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SS-side policies improves economic capacity over time. Does not have much impact on the current economic situation

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SS-side policies can raise economics growth, but may not improve the deflationary condition.

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SS-side policies can raise economics growth, but may not improve the deflationary condition.

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SS-side policy increases economic growth but does not address the root cause, i.e. low AD

Effect on AD is not as direct as DD-management fiscal policy that targets directly at raising AD.
In fact, effect on AD is uncertain, depending on firms' and households' response on government's policy measures. This depends on level of business optimism during this period of deflation.

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Effect of taxes on economic outlook.

Like our minister of finance said, government policies are put in place for the firms to increase investments, but its up to the firms to use them.
Hence the effectiveness of lowering taxes depends on business confidences the firms have on the economy.

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Small multiplier will limit the effectiveness of fiscal policy

Singapore's high saving and high import make its multiplier small, limiting the effect of the increase in AD on NI. Hence govt expansionary demand-management policies will lead to rise in NI by a small multiplier.

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During recession, AD is low. Also during recession with deflation, economic optimism is low. Firms not very willing to invest due to low profit margin as prices are not rising during deflation.
Hence there;s a need for the government to increase G to increase AD. Also need to lower taxes to stimulate C and I.

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e.g. lower taxes attract new investments
--> help to lower costs --> increases SRAS

e.g. anti-trust laws
e.g. subsidies on start-up costs
e.g. increase no of licences into an industry
--> more firms in the market -->  increases AS.
--> Also increases competitiveness in the market --> encourage efficient production methods --> lower production costs  --> increase X competitiveness --> increase X --> increases AD

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Effect of multiplier effect from fiscal policy depends on nature of the citizen's spending. Singaporeans like to save, so extent of multiplier effect not that large.

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However, there will be time lags in policy implementation. For the expansionary fiscal policy to be implemented, the Singapore government is required to debate and discuss the policies before they can be implemented. This leads to delays between recognising deflation and the implementation of the solutions. Hence, the solutions may only come into effect by the time Singapore has recovered from deflation or the economic situation may have worsen.

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grants, subsidies, tax rebates --> help to cover costs for technology   --> increase productive capacity --> LRAS --> increase long run growth / potential growth

Also subsidies on training -->  Invest in ongoing skills developement for workers
-Encourage worker to improve their skills, preventing structural unemployment( match skills to the current level of technology) -> Increase labour productivity --> increase employability hence lower unemployment.
- Also, more people working => more people have income => increase in disposable income => increase consumer expenditure => further increase in production. This multiplier process continues --> NI increases --> improves economic growth and rising prices and hence inflation to a healthy level as the economy moves towards full employment.

policies to help lower production costs can maintain and improve the country's competitiveness --> higher export and foreign investment --> higher AD --> higher production
Also increase economic capacity, hence increase LRAS --> increase national output and econ growth

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1. Impact on distribution of income
- short term
- lower taxes rates, reduced union power and privatisation all contributed to gap between rich and poor
Ms Marhaini's comment: irrelevant to the question.

2. Receptivity of public
-reducing unemployment benefits and abolishing minimum wages can lead to wide spread discontent and worsen working conditions that will affect labour productivity
Ms Marhaini's comment: So? Does this affect the effectiveness of ss-side policy in addressing the economic recession and deflation? If yes, if what way?

3. Trade off with environmental sustainability
- increases market freedom can lead to higher economic growth but natural resources can be exploited and negative externalities will result.
Ms Marhaini's comment: How is this relevant to the question? What has this to do with managing the economy in the face of recession?

Positive:
-let market forces operate more efficiently
-improve competition ..
Ms Marhaini's comment: so to what extend does this help to increase growth and GPL during this recession and deflation period?

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Expansionary Fiscal Policy may cause increase in GPL, hence increase inflation, thereby addresses the issue of deflation. The increase in GPL during deflation would mean that the Singapore economy is facing healthy inflation.

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some older age workers may have difficulty in learning the new skills that is provided by the government
-The money spend on investing ongoing skills training could have been better use on other sectors such as Education and Healthy care
Ms Marhaini's comments: relevance of these on the policies' ability to manage the economy in the face of deflation

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increase G to directly increase AD
also lower taxes . lower income taxes to increase disposable income  --> increase C
lower corporate taxes --> attract I --> increase AD
the increase in AD --> increase production, employment, via multipier process --> increases NI and hence increase economic growth