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ECO403 Macroeconomics GDB 1 Solution Spring 2013

MAGA-DEVELOPER is one of the top leading Bungalows constructing companies in Singapore. Directly and indirectly MAGA-DEVELOPER accounts for 27% of Gross Domestic Product, 40% of exports, 15% of imports and employs 17% of the total labor force. It has been observed that people of this country have started preferring bungalows over flats from last few years. They are using bungalows not only for residences but also for offices, hotels, galleries, spas and restaurants. To meet higher demand, suppose the managing directors have decided to build one thousand bungalows in first phase. For the construction of 1000 bungalows, the said company has taken three major actions. First, company has purchased 80% material domestically while 20% material is imported from Japan and China. Second, to materialize the project, company has hired more workers on attractive salaries and increased salaries of existing workers to increase their efficiencies.  Third, company has got relaxation on electricity charges from the government.

Requirement:

Keeping in mind the above situation, analyze how the above stated actions taken by MAGA-DEVELOPER will affect overall consumption level of people of this country.


Soltuion: When MAGA-DEVELOPER buil 1000 bungalows its mean company hire labor  its mean total labor force will increase, People of the country in fact employees and employer earn money and their living standard will also increase. So consumption will also increase. People move from necessities to luxury, this is the rule of thumb, because necessities are limited but luxuries are unlimited. There consumption level and living standard will increase consecutively.

The demand of bungalows in Singapore very high. So Mega Developer want to construct 1000 bunglaws in 1st phase to meet higher demand.  For the construction of 1000 bungalows, the said company has taken three major actions. First, company has purchased 80% material domestically while 20% material is imported from Japan and China. Second, to materialize the project, company has hired more workers on attractive salaries and increased salaries of existing workers to increase their efficiencies.  Third, company has got relaxation on electricity charges from the government
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