Discuss whether the introduction of maximum prices by a government would solve the problem of scarcity.

1751 WordsFeb 22, 20148 Pages
Discuss whether the introduction of maximum prices by a government would solve the problem of scarcity. Introduction Maximum price is the highest possible cost of a good or a service that is legally allowed. While an unregulated market usually does not have a maximum price besides what consumers are willing to pay, during certain times, the government would step in to assert some price control so that consumers within the country will not be affected that badly by inflation. (BusinessDictionary.com, 1999) How Does Maximum Prices Affect A Country? While setting a maximum price would ensure that all citizens of the country would be able to afford products, setting a price ceiling would shift the price equilibrium causing a few things…show more content…
Lastly, maintaining economic growth would then ensure better standards of living. Potential growth is especially important as it ensures that the country’s growth is sustainable. Most Significant Macroeconomic Problem The most significant macroeconomic problem that Singapore faces is to maintain the high speed of growth. Since the founding of the country, economic growth has accelerated so fast within the country that Singapore has been catapulted from an unknown village to one of the world’s best ports. Singapore’s currency has also been progressively getting stronger over the past few years. Therefore, in order for Singaporean citizens to continue enjoying the current standard of lifestyle, the rate at which the country’s economic growth has to be constant. The Singapore Government has therefore used the monetary policy and the Fiscal Policy to help them achieve their macroeconomic aims. Monetary Policy The Monetary Authority of Singapore manages the Singapore dollar exchange rate against a trade-weighted basket of currencies of Singapore's major trading partners and competitors. The composition of this basket is reviewed and revised periodically to take into account changes in Singapore's trade patterns. This trade-weighted exchange rate is maintained broadly within an undisclosed target band, and is allowed to appreciate or depreciate depending on factors such as the level of world inflation and domestic price pressures. Monetary Authority of

More about Discuss whether the introduction of maximum prices by a government would solve the problem of scarcity.

Open Document