With the A Levels around the corner, I’ll be spending the next couple of weeks churning out free high quality content for you. Yes, you, my loyal reader. In the past few months, I have been sharpening my edge at NIE. Now, I have quite a few new tricks up my sleeve. I want to help you maximise your learning and revision time.
The implications of what we discussed yesterday are profound for modern society. Most of you reading this will end up working in specialised jobs that take advantage of your unique talents. For your skills to add value to society, you don’t have to be the best1; you just need to have a comparative advantage.
The following data relate to the Singapore economy in 2011
|Private Consumption Expenditure||129|
|Gross Fixed Capital Foundation||77|
|Government Consumption Expenditure||34|
|Exports of goods and services||531|
|Imports of goods and services||444|
How is monetary policy determined?
To understand how a policy is formulated, you have to first understand the motivation of the Central Bank. Depending on the country we are referring to, the central bank either is independent of or controlled by the government. Regardless, in general it is safe to assume that the Central Bank wants to achieve its mandate. For the Federal Reserve in the US, it is maximum employment (5.2% to 5.5%), stable prices (2% inflation), and moderate long-term interest rates; for the Bank of England, it is similar, it has the dual mandate of maintaining financial stability and meeting the government’s inflation target, which is at 2%; for the Monetary Authority of Singapore, it aims to promote sustained non-inflationary economic growth, a sound and progressive financial centre using the exchange rate as a main policy instrument. The key economic principle here is that agents respond to incentives, and agents are rational. The Central Bank’s staff is incentivised to achieve the bank’s objectives and will find ways to do so actively.