ i r ċ iıı￡ir f ló w o f iń c ö iin q in th e e c o n o m y . T h is g iv e s ńse

to n t p ro d u c t a p p ro a c h in co m e a p p ro a c h a n d e x p e n d itu re a p ro a c h
th r e e w a y s o f m e a s u re m
F ,
p .

ı
n co m e s

ı
m p o r t s «M '
Ex p o r t s (x )

i E x te r n a l E c o n o m y

F ig u re 1 C lrc u la r llo w o f jn c o m e in th e op e n e co ı
1o m y

T he w ōd u c t .
APPiitiË in v o ıv e s a d d in g u p th e Ħ iĵ ã ! . ā! ü ėÁf äıĺ tië ģ ö õĎś .
ā ñđ\ v ic
q
s p ro d u c e d b y in a n

e c o n o m y . W he n w e a d d u p th e v a lu e o f th e o u tp u t o f a ı
l fir m s , w e m u s t b e c a r e f u l to a v o id c fo u b le c o u n t ih g
.

Fo r e x a m p ı
e ,
if a m a n u f a c t u re r s e lı
s a te ı
e v is io n to a re ta ile r fo r $ 2 0 0 a n d th e re ta ile r s e lls it to th e c o n s u m e r

fo r $ 3 0 0 ,
t h is t e le v is io n w o u ıd h a v e o n l
y
c o n t r ib u t e d $ 3 0 0 to th e G D P , n o t $ 5 0 0 In . o t h e r w o rd s , G D P c a n b e

c a lc u la te d th ro u g h th e p ro d u c t a p p ro a c h b y e ith e r s u m m in g th e v a lu e .
o f a lı f in a ı o u t p u t p ro d u c e d o r b y

s u m m in g th e v a lu » a d d e d a t e a c h s ta g e o f p ro d u c tio n .

T h e p ro d u c t io n o f g o o d s a nd s e rv ic e s g e n e ra te s in c o m e s fo r h o u s e h o ı
d s in th e fo rm o f w a g e s fo r la b o u r ,

in te re s t fo d p ro f its T h is
fo r c a p ita ı
,
r e n t r la n d ,
a n fo r e n tre p re n e u rs h ip
T he
.
g iv e s ris e to th e m a p p ro î
g .

T h is is th e m e th o d o f a d d in g u p a ll th e s e in c o m e s . v a lu e o f a lı th e p ro d u c ts e a rn e d b y firmš w iı
ıb e

returned b a d s in e ith e r o f th e s e fo u r fo rm
c k to h o u s e h o ı s o f in c o m e . T h is is w h y p ro d u c t is e q u a l to in c o m e .

T he T h is
【
l e x p e n d it u re o n fin a ıo u t p u t
e x p e n d it u r e a p p r o a ë !ï a d d s u p a ı . in c ı
u d e s m e r expendltu
(C ) w h ic h is a ı i e x p e n d itu re o n g o o d s a n d s e rv ic e s b y h o u s e h o ld s a n d b y n o n p ro fit in s tit u t io n s s e rv in g
-

ho d s ; I n v e Ħ i iıë ñ t
u s e h o ı {ı
lw h ic h a lıe x p e n d itu re o n c a p ita ı
, s u c h a s b u iı
d in g s a nd m a c h in e ry ,
in c ı
u d in g

in v e n to rie s o f ra w m a te ria ls fin is h e d g o o d s o r fin he d g o o d s ; g o v e rn m e n t

'

pe n d it u ŕ ē l G ) w h ic h is
ĵ
-
s e m i e x
,
'

ıg o v e r n m e n t e x p e n d itu re o n fin a l g o o d s a n d
a ı s e rv ic e s ,
but e xcı
u d e s tra n s fe r p a y m e n ts ,
s u c h a s p e n s io n s
e x p o iriś -M
a n d s o c ia l s e c u rity p a y m e n ts a n d ıi t (X ) ļ w h ic h is th e n e t e x p e n d it u r e b y fo re ig n c o u n tń e s o n

th e e x p o r ts o f g o o d s a n d s e r v ic e s a n d im p o rts h a v e to b e s u b tra c te d .

S in c e th e s u M o f a lıe x p e n d itu re s c a n g iv e u s th e n a tio n a ıp ro d u c tio n o r n a tio n a ıin c o m e , w e c a n w ń te G D P

= Y = c ◆ ı ◆ G ◆
(x -
M ) .

D iffe r e n t u s e s o f d iff e r e n t a p p r o a c h e s

tp ii m m t i 中中 r h e lp s to d e te rm in e c o n t rib u tio n f ro m v a rio u s in d u s trie s . T h is a p p ro a c h u se s d a ta fro m

th e c e n s u s o f p ro d u c tio n to d e r iv e p ro d u c t io n fig u re s o f th e v a r io u s in d u s tń e s . T h is r e v e a ls t h e m å i t i v

\ļ ñiwiiciėiï hëlifféreńt ś ē đõi a n d in d u s tr ie s o f t h e e c o n o m y b y s h o w in g th e ir r e s p e c tiv e c o n tr ib u tio n s to

n a tio n a l in c o m e a n d th e p e rc e n t o f t h e to ta l la b o u r fo rc e e m p ı
o y e d b y th e m . T he re la t iv e c o n trib u tio n o f th e

ı
T h is in c lu d e s g o v e r n m e n t e x p e n d it u r e o n n o n -
m a r k e te d s e r v ic e s . Fo r in s ta n c e ,
S in g a p o re
'
s e d u c a t io n is a r g e ly n o t
ı

m a r k e t e d a s th e e x c h a n g e o f th e s e r v ic e is n o t d ir e c tl y b e tw e e n
p ń v a te f ir m s as d co n su m e rs . R a th e r * m o s t s c h o o ıs a r e

gove rnme nt
-
o w n e d Th . tı
s, p
r ic e a n d
q
u a n t it
y
is n o t d e te r m in e d b
y
m a r k e t fo r e s . S uch e x p e n d it u r e is a ls o in c lu d e d in

th is c o m p o n e n t .
 国

d iĦe re n t s e c t o rs is a r e lle c t io n o f o f a c o u n tr y w ith t h e a r y s e c to r b e in g a m a jo r

t h d e v e l ó r e * t p rim
c o n trib Lı
to r in a d e v e lo p in g c o u n t ry a n d . T he s e c o n d a ry s e c to r b e in g th e m a in c o n t n b u to r in a n in d u s t ria lis e d
c o u n t ry .

a iËiiĦ # show s d is t r ib u tio n

b e t w e e r l '" rem a r T h is m e th o d in d ic a te s th e
d is trib u o n
tı o f n a t in n a l in c o m e a m o n g d iĦe re n t in c o m e la
g ro u p s s u ch a s w o rk e r s , c a
p
it a l is t s , n d lo rd s a nd
e n tre p re n e u rs s in c e it s h o w s th e n a tio n a l in c o m e s h a re o f e a c h T he d is trib u tio n o f th e n a tio n a l
g ro u p -

in co m e
profit is
'
b e tw e e n w a g e , r e n t , in te r e s t a n d s ig n ific a n t in d e te rm in in g w h e th e r a c o u n t ry s in c o m e is
= e s H a T ha t is , th e e x te n t to w h ic h in c o m e is u ne q u a u
y d is tr ib u te d b e tw e e n th d = H m ] æ
(w a g e ea r n e r s a n d t n e o w n e n ￥ e n t, ın t e r e s t a n d p ro f it e a r n e rs
) .

ĮE x p e n d lt u r e a p p ro a c g id e n tifie d w rc e s o f e c o n o m T h is
g ro w t ņ a p p ro a c h is m o s t c o m m o n ly u s e d in
s t u d y in g m a c ro e c o n o m ic s T he æi a t i v e c o n h ib u ü o ￠ o f c o n s u m p t io rl , o v e r n m e n t e x p e n d itu re
g
.
in v e s t m e n t
,

a n d n e t e x p o rts d e te r m in e s th e d e p e n d e n c e o f e c o n o m ic g ro w th o n c o n s u m e r d e m a n d ,
de m a n d fo r c a p ita l,

g o v e r n m e n t njection o r o n th e external e co n o m y A c o u n tr y w ith a l Ħ i d o m e s tic d e m a n d

1
tilB ıg e s ig n Ħ c a n c e o f th e c o n s u m p tio n c o m
p o n e r p w o u ld b e * ā s s V u ln e ra b le to
e x t e

2
H a M e s ı. s b l o n
E . n o m ic s o e p a r e n t
 A ppe n d ix B -
D iĦe re n c e s r e la te d t o N a t io n a ı lq c o m e a c c o u n t in g

N a tio n a l in c o m e c a n b e c a lca rla te d a t g r o s s o r n e t v a lu e . T he d iĦe re n c e b e tw e e n t h e m is th e d e p re c ia tio n o f

'

G in d
"

th ro u g h w e a r a n d te a r o r o b s o le s c e n c e ro s s ic a te s th a t th e v a lu e lo s t
c a p ita l s to c k w h ic h o c c u rs .

th ro u g h th e w e a r a n d te a r o f c a p ita l u s e d in p r o d u c tio n h a s n o t b e e n d e d u c te d . If !h is ņ a c ia ū o rı w e re
* P ı
2
d e d u c te d fr o m t h e G D p w e w o u ld h a v e a m e a s u re c a lle d n e t d o m e s tic p r o d u c t ( N D p ) .

ı
n sh o n G D P - d
ep r ec i at i on -
N D P

te
'

T he o re tic a lly ,
N D P iv e s a t r u e r
p
ic t u r e o f a n a t io n s in c o m e th a n G D ı
? . H o w e v e r, e c o n o m is t s nd to use
g
\
th e g r o s s fig u re s b e c a u s e d e p re c ia ti n is h a rd to e s t im a te a c c u ra te ly -

2 .
Q 0 ŁA Į M A B Ķ E T p R ı
ÇE $ D p A T FA C T O R C O S Į

M u c h o f w h a t w e s p e n d o u r m o n e y o n is s u b je c t to in d ir e c t t a x e s o r In d ir e c t s u b s id ie s . Fo r e x a m p le ,
if a

s to re s e lls a p r o d u c t fo r $ 1 . 00 a n d G S T is 7 % , t h e t o t a l b i n is $1 07 . . H o w e ve r , o n l
y $ 1 00 . o f t h a t p u rc h a s e

go e s to th e s to re o w n e rs . T he r e m a in d e r $ 0 . 07 go e s to th e g o v e rn m e n t . T he re fo re ,
c o n s u m e r e x
p
e n d it u r e

pa id o u t is n o t e x a c tly e q u a l to in c o m e s p a id o u t fo r w a g e s ,
in t e r e s t , r e n t a n d
p r o f its . S u c h a d ju s tm e n ts fo r

n e t in d ir e c t t a x e s w iil re s u lt in G D p a t fa c to r c o s t , w h ic h is e
qu a l to e x p e n d itu re . In o th e r w o r d s ,

GD P a t f a c to T c o s t = G D P a t m a r k e t
p
r i c e s
-

T t e t lııd ir e c t ta x e s

- G D p a t m a r k e t
p
r i c e s
-

(t a x e s
-

s ı ı bs id ie s )

= G D P a t m a r k e t
p
r ic e s
-

t a x e s + s u b s id i e s

E c o n o m is ts u s u a lly d is tin g u is h b e tw e e n G D P a t m a ı* e t p ri c e s a n d G D P a t fa c t o r c o s t , a n d w ill u se G D P

a t fa c to r c o s t f o r a n a ly s e s . N o n e th e le s s , t h e tw o m e a s u r e s w i ll n o t s h o w m u c h v a r ia t io n w he n it c o m e s to

a s s e s s in g im p a c t e c o n o m ic g ro w th u n le s s t h e re a re b ig c h a n g e s in in d ire c t ta x a tio n /S u b s id ie s .

3 .
Ș Ș N A T !Q N A ! P R O O vș Ģ R O S Ș M T I I N C O M

T h e d e fin itio n o f t h e g r o s s d o m e s t ic p r o d u c t ( G D P ) w a s c le a rly e x p la in e d in S e c tio n 2 . 1 E co n o m ic G m ud h .

H ow e v e r, s o m e c ïa rific a ıio n s m a y b e n e e d e d fo r th e s u b tle d iĦe re n c e s b e tw e e n g ro s s o n a l p ro d u c t

n a tı

(G N P ) a n d g ro s s n a t io n a l in c o m e (G N ı
) . In th e p a s t , m a c r o e c o n o m ic a n a l
y
s e s by W o rld B a n k u s G D P

a n d G N P . H o w e v e r, s in c e 2 00 1 , t he W o rld B a n k h a s s w itc h e d to u s in g G N I in s te a d o f G N P .

G ro s s n a t io n a l p r o d u c t ( G N P ) re fe rs to t h e v a lu e o f th e fin a l o u t p u t o f g o o d s a n d s e rv ic e s p ro d u c e d fr o m a

in It re t h r o u g l Ħm q q g j i ın d ıt u ıu a h a
'

c o u n t ry s r e s o u r c e s a ye a r . fe rs to c a lc u la tio n s d o n e

G ro s s n a t io n a ı In c o m e (G N ı
) r e fe rs a ls o to th e v a lu e o f th e f in a l o u t p u t o f g o o d s a n d s e r v ic e s p ro d u c e d
'

fro m a c o u n tr y s r e s o u r c e s i n a
ye a r , bu t is c a lc u la te d u s in g t h i l Þ p t c i m . Fo r in s ta n c e ,
t h e W o r ıd

'

B a n k d e f in e s G N I a s t he s u m o f v a lu e a d d e d b y a ll re s id e n t p ro d u c e r s p lu s a n y p ro d u c t t a x e s (m in u s

s u b s id ie s ) n o t in c lu d e d in th e v a lu a t io n o f o u tp u t p lu s n e t r e c e ip ts o f p ń m a ry in c o m e (c o m p e n s a t io n o f

e m p lo y e e s a n d p r o ￠»e r ty in c o m e ) fro m a b ro a ď .

T he re f o r e ,
bo th G N P a n d G N I a re e q u iv a le n t in v a lu e , o n l
y
d if f e r e n t in m e t h o d o f m e a s u re m e n t . B o th o f

th e a re a ls o d iĦte re n t f ro m G D P b y th e n e t in c o m e ır o m a b n o e d
m (N F ı
A ) .

4 . NC O M E
ı D IS P O S A B L E ı
N C O M E v s EıL ı! \R Y
D IS c R E T ı IN C O M E

=lii re fe rs to a ll th e w ñ ıö æ ć to łq m a d e b y h o u s e h o ld in th e to rm at
! n t e w ņ § n o - p r o n q
How e v e r, a h o u s e h o ld c a n n o t c ho o se to spe nd o f a ll t h e in c o m e s th e y m a ke , a s t h e
y ha ve to p a y d ire c t

ta x e s to th e g o v e r n m e n t . Ta xe s o n w a g e s in te re s t s
, a n d r e n t a re c a lle d p e rs o n a l in c o m e ta x , w h i te t a x e s o n

p ro fits a re c a lle d c o rp o ra te ta x e s . Thu s , th e in c o m e th e y is a t th e d is p o s a b le o f th e h o u s e h o ld is o n ly th e

'
S i. I la r l y , if w e tlr d r t« r d t h e d e r e c i a t io n łi o m G IW o r G N Į , w e w o u ld e t t h e c o r r e s o n d in N N P o r N M .
p g p g

R a m as J b s h h n n 3
E c on am h D epaHm ent
 国

W S tą a x m c o a ls o k n o w n a s th e .
D iś þiiś a b ıe ın c o m e a s u re s th e in c o m e th a t p e o p le h a v e a v a ila b le
fo r s p e n d in g o r s a v in g : i fte r a n
y Ħ ē ď u c tio n s a d d itio n s f ro m tra n s fe r
Fo r in c o m e ta ) q
G p a nd
. e . A -

pa y m e n ts s u c H a s p e n s io n s o r c h iı
d b e n e fit , e tc . Ha v e b e e n m a d e .

D is p o s a b le in c o m e , Yd -
ın c o m e
-
n e t d ir e c t t a )ce s
- in c o m e
-

(t a x e s -
s u b s id ie s )
* =
ta x e s + s u b s id i e s
-
ın c o m e

w iı
ıb e c h a n n e ı
ıe d to e ith e r o f th e fo lı
o w in g th re e
componentsqonsu ,

O n th e o th e r
d , į in c o m e re fe r s to in c o m e le ft a t t h e d is c re tio n o f h o u s e h o ld s
a n e r
n a v e P e e n .æ ı
ĝ a n d a fte r
d is c re t io n a ry in c o m e is d is p o s a b le
.
s
pe n d in g
o lex m s u n © m -
ha s b e e n d e d u c te d . In o th e r w o rd s ,
in c o m e ss s p e n d in g n e c e s s itie s . D is c re tio n a r y in c o m e is
ty p ic a lly u s e d in a n a ly s e s o f s o c ia l w e lfa re
, r a th e r th a n f o r th e p u rp o s e o f m a c ro e c o n o m ic a n a l s e s
y .
 A pp e n d ix C -
ı
m p a c t o f s o u rc e s o f e c o n o m ic g r c? w t h o n s u s t a in a b iı
it y a n d in c ıu s iv e n e s s

s t a in a b ıe e c o w t h

S u s ta in e d e co n o m ic g ro w th a c h ie v e d b y a c t u a ıa n d p o te n t ia l e c o n o m ic g ro w th m a y n o t b e s u s ta in a b le if it is
a t th e e x p e n s e o f th e e n v iro n m e n t . T he s e s o u rc e s o f re p a id e c o n o m ic g ro w th a re u n ı
ik e ı
y s u s ta in a b ı
e

U iid u s tr ia lis a tlm

ı
n d u s tria ı
is a t io n is rg a n is a tii»n
'

p t a
-

th e ・
(
e o c o u n try s
p ro d u c t io n p ro c e s s e s th a t in v o lv e th e m !ic a tio n o I
g e c h ıo \ a n d m e c h a n ic a ıa n d e ı
e c tric a ıp o w e r to
șopiiıimërit än ď r e p la c e h u m a n ı
a ib o ü l ın d u s tria lis a tio n
re s u ı
ūfāctúńńį indūitiijl a ls o
'
ts
áħ
thelTřħ da
' 3
in th e e s ta b lis h m e n t o f .
know n a s th e s e c o n ry in d u s tr y .

ı
n d u s tria lis a t io n h e lp s a c o u n try t o g ro w b y t h e Ħu g m e n t i ń j th ė p ro d ü đ iv įtl o f its r e s o u rc e s w ith te c h n o lo g y ,

a nd is u s u a lly re ı
a te d w ith in flo w o f fo re ig n d ire c t in v e s tm e n t th a t f u rth e r in c re a s e s e c o n o m ic a c tiv ity in a n
e co n o m
y .

H ow
'

e v e r, w he n m o re m a c h in e r y is u s e d , fu e l u s a g e in th e p ra d u c tīo n o f m a n u fa c tu re d g o o d s re s u lts in th e
§g a t m w r w H i í extemaitiipf ai r po H u t ion ol
©
t h a t red u c e s t he qu a h v of ai r fof al l o f so c i ev . P lut ed ai r
th a t is n o t c le a n e d u p w ill c o n tin u e to a ffe c t fu tu re F u rth e io
g e n e r a tio n s . rm o re , t h e
p
ro d u c t n o t e le c tric iv
u s in g f u e ls g iv e s r is e to
g re e n h o u s e g a s e s th a t re s u lt m g lo b a l w a rm in g C h a n g in g g lo b a l c lim a te s w ill a ffe c t .

th e s u c c e s s o f a g ric u lï ıirn t n r ï iv itie s in t h

m a n d th e liv e lih o o d o f f u tu re g e n e ra tio n s .

ın m a n y e m e rg in g c o u n t r ie s e x p e r ie n c in h ig h fo
g ro w th r a te s rm o f ı
a rg e -

g ,
in d u s t r ia l iz a t io n o c c u r s in t h e

s c a le c a p ita ıin te n s iv e e n te r p ris e s in s te a d o f s m a ı

-

ı -
s c a le r u r a l in d u s t rie s . M a n y o f th e s e ı
a rg e -
s c a le in d u s tria ı
-

a c tiv itie s o c c u r in th e i v y a n d ċ h e rji ic ia l iėċ torsl w h ic h c a u s e s g r e a te r e n v ir o n m e n ta l d a m a g e . Fo r

in s ta n c e , S o u th K o re a
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s r a
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in d u s tr ie s s u c H a s s h ip b u ild in g a u t o m o b ile a n d c o n s tru c tio n in d u s tr ie s P re s e n t ı C h in a is a ı
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ın a d d itio n , Ëi i i n . ó f fo r e s tk irid fo r In d u ś triä t u s e c o m p o u n d s th e p ro b ı

e m o f in d u s t ria lis a tio n . T h is is
be c a u s e 1 d e f o re s ta tiō ii ı a c tiv itie s re d u c e th e a ir q u a lity a n d p ro d u c e ı
a rg e a m o u n ts o f c a rb o n d io x id e

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w
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s u c h th a t m o re la b o u r c a n b e e m p lo y .
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s ta n d a rd s o f f u tu re g e n e ra tio n s .

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q t T h e e c o n o m ic g ro w th re s u ı
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rnurages g re a te r c o n s u m p tlō i Ĥ r h e re s o u rc e s o f
a n e c o n o m y m ig h t b e d e p le te d q u ic k ly to m e e t th e ra p id ly ris in g d e m a n d . ı
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n a tu ra l r e s o u rc e s a n d
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a g r ic u lt u r a l p r o d u c ts . T h is b e c o m e s a p ro b le m w h e n th e e x p o rts r e a c h
f la n d b e c o m e s u n lik e ly
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o
.

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de p e n d s o n it s m in in g a c t iv itie s to e x p o rt m s to
in e ra ı th e w o rı
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o s e to 6 % o f its G D P . S uch e x p o rts o f n a tu ra ı re s o u rc e a n d

le v e ls o f p ro d u c t io n a n d e c o n o m ic g ro w th in th e s e c «»u n trie s
a g r ic u ı
tu re s ig n ific a n tly e x p ı
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s y s te m a ls o a Ħe c ts fo o d c h a in s a n d fo o d p ro d u c tio n fo r f u tu re g e n e ra tio n s .

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a n d in c re a s in g ly u n e q u a l in c o m e d is tr ib u tio n o v e r th e
po s itiv e re la tio n s h ip b e tw e e n f u rth e r e c o n o m ic g ro w th
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In th e p u rs u it o f e c o n o m ic g ro w th ,
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in te n s iv e m ig h t f o s te r e c o n o m ic g r a w t h a t th e e x p e n s e o f in c o m e in e q u a lity .

o p e n in g u p o f th e e c o n o m y t d © $ a

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th a t p ro d u c e s g o o d s t h a t w ill b e re p la c e d b y im p o rts , w h i c h
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E x
.

W h ile g ì Ħq g E
d e m a n d fo r la b o u r in s u n s e t in d u s tń e s T h e s e la b o u r m a rk e t c h a n g e s re s u lt i n t Ħ .
.

g re a te r flo w o f t ra d e is re la te d w ith g re a te r e ç o n o m ic g ra w th , it a ls o r e s u lt s
i l w =
A m la æ = = o u n tr y w ill
Fu rth e rm o re , m ig ra tio n o f la b o u r a ls o a « e c ts s u p p ly o f la b o u r a nd w a g e s .

in c r e a s u p p ly o f lo w k ill
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k ille in s e a rc h fo r b e tte r o p p o r tu n itie s

a f a ll
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s u r e o n w a g e s o f in c re a s in g ly s c a r e e highkilı
erl
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e n in
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o f th e e c o n o m y to g lo b a lis a io n a llo w s c o u n t rie s to re a p th e Æ M t M A E M

冒弱国国園回国曲目 th e c h a n g e s in t h e 國 壓 鸛 國电炻园デ 山 c a u s e 因 丽

6
R n s titu tio n
a fĦe s ł
E c o n o m ic s D \ a rtm e n t