“Against this backdrop of continuing increase in global oil, and other commodity prices, as well as increase in business costs due to tighter conditions in the labour and commercial property markets, an upward shift of the S$ exchange rate band at this point will help to moderate inflation going forward, while providing support for sustainable growth in the economy.”Adapted from Monetary Authority of Singapore Policy Statement, April 2008 Explain how an increase in external and domestic costs mentioned above may affect the balance of payments of Singapore. [10 marks]
Chapter: Balance of Payment
Changes in the external and internal costs affect the cost of production, which will influnece the changes in level of exports and imports. As such, changes in the level of exports and imports will affect the balance of trade, which affects the balance of payment. Assess the possible consequences of changes in the costs that affect the external equilibrium.
07 August 2018