Asian countries like as Singapore have achieved tremendous economic growth in the last forty years of development. The key success factors has been macroeconomic stability in these countries.

Topics: Macroeconomics, Economics, Inflation Pages: 5 (1800 words) Published: May 30, 2014
Many Asian countries such as Singapore, HK, and South Korea have achieved tremendous economic growth in the last forty years of development. One of the key success factors has been macroeconomic stability in these countries. Multiplier effect --- population

Talk aboit the characteristic of Asian countries-past 40 years –deveoping country –vast raw material 1
Economic growth is defined as an increased in the level of production of goods and services by a country over a certain period of time. Economic growth can be in terms of real economic growth or potential economic growth. I agree with the author that one of the key factors that have allowed many Asian countries to have achieved economic growth has been macroeconomic stability such as low inflation, low unemployment rate and stable exchange rate in the currency market. However these Asian Countries have achieved tremendous economic growth are also due to other supporting key success factors such as globalisation and political stability enjoyed in these countries which I will explain in this essay. 2.Low Inflation

I agree that macroeconomic stability due to low inflation is one key success factor that leads to economic growth in many Asian countries. Inflation is defined as the sustained increased in general price level. When there is low inflation in these Asian countries, it helps to ensure a competitive export industry. This implies that its exports will have a higher price competitiveness over their trading partner hence its export will increased. For example, Singapore, a small and open economy with no natural resources depends mainly on its trade for its economic growth. Hence having a low inflation allows Singapore goods to be relatively cheaper than foreign goods and this cause the net export of Singapore to increase.(…………….).Low inflation protects domestic industry away from foreign goods competition as the price of the domestic goods is cheaper than foreign goods will cause the demand for imports to fall. Thus low inflation would result in an increased in net export (X-M Low inflation also leads to an increase in the investment expenditure. Since Singapore has low inflation ,it implies that Singapore tends to be more stable and there is less uncertainty, firms and foreign direct investors will find it easier to estimate the costs and revenues of investments. (………)Hence when inflation is low it will give a good business sentiments and this leads to an increase in investment expenditure. Since net export (X-M) and investment expenditure are components of aggregate demand when net export (X-M) increased and investment expenditure increased, AD will also increase. ( Graph figure1 ………………………………..) As seen from figure 1,when AD curve shift right from AD1 to AD2 the general price level increase from p1 to p2 and real GDP increases from Y1 to Y2.Thus,Singapore experience real Economic growth as a result of macroeconomic stability due to low inflation. Thus, I agree with the author that one of the key success factors leading to economic growth in many Asian countries is due to macroeconomic stability.

3. Low unemployment
Another key success factors that leads to economic growth has been macroeconomic stability due to low unemployment rate. Unemployment is defined as the number of people who is willing and able to work but is unable to find a suitable job and is contantly searching for a job. Asian countries for example Singapore have a low unemployment rate. The low unemployment rate allow the economy in Singapore to produce a larger amount of output and implies a large amount of people in Singapore have income. Thus, having low unemployment rate that the consumers in Singapore have higher spending powers due to higher disposable income and more people having the ability to spend as they holds a job. Thus consumption level in Singapore will increase. In addition, when the unemployment rate in Singapore is low, the government will be able to collect more tax...
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