Inflation in Singapore is caused by both domestic and foreign demand pull factors and cost push factors. Singapore primarily suffers from demand-pull inflation, which can occur when the increase in aggregate demand (AD) consistently exceeds that in aggregate supply (AS), causing excess demand when the economy is close to or at full employment. Inflation, in this case, is due to the rise in AD, which can come from the rise in C, I, G and (XM), thus causing upward pressure on the general price level (GPL). Say no to plagiarism. Get a tailor-made essay on 'Why violent video games should not be banned'?Get the original essay Singapore's main source of demand-pull inflation would be rising revenues of its trading partners, leading to a increase in household purchasing power. This, in turn, leads to a greater increase in demand for Singapore's exports. When there is an increase in Singapore's net exports, its AD increases, leading to an increase in LPG. This can be seen as countries like the United States recovered from the 2008 global financial crisis. Being one of Singapore's largest export markets, when the national income of the United States increases, it will result in a increasing demand for Singapore's exports. With the value of Singapore's exports being more than twice that of its domestic economy, this will have a significant impact on AD and therefore LPG. Additionally, there could also be an increase in foreign direct investment (FDI). This is not only because of the higher expected rate of return on investments in Singapore when external demand increases, but also because multinational companies (MNCs) producing in Singapore tend to be export-oriented. An increase in FDI will lead to a rise in DA and upward pressure on LPG prices. Singapore may also face demand-pull inflation from domestic sources. For example, as Singapore's economy recovered from the financial crisis, household purchasing power increased. Combined with the influx of foreign workers arriving in Singapore, this also increased domestic C and AD, leading to an increase in LPG. One source of cost-push inflation in Singapore would be increased global demand for raw materials or products such as food and basic goods. oil. This increases the unit cost of production as these raw materials are a significant factor of production, leading to an increase in AS and therefore an increase in LPG in Singapore, leading to cost-push inflation. For example, in 2012, the average price of crude oil was at historically high levels as OPEC limited its oil production. This was a significant factor in Singapore's high inflation rate that year, because with few or no substitutes for imported raw materials like oil, demand for its imports is price inelastic. GPL thus increases.Keep in mind: this is just a sample.Get a custom paper from our expert writers now.Get a custom essayAnother cause of cost-driven inflation in Singapore would be the government efforts to reduce the influx of foreign workers. Tightening foreign labor policies have led to an overall increase in the labor force that is slower than labor demand, resulting in a labor shortage. The rise in wages..