Introduction

First of all, we need to find out what is inflation. Inflation is defined as a sustained increase in the overall level of prices for goods and services. It is measured as a percentage of annual growth. As inflation rises, every pound you have bought a smaller percentage of goods or services. The cost of a pound does not remain constant in the presence of inflation. The cost of a pound is observed in terms of purchasing power, which is a real, tangible goods that money can buy. When inflation increases, a decrease in the purchasing power of money. For example, if the inflation rate of 2% per year, then theoretically £ 1 a pack gum will cost £ 1,02 per year. After inflation, your pound can not buy the same goods it could beforehand.

There are several options on inflation:

• Deflation is when the general price level falls. This is the opposite of inflation.

• Hyperinflation unusually rapid inflation. In extreme cases this can lead to the collapse of the monetary system of the country. For example, one of the best examples of hyperinflation occurred in Germany in 1923, when prices rose 2500% in a month!

• Stagflation is a combination of high unemployment and economic stagnation with inflation. This happened in industrialized countries in 1970, when the bad economy, combined with OPEC raising oil prices

Singapore was founded by a British trading colony in 1819. It joined the Malaysian Federation in 1963 but separated two years later and became independent. Singapore subsequently became one of the most prosperous countries with strong international trading links (its port is one of the world’s busiest in terms of tonnage handled) and per capita GDP equal to that of the leading countries of Western Europe.

Singapore has a highly developed and successful free market economy. It has a surprisingly open and corruption-free environment, stable prices, and GDP per capita is equal to that of the four largest countries in Western Europe. The economy depends heavily on exports, particularly in consumer electronics and information technology products. It was hard getting into the 2001-03 global recession, the downturn in the technology sector, as well as the outbreak of severe acute respiratory syndrome (SARS) in 2003, to curb tourism and consumer spending. Fiscal stimulus, low interest rates, export growth, and internal flexibility led to strong growth in 2004-07 real GDP growth averaged 7% per year. The government hopes to establish a new growth path that will be less vulnerable to global cycles of demand for information technology products – attracted a lot of investments in pharmaceuticals and medical technology production – and will continue its efforts to establish Singapore, Southeast Asia, financial and high technology center. Annual inflation rate in Singapore was 6.7% in March – the highest since 1982 – and in the country currently pays a high price in the establishment of a global city of the good life.