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SERANGOON JUNIOR COLLEGE H1 AND H2 ECONOMICS

PRELIM ESSAY QUESTIONS 2010 PRELIM ESSAY QUESTIONS

SCARCITY, CHOICE, OPPORTUNITY COSTS & MARKET FAILURE ACJC Resources are used to produce bottles for the water industry. Around the world, campaigns to ban bottled water are under way as consumers become aware of the environmental and economic costs involved.

The Straits Times, Tuesday, July 14 2009 Discuss if a ban on bottled water is the best way to reduce the environmental and economic costs involved. [25] ACJC Compared with December 2008, the consumer price index remained stable in December 2009. Higher costs of transport & communication and health care were offset by lower cost of housing.

Singstat.gov.com.sg (a) Explain the reasons for the rising health care costs in Singapore. [10] (b) Assess the desirability of the government fully subsidizing healthcare expenditure in Singapore. [15] CJC Discuss the view that direct provision by the government is the most effective policy to adopt in tackling the sources of market failure in the health care industry in Singapore. [25] DHS (a) Explain, with supporting examples, how public and merit goods might lead to market failure. [10] (b) Assess the view that public goods and merit goods should be the major causes of government intervention within Singapore. [15] DHS (a) Explain how the price mechanism allocates scarce resources among competing needs in a free market. [10] (b) Discuss if the price mechanism is always the best way to allocate scarce resources in the economy. [15] HCI Singapore government allocates the largest amount of the fiscal budget to the Ministry of Defence and the Ministry of Education. Discuss whether the expenditure in defence and education by the Singapore government contributes to the economic goals of efficiency and economic growth. [25]

Italicised questions – H1

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HCI "The Singapore Government vowed to improve drainage and step up alert systems after parts of the city-state were hit by flash floods, damaging homes and business."

The Straits Times, 20 July 2010 (a) Explain what is meant by public good and consider whether the flash flood alert system is an example of a public good. [10] (b) Discuss whether government intervention in the markets for goods and services within Singapore should be restricted to the provision of public goods. [15] IJC (a) Analyse, with supporting examples, how income inequality and positive externalities can result in market failure. [10] (b) Assess the extent to which government policies in Singapore can correct these causes of market failure. [15] IJC The ASEAN health ministers agreed it was vital to educate the public about good hygiene and encourage high risk groups to get seasonal flu vaccination. (a) Explain the need for government intervention in educating the public about good hygiene and encouraging vaccination. [10] (b) Discuss the likely impact of contagious diseases on the Singapore economy in the era of globalization. [15] JJC At the Copenhagen climate change meeting, UN estimated that one-third of the profits of the world’s 3000 largest companies would be lost if firms were forced to pay for the use, loss and damage of the environment. UN “polluter pays” principle states that whoever is responsible for environmental damage should bear the cost associated with it.

Source: The Guardian, November 2009 (a) Explain why global warming is a cause of market failure. [10] (b) To what extent would policies that internalise the costs of environment damage

reduce global warming? [15] JJC Discuss the view that the development and operation of the Integrated Resorts should be left entirely to private enterprises but fireworks display during National Day Parade and health care must be provided by the Singapore government to correct market failure. [25] MI The Housing and Development Board (HDB) of Singapore has a ruling that a couple who are buying a new flat in its public housing program must have a combined monthly household income of not more than $8000. This is because new HDB flats are heavily subsidized by the government. (a) Explain whether you consider a HDB flat a public or merit good. [10] (b) Discuss whether the above action by the Singapore government leads to a better

allocation of resources in the housing market in Singapore. [15]

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MJC Assess the view that the Singapore government should use taxes rather than any other economic policies when dealing with the market failure associated with negative externalities. [25] MJC a) Using examples, explain and illustrate how private and social costs differ. [8]

b) How far do you agree with the proposition that economic activity of the government

should be restricted to the provision of public goods within Singapore? [17] NJC With reference to examples, discuss whether there is a need to change the current policies adopted by the Singapore government in the market for healthcare. [25] NJC “Hong Kong expatriates are fleeing the country. Hong Kong's air contains 1.3 times more particles of soot and other pollutants than Tokyo's, 1.7 times Singapore's and 3 times more than New York's. More than half of the pollutants come from its own power plants, vehicles and ships' burning bunker fuel, the other 40% from roadside emissions by buses.”

Source: The Straits Times: 16 May 2010 (a) Using economic analysis, explain how the situation described above is an example of market failure. [10] (b) Assess the various policies that the Hong Kong authorities could implement to alleviate the above situation. [15] NYJC Healthcare services are provided free in France, but not in Singapore. (a) Explain why the provision of healthcare services may lead to market failure. [10] (b) Discuss whether the Singapore government currently adopts appropriate policies to overcome this market failure. [15] PJC (a) Explain TWO ways in which an economy might move from a point within its production possibility curve (PPC) to a point on it. [10] (b) Discuss the most effective policies used to move the PPC outwards in Singapore. [15] RI Music recording companies have been plagued with the issue of illegal distribution of their music and of lost sales from their digital recording media like CDs. On the other hand, consumers have been willing to pay for online music services by Apple iTunes to download songs of their preference for a price of $0.99 each. (a) Distinguish between private goods and public goods and consider whether digital content is a public good. [12] (b) Discuss the effectiveness and desirability of protecting intellectual property rights. [13]

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PJC (a) Explain whether public housing could be considered to be an example of a public good or merit good. [10] (b) Discuss whether government intervention can lead to a more efficient allocation of resources where merit goods exist in markets. [15] RI The pricing of water should be left to market forces. However, some governments choose to subsidise water while others place a tax on it. Comment. [25] RI Cancer is the number-one killer in Singapore. Through regular screening, cancer can be detected early where treatment is generally more successful. (a) Consider whether screening for cancer is likely to be a merit good or a public good. [10] (b) It is better to subsidise such cancer screenings that to embark on costly health campaigns. Comment. [15] SAJC The Singapore government actively promotes research and development (R&D) by firms through tax deductions or grants, such as the Productivity and Innovation Credit introduced in the 2010 Budget. a) Consider whether scientific knowledge derived from R&D is a public good and explain

why the government needs to intervene in the private market to promote investment into R&D by firms. [10]

b) Evaluate market-based and non-market-based solutions to correct market failure

associated with externalities in production. [15] SAJC “There has been a sharper rise in world petroleum prices compared to food prices in the last 10 years.” Discuss the likely causes of the above and its effects on the global allocation of resources. [25] SRJC (a) Explain how public goods and merit goods cause markets to fail. [10] (b) Consider whether market-based solutions are the best way for the Singapore government to correct market failure that results from the existence of a negative externality. [15] SRJC Beyond a certain level of road usage, traffic congestion increases and eventually it undermines the environment, quality of life and overall efficiency of the economy. (a) Analyse how traffic congestion can lead to market failure. [10] (b) Evaluate the measures that could be taken by the government to solve the problem of market failure due to traffic congestion in your country. [15]

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TPJC a) Distinguish between private and public goods using relevant examples. [10]

b) The economic activity of the Singapore government should be restricted to the

provision of public goods. Discuss. [15] VJC “Singaporean households across all income groups earned more money last year, said the Department of Statistics. In fact, its findings showed the average monthly household income rose by over 9 percent, the fastest rate of growth in 10 years. But the income gap between the rich and poor has also widened.”

Channel News Asia 13 Feb 2008

(a) Examine the main sources of income inequality in Singapore. [10] (b) Evaluate the policies currently used by the Singapore government to address the

issue of income inequality. [15]

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DEMAND, SUPPLY, ELASTICITY CONCEPTS ACJC According to the United Nations (UN) Food and Agricultural Organisation (FAO), wheat has doubled in price; maize is nearly 50% and rice is 20% more expensive than a year ago. Record world prices for most staple foods have not only led to food price inflation in many countries but have had major impact on the market for fertilizers and meat products.

Adapted from The Guardian, 3 November 2007 (a) Explain the likely reasons for the record rise in staple food prices in recent years. [10] (b) Assess how the markets for fertilizers and meat products might be affected by these

price increases. [15] CJC In November 2008, political turmoil caused the closure of the Bangkok’s Suvarnabhumi International Airport. a) Using demand and supply analysis, explain how the above closure may affect the

tourism related industries in Bangkok. [12]

b) Discuss how the tourism related industries in Bangkok could reduce the impacts of or increase the gains from the turmoil. [13]

DHS The strong Asian economic recovery and low interest rates fuelled the property market in Singapore. At the same time, the government is releasing more new HDB units and more land for sale to private developers. (a) With the use of a relevant demand elasticity concept, explain the relationship between public and private housing. [8] (b) Assess the impact of the above events on the private and public property markets in Singapore. [17] HCI With economic growth and the Singapore government’s move away from direct taxes towards indirect taxes, examine the impact on business sales and revenue of various types of goods and services. [25] IJC Developments in modern technology and increasing availability of books, magazines, newspapers and other printed publications on the Internet have had major impact on the demand and supply of print media and associated services. Assess how the markets involved might be affected by these developments. [25]

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NYJC “We must implement subsidy reforms for foodstuffs that will remove distortions in the marketplace and enable us to better target our resources to those most in need, and on investments that will provide lasting benefits for Malaysians.”

Statement from Malaysian Prime Minister’s Office, 15 July 2010 (a) Using economic analysis, explain how the market for foodstuffs has been affected by the subsidies. [10] (b) Discuss the view that the Malaysian government should cut subsidies for foodstuffs to better target resources to those most in need. [15] PJC Starbucks experiences a decline in customer visits in America. The current economic environment is the weakest in the company's history, marked by lower home values and rising costs for energy, food and other products that are directly impacting Starbucks’ customers. Starbucks has also been dealing with fierce coffee competition from McDonald's and Dunkin' Donuts.

Adapted from The Guardian, 24 April 2008 (a) Explain what might cause Starbucks to experience a decline in customer visits in America. [10] (b) Assess the relevance of price elasticity of demand, income elasticity of demand and cross elasticity of demand to the Chief Executive of Starbucks who aims to increase sales revenue. [15] SRJC Assess the usefulness of price elasticity of demand, income elasticity of demand and price elasticity of supply to a government in formulating microeconomic policies. [25] VJC Using appropriate examples, discuss the extent to which elasticity concepts impact the effectiveness of microeconomic and macroeconomic policies of different governments. [25] MI With the recovery of the world economy and the opening of the two integrated resorts which housed casinos, tourist spots like Universal Studio and new hotels, the tourist trade in Singapore will be greatly affected. Assess how the hotel and its related industries might be affected by these developments.

[25] MI Singapore’s real estate prices jumped to a record high in the second quarter as the city state’s economic recovery broadened. Private residential property prices rose 5.2 per cent in the April-to-June period, the highest level since the government began the index in 1975, the Urban Redevelopment Authority said. The prices of government-built HDB flats have also gone up by 2-3 per cent.

The China Post, 2 July 2010

(a) Using demand and supply analysis, explain the increase in residential property prices. [10]

(b) Discuss the measures that may be taken by the Singapore government in the light of

the effects of the increase in property prices. [15]

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MJC Fears of a property bubble forming saw the government introducing measures such as removing easy financing schemes to cool the private homes sector. But Mr Mah Bow Tan said a call for the government to artificially dampen prices is not the solution. Channel NewsAsia 29 Dec 2009 (a) Explain the determinants of housing prices in Singapore. [10]

(b) How far would you support the government’s stand not to artificially dampen prices in the housing market? [15] NJC In light of the global economic downturn, the Government has announced a personal income tax rebate of 20%. In addition, a 40% property tax rebate is given for industrial and commercial properties to help reduce the cost of running businesses.

Ministry of Finance, Singapore Budget 2009 Discuss the effect on market equilibrium of the above budget initiatives for different types of goods & services. [25] TPJC Raw commodity prices such as lead, copper, zinc and oil have all skyrocketed in the past six years. Growing demand from China, India and other developing economies is often cited as the reason. But that demand and periodic supply disruptions alone, cannot be responsible for extent of price increases. Markets can also be driven by speculations but there are concerns about alleged collusion and manipulation.

Adapted from Business Times, 22th Nov 2007

a) Explain the possible factors leading to large increases in the price of raw commodities.

[10]

b) In light of the current challenge of rising raw commodity prices, comment on some strategies that can be undertaken by a car producer like General Motors and Toyota in their pursuit of profits.

[15]

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THEORY OF FIRMS AND MARKET STRUCTURE ACJC The growth of emerging economies such as China and India has seen their companies growing into global corporate giants by acquiring big established companies of Western economies. (a) Explain why companies from emerging economies might want to acquire those of

Western economies. [10] (b) Discuss how such acquisitions might affect the consumers and producers in the

industries of the Western economies where these occur. [15] CJC Food service management company Kopitiam Group is branching into the fast food business. It is bringing the franchise of American fast food chain Wendy's back to Singapore after more than 10 years.

Source: Channel NewsAsia, December 2009

a) Explain how a firm like Wendy’s is likely to determine its output and pricing decisions. [10]

b) Discuss if product differentiation is the best way for firms in an industry like the fast food industry to compete. [15]

DHS Many business buyers buy Dell personal computers through its website. A standard Dell Latitude E6400 would sell for $1,197 if the buyer clicks to the webpage for “small & medium business” or for $1,339 if the buyer clicks to the webpage for “Large Business”.

Luke M. Froeb (2009), Managerial Economics: A Problem Solving Approach (a) Explain, whether this pricing strategy could be considered to be an example of price discrimination. [10] (b) Discuss whether the rapid expansion of e-commerce using the internet is making it easier for firms to practise price discrimination. [15] DHS For the first time, Singapore experienced employment growth amid an economic recession in 2009. The labour market was more resilient than in previous downturns, supported by the Resilience Package and concerted tripartite efforts to save jobs.

Ministry of Manpower, Labour market, 2009 (a) Explain why governments should be concerned about economic recession and unemployment. [10] (b) Discuss whether discretionary fiscal policy is the best way for the Singapore government to ‘save jobs’ for an economy in recession. [15]

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HCI (a) Explain why the Mass Rapid Transit (MRT) network can be considered a natural monopoly and explain how, according to economic analysis, profit maximizing price is set. [10] (b) Discuss to what extent the behaviour of the operator of MRT disproves that economic analysis. [15] IJC Greater contestability will be introduced in the public transport industry to encourage greater efficiency and service improvements for the benefit of commuters. The license period for future Rapid Transit System operating licenses will be shortened while the basic bus service market will be opened up gradually to allow greater competition.

Source: Land Transport Masterplan 2009 (a) Explain the type of market structure in which the Rapid Transit System and bus service markets in Singapore are likely to operate in. [10] (b) Assess whether Singapore government’s move towards a more contestable market in the public transport industry necessarily leads to greater societal welfare. [15] JJC The Nano, the world's cheapest car costing USD 2,500 dollars, was unveiled by India’s Tata Motors in Delhi. One of its main competitors, Hyundai Motors, definitely sees the Nano impacting its sales but remains uncertain about being overtaken as a market leader. Source: Adapted from New York Times, January 2008 (a) Explain how barriers to entry affect firms in the automobile industry. [10] (b) How far do you agree that monopolistically competitive firms are more efficient and equitable compared to oligopolistic firms? [15] MI (a) Explain why firms have different profit levels in different markets. [10] (b) Discuss the extent to which the profit level of a firm will determine its behaviour in the real world. [15] NJC “Consumers’ tastes and preferences is the most important factor in influencing a firm’s pricing behaviour.” Discuss. [25] NYJC Nokia, the world’s largest cellphone maker, said on Thursday that its profit fell by 64 percent in the second quarter as it struggles to compete with innovative software experts Apple and Google in the critical smartphone segment. International Herald Tribune, 22 Jul 2010 (a) Explain the market structure that cellphone makers are likely to operate in. [10] (b) Assess whether it is always in the consumers’ interest when firms are more competitive in the market. [15]

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RI The pay-TV market in the UK consists of Sky TV, Top-Up TV as well as Virgin Media. At present, Sky TV controls 100% of the subscription movie market and more than 80% of the premium sports content. Ofcom, the regulator for UK’s Communications industry, recently decreed that Sky TV has to supply its premium services to its rivals at a controlled price. (a) Explain how, in economic theory, a firm determines price and output. [10] (b) To what extent will an industry, such as the above, always lead to a few large firms dominating the industry? [15] PJC Assess the view that oligopoly is the best market structure to achieve efficiency, equity and innovation. [25] SAJC The telecommunications industry is arguably a classic example of the price leadership model. (a) Explain the factors that a firm may consider in deciding whether to engage in price

leadership behaviours. [10]

(b) Comment on whether pricing decisions should remain as the primary strategy for a telecommunications firm. [15]

SRJC Barriers to entry is the only factor influencing a firm’s pricing strategy and it would always lead to inefficiency. Discuss. [25] TPJC Barriers to entry are an important criterion in determining the types of profit earned by individual firms and the level of economic efficiency between different market structures. Discuss this statement using relevant examples in your country. [25] VJC In Singapore, the healthcare industry has been expanding over the past decade. The emergence of large medical groups, such as Healthway Medical Corporation offering a wide range of services in family medicine, specialist care and dental care, has threatened the survival of small neighbourhood clinics providing just basic healthcare services, some of which have already been forced to close down. (a) Explain possible reasons for the expansion of the healthcare industry over the past

decade. [10]

(b) To what extent will the growth of large medical groups such as Healthway Medical Corporation drive out small neighbourhood clinics. [15]

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INFLATION CJC (a) Explain why a country may experience a persistent rise in its general price level. [10] (b) To what extent is reducing inflation often the most important macroeconomic goal for

a government? [15] JJC The inflation rate in Singapore hit 7.5% in April 2008 – a 26-year high. Discuss whether monetary policy is the best way of achieving price stability in Singapore. [25] MI (a) Explain how changes in the external value of a currency can affect the domestic price level. [10] (b) Discuss whether an increase in the general price level will affect the domestic sector more than the external sector in Singapore. [15] MJC Analyze the recent sources of inflation in Singapore and assess whether low inflation should be the main macroeconomic objective of the Singapore government. [25] NYJC ‘The people in United States are weathering the economic storms of stagflation, fueled by rising oil and food prices, and intensifying housing and credit problems.’ Adapted from ‘Worries grow for worse stagflation’, Associated Press, 26 Feb 2008 (a) Explain the economic problems faced by the United States. [10] (b) To what extent are demand management policies effective in tackling stagflation?[15] VJC The Singapore economy is expected to grow by 4-6 percent for the whole of 2008. Annual inflation hit a 25 year high of 6.6 percent as the local currency weakened and global oil price reached US$147 a barrel, the highest ever recorded. Unemployment rate on the other hand rose to 3.4 percent.

Adapted from Channel News Asia, Oct 2008 (a) Explain the possible causes of Singapore’s high inflation rate. [10] (b) To what extent is curbing inflation more important than reducing unemployment in

Singapore? [15]

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ECONOMIC GROWTH & UNEMPLOYMENT ACJC Singapore’s Ministry of Trade and Industry (MTI) announced on 14 July 2010 that it expected the economy to expand by 13.0 to 15.0 per cent in 2010. The economy’s real economic growth rate in 2009 was -1.3%. Discuss whether small and open economies such as Singapore should adopt different economic policies from those of large economies in order to sustain healthy economic growth. [25] ACJC The US unemployment rate hit a record high of 10.1% in Oct 2009 and the US trade deficit soars to US$36.4 billion for the month of Nov 2009. Some Americans have advocated the imposition of harsh tariff measures on imports from China if she fails to allow the Yuan to appreciate. (a) Is unemployment always caused by competition from cheaper imports? [10] (b) Discuss the effectiveness of the use of harsh tariff measures to prevent unemployment.

[15] ACJC The Ministry of Trade and Industry (MTI) announced today that it expects the Singapore economy to expand by 13.0 to 15.0 per cent in 2010, an upward revision from the earlier forecast of 7.0 to 9.0 per cent.

Straits Times 14 July 2010 (a) Explain the indicators used in assessing the economic health of a country. [10] (b) Discuss whether higher economic growth necessarily leads to a higher standard of living in Singapore. [15] DHS The sheer magnitude of the economic crisis that the world faced in 2008 had led to its equally large policy responses. The deterioration in fiscal positions in major economies will be difficult to reverse. (a) Explain the factors that determine the magnitude of fall in GDP when aggregate demand declines. [10] (b) In view of the above statement, discuss whether governments should have avoided the use of Keynesian fiscal stimulus and adopted alternative policies to smooth out cyclical fluctuations instead. [15] HCI Assess whether the Singapore government currently adopts appropriate policies to achieve high standard of living (SOL). [25] IJC (a) Explain the causes of unemployment in Singapore. [10] (b) Discuss the view that the Singapore government should use primarily supply side policies to achieve low unemployment in Singapore. [15]

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JJC (a) Explain the relative importance of factors that enhance economic growth in Singapore. [12] (b) To what extent do you agree that achieving economic growth is the most important macroeconomic aim for Singapore? [13] MI As the unemployment situation worsens during the recession, the Ministry of Manpower (MOM) will continue to press on by increasing expenditure on various schemes to tackle the downturn. The Manpower Minister also emphasises the need to focus on long-term fundamental issues such as re-employment, skills upgrading, employment of older workers and women so that when the economy recovers, there is a source of workers to support our economic growth.

Adapted from Channel NewsAsia, 5 April 2009

(a) Explain the likely causes of unemployment in Singapore. [10] (b) Discuss the measures that may be adopted by the Singapore government to address

the unemployment problems faced during a recession. [15] MJC The recent financial crisis saw Singapore's exports plunge as the global recession has affected almost all major economies in the world, including the USA. a) Explain how the recent financial crisis would affect the circular flow of income in a

country. [10] b) Discuss the relative effectiveness of demand-side and supply-side policies in sustaining

economic growth and stability in Singapore. [15] NJC “The 2010 FIFA World Cup is viewed as a defining moment for South Africa, with $75 billion in improved roads, airports and other infrastructure; a reduction in unemployment and the potential enhancement of international investment and tourism.”

Source: The New York Times, 27 June 2009

(a) Explain the impact of hosting the 2010 FIFA World Cup on the different types of unemployment in South Africa. [10]

(b) To what extent is a higher rate of economic growth always beneficial for South Africa? [15]

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NJC “In Singapore, inflation hit a 26-year high of 7.5 per cent in April and May partly due to the rise in the Goods and Services Tax over the previous year. In response, the Monetary Authority of Singapore (MAS) gave the Singapore dollar an immediate boost to help offset more expensive imported goods. However, the MAS reversed its Singdollar position in October that year, adopting a neutral stance that signalled its change of priorities from targeting inflation to stimulating economic growth”.

Source: The Straits Times: 30 Dec 2008 (a) Explain the rationale for the change in the stance on the Singdollar over this period. [10] (b) Discuss whether this policy alone was adequate to stimulate the economic growth in Singapore. [15] NYJC The pursuit of rapid economic growth should be the macroeconomic priority of a government. To what extent do you agree with this statement? [25] NYJC (a) Explain natural unemployment and demand-deficient unemployment. [10] (b) Discuss whether the use of demand management policies can solve the problem of unemployment in Singapore. [15] SRJC Labour productivity in Singapore has fallen by 3.9% in 2009. (a) Analyse the possible macroeconomic outcomes of falling labour productivity. [10] (b) Discuss the view that supply-side policies are more effective than demand- management policies to achieve full employment in an economy. [15]

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INTERNATIONAL ECONOMICS: INTERNATIONAL TRADE AND PROTECTIONISM ACJC (a) Explain the economic basis for specialisation and free trade. [10]

(b) Discuss whether Singapore is among the economies that have most to gain from freer

movement of labour and capital between countries. [15] CJC (a) Explain the possible impacts that Free Trade Agreements have on Singapore’s economy. [10] (b) Discuss the effectiveness of using protectionism to address a balance of trade deficit. [15] IJC (a) Explain how immobility of factors of production can affect trade between countries. [10] (b) Assess the extent to which supply factors, rather than demand factors, are the major determinants of trade patterns between Singapore and the rest of the world. [15] MI (a) Explain why protectionism still exists with globalisation. [12] (b) Discuss some measures a government can adopt when confronted with increasing protectionism. [13] NYJC Due to the global financial crisis, countries are quick to impose trade barriers to solve their domestic woes. (a) Explain the above statement. [10] (b) In view of the protectionist tendency, discuss the measures that the Singapore government can take to help alleviate the problems caused by the financial crisis. [15] VJC Despite the many risks of economic globalisation, most countries have been choosing to globalise their economies to a greater extent. This has resulted in significant changes in the patterns of international trade. (a) Account for the possible changes in a country’s trade pattern. [10] (b) Discuss whether countries should globalise their economies despite the many risks of

economic globalisation. [15]

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INTERNATIONAL ECONOMICS: GLOBALISATION, BOP & EXCHANGE RATE CHANGES DHS Governments have imposed minimum wage laws and price ceilings on basic necessities to help their citizens cope with the consequences of globalisation. In view of the trend towards globalisation, discuss whether government intervention through price controls could ever be justified. [25] HCI China has always been accused of keeping the yuan undervalued to gain an unfair advantage in the international market-place (a) Explain how China keeps the yuan undervalued. [8] (b) The undervaluation of the yuan is expected to worsen Singapore’s balance of payments. To what extent would you agree with this assertion? [17] HCI The globalization of trade puts pressure on natural resources around the world, helping to drive the rapid depletion of tropical forests and the collapse of many ocean fisheries. On the other hand, some countries has benefited from the flow of labour into their countries. (a) Explain how the pattern of trade will change as a result of the changes in factor endowments stated above. [10] (b) Discuss the role of government in the age of globalisation. [15] IJC (a) Analyse the effects of changes in exchange rate and interest rates on an economy’s balance of payments. [10] (b) Discuss the view that policies to correct a balance of payments deficit on current account always result in lower standard of living in an economy. [15] JJC Globalisation presents both opportunities and challenges. Discuss why some countries gain more than others. [25] MJC In its annual review of Singapore's economy, the International Monetary Fund said the modest and gradual rise of the Singapore dollar "appears consistent with internal and external stability".

IMF, Reuters Jul 26, 2010

a) Explain what might have caused an appreciation of the Singapore dollar. [10] b) Discuss the view that for Singapore, the benefits of attempting to improve economic

performance through a managed appreciation of its exchange rate, rather than interest rate, have outweighed the costs. [15]

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NJC It has been asserted that “the signing of more free trade agreements (FTAs) brings about benefits to consumers at the expense of local producers”. a) Explain how the signing of more FTAs can help an economy to achieve its

macroeconomic objectives. [10]

b) Discuss whether you agree with the above assertion. [15] PJC (a) Explain Singapore’s choice of exchange rate rather than interest rates as an instrument for its monetary policy. [10] (b) Discuss whether changes in domestic or foreign factors are more likely to influence the exchange rate of the Singapore economy. [15] PJC China still keeps surplus of both the current account and the capital account in the first half of 2009. (a) Explain why some countries such as China are experiencing current account surplus while other countries such as USA are experiencing current account deficit. [10] (b) Assess whether surplus in both the current account and capital account are always beneficial for an economy. [15] PJC (a) Explain the causes of a persistent and large balance of payments deficit. [10] (b) Discuss the view that the government should always adopt an exchange rate-centred monetary policy to focus primarily at reducing the balance of payments deficit. [15] RI Globalisation brings about the need for structural changes in an economy as it forces local industries to become competitive with global producers. Discuss whether globalisation necessarily results in more benefits for developing countries than for developed countries. [25] SAJC Globalisation presents an opportunity for Singapore but there are threats that the Government needs to be aware of and take appropriate measures to balance the pros and the cons.

Source: The Straits Times Oct 2008

(a) Analyse the impacts of globalisation on Singapore. [12]

(b) Discuss the relevance of the multiplier and the degree of openness of the Singapore economy in influencing its macroeconomic policies in dealing with the negative effects of globalisation. [13]

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SRJC While integration into the world economy continues to underpin Singapore’s economic success, its exposure to the global business cycle is posing considerable challenges at present. (a) Explain how Singapore’s balance of payments might have been affected by the global business cycle in recent years. [10] (b) Discuss what policy options would best reduce a country’s balance of payments deficit. [15] SRJC The US dollar may depreciate as a result of the faster economic growth in Asia. (a) Explain the possible causes of a depreciation of a country’s currency. [10] (b) Discuss the possible impact of currency depreciation on an economy. [15] TPJC American’s car makers have complained that the weak yen makes imported Japanese cars unfairly cheap. China has been also accused of undervaluing the yuan in order to artificially foster economic competitiveness and distorting the global pattern of trade.

Adapted from The Economist, 10th Feb 2007

a) Examine the relevance of demand and supply analysis in determining the pattern of trade between countries. [10]

b) Discuss whether a rise in economic competitiveness via an undervalued currency is

the best way to achieve a government’s macroeconomic goals. [15]

"We are part of the world economy. We make chips, we make pharmaceuticals, we make petrochemicals. We consume maybe 1% of what we make of these things. Probably less…We are making for the world. We buy from the world, for the world ... that's how we prosper.

PM Lee Hsien Loong, Straits Times, 28th February 2009

a) Explain the benefits of globalisation to Singapore. [10]

b) Discuss whether Singapore should move away from the export-driven growth strategy, in the aftermath of the US subprime mortgage crisis which led to a world-wide recession. [15]

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[compiled by SRJC 2010 JC2 Econs Unit]

OTHERS (ROLE OF GOVERNMENT / CONFLICTS / MACROECONOMIC GOALS) CJC The 0.8% contraction in the UK economy during the three months to June came as a big - and very much unwelcome - shock to the City…. Industrial production output was down by 0.7%, construction output was down by 2.2% and the dominant service sector shrank by 0.6%... Businesses are struggling to find banks willing to provide them with working capital and have mothballed investment plans.

Source: The Guardian, July 2009

In light of the above statement, evaluate the impacts on the UK economy and its implications on government policy decisions. [25] DHS To what extent is a country’s macroeconomic priority dependent on the openness of its economy? [25] HCI (a) Explain the macroeconomic aims of the Singapore government. [10] (b) Discuss whether the policy of a gradual appreciation of the Singapore dollar would be the best way of achieving these macroeconomic aims. [15] IJC How far do you agree that the recent policies implemented by the Singapore’s government are the most appropriate to enhance her global competitiveness? [25] JJC (a) Explain the factors that influence the current account and capital account of the

balance of payments. [10] (b) To what extent would a depreciation of a country’s currency help to reduce its

balance of payments deficit? [15] MI Amidst weak employment and housing markets, consumers are saving more and spending less than they have in decades.

New York Times Discuss the possible impact of such consumer behaviour upon the economy. [25] NJC “The Government will introduce a temporary Jobs Credit scheme which will encourage our businesses to preserve jobs in the downturn. Employers will receive a 12% cash grant on the first $2,500 of each month’s wages for each employee on their CPF payroll. Furthermore, to help Singaporeans stay employed or seek reemployment, the Government launched the Skills Programme for Upgrading and Resilience (SPUR) which provided higher course fee support for individuals and companies that send their workers for training.”

Ministry of Finance, Singapore Budget 2009

Assess whether the above policies fully address the economic priorities of the Singapore government in recent years. [25]

21

[compiled by SRJC 2010 JC2 Econs Unit]

PJC Assess the view that raising labour productivity is the best way to achieve the macroeconomic aims of Singapore. [25] RI (a) Explain and compare the effects of the 2008 global financial crisis on small and open countries like Singapore and big countries like Australia. [12] (b) Discuss the best policy option that the Singapore government could adopt to reduce the adverse impact of the crisis. [13] RI In the light of America's growing twin deficits (budget deficit and current account deficit), the US government is putting pressure on China to revalue her domestic currency. (a) Explain the problems faced by a country if it incurs a twin deficit. [10] (b) Discuss whether conflicts in achieving macroeconomic objectives will arise for the Chinese authorities when she revalues her domestic currency. [15] RI (a) Explain and compare the effects of the 2008 global financial crisis on small and open countries like Singapore and big countries like Australia. [12] (b) Discuss the best policy option that the Singapore government could adopt to reduce the adverse impact of the crisis. [13]

SAJC “The decline in export earnings in 2009 for Singapore was resulted from a steep decline in manufacturing output, reflecting the sharp collapse in external demand.”

(a) Explain the factors that might have caused the fall in Singapore’s export earnings in 2009. [10]

(b) Discuss the view that improving trade competitiveness will help a country achieve its economic objectives. [15]

SAJC For any economy, labour is a key ingredient in creating output and powering growth. To raise output through labour, an economy can either keep increasing the number of workers – which is not viable in the long term – or raise the amount of output from each worker. More productive workers tend to improve an economy’s competitiveness.

Adapted from The Straits Times Dec 2009 Assess whether the policies currently undertaken by the Singapore government to address declining productivity would bring more harm than good to the economy. [25]

SRJC (a) Explain why governments should be concerned about a fall in real GDP. [10] (b) To achieve high and sustained growth, low inflation is an essential condition. Hence, its attainment should be the main aim of government economic policy. Discuss. [15]

22

[compiled by SRJC 2010 JC2 Econs Unit]

TPJC There have been concerns over the rapid oil price hike as it will invariably lead to further rise in commodity prices. a) Explain the possible reasons for the rapid oil price hike. [10] b) Examine the policies that a small and open economy like Singapore can adopt to deal with the concerns over the rapid oil price hike. [15] TPJC In recent years, Singapore has had to cope with challenges such as vulnerability to external shocks like rising oil prices, competition from low-cost producers and rising wage inequality between skilled and less skilled workers.

Adapted from The Straits Times, 15th July 2008 Assess the various policies that the Singapore government can implement to cope with the various macroeconomic challenges and rising wage inequality. [25]