Usa and Singapore Inflation
Introduction
Have you ever wondered why the price of an item that you normally buy keeps increasing every other time you buy it? Every month, prices of raw materials keep rising and rising. Companies are forced to increase their prices to keep the profits margin up and employees are also expecting higher and higher wage due to the simple fact that they can’t afford the increasing cost of living. On one hand, companies need to price their goods relatively high to cover increasing cost of raw materials. But at the same time, employees are demanding pay rose since commodities prices are increasing. If the companies increase their employee’s wages, they need to increase the price of their products again, leading to higher prices in commodities. This interlocking effect is the work of inflation and if a country is not cautious, their economy can be severely damaged. In a way, inflation affects everyone living in this world and in today’s economy, not everyone has the same income and purchasing power. When cost of living becomes too high, it would have undesirable effects on us. So how high is too high and how much is too much? Therefore, it is important for us to understand what exactly is causing this constant increase in price and find ways to control it. For the rest of this paper, our analysis is based on an article from The Straits Times dated 25th February 2008, entitled “January inflation may be as high as in 70s oil crisis”.
Literature
In this paper, our main objective is to explain the inflation process that is ongoing in Singapore today and our views on how the Singapore government can effectively tackle this situation. The proposed solution is derived by comparing and analyzing the various methodologies used to control inflation.
The analysis done in this paper is approached from a micro to macro perspective. Firstly, we will introduce the definitions of inflation, various types of inflation and what causes inflation. Secondly, we will be
Have you ever wondered why the price of an item that you normally buy keeps increasing every other time you buy it? Every month, prices of raw materials keep rising and rising. Companies are forced to increase their prices to keep the profits margin up and employees are also expecting higher and higher wage due to the simple fact that they can’t afford the increasing cost of living. On one hand, companies need to price their goods relatively high to cover increasing cost of raw materials. But at the same time, employees are demanding pay rose since commodities prices are increasing. If the companies increase their employee’s wages, they need to increase the price of their products again, leading to higher prices in commodities. This interlocking effect is the work of inflation and if a country is not cautious, their economy can be severely damaged. In a way, inflation affects everyone living in this world and in today’s economy, not everyone has the same income and purchasing power. When cost of living becomes too high, it would have undesirable effects on us. So how high is too high and how much is too much? Therefore, it is important for us to understand what exactly is causing this constant increase in price and find ways to control it. For the rest of this paper, our analysis is based on an article from The Straits Times dated 25th February 2008, entitled “January inflation may be as high as in 70s oil crisis”.
Literature
In this paper, our main objective is to explain the inflation process that is ongoing in Singapore today and our views on how the Singapore government can effectively tackle this situation. The proposed solution is derived by comparing and analyzing the various methodologies used to control inflation.
The analysis done in this paper is approached from a micro to macro perspective. Firstly, we will introduce the definitions of inflation, various types of inflation and what causes inflation. Secondly, we will be