1 Italicised questions – H1

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]

[compiled by SRJC 2010 JC2 Econs Unit]

 2

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]

[compiled by SRJC 2010 JC2 Econs Unit]

 3

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]

[compiled by SRJC 2010 JC2 Econs Unit]

 4

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]

[compiled by SRJC 2010 JC2 Econs Unit]

 5

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]

[compiled by SRJC 2010 JC2 Econs Unit]

 6

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]

[compiled by SRJC 2010 JC2 Econs Unit]

 7

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]

[compiled by SRJC 2010 JC2 Econs Unit]

 8

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 [15]
Toyota in their pursuit of profits.

[compiled by SRJC 2010 JC2 Econs Unit]

 9

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]

[compiled by SRJC 2010 JC2 Econs Unit]

 10

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]

[compiled by SRJC 2010 JC2 Econs Unit]

 11

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]

[compiled by SRJC 2010 JC2 Econs Unit]

 12

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]

[compiled by SRJC 2010 JC2 Econs Unit]

 13

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]

[compiled by SRJC 2010 JC2 Econs Unit]

 14

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]

[compiled by SRJC 2010 JC2 Econs Unit]

 15

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]

[compiled by SRJC 2010 JC2 Econs Unit]

 16

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]

[compiled by SRJC 2010 JC2 Econs Unit]

 17

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]

[compiled by SRJC 2010 JC2 Econs Unit]

 18

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]

[compiled by SRJC 2010 JC2 Econs Unit]

 19

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]

[compiled by SRJC 2010 JC2 Econs Unit]

 20

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]

[compiled by SRJC 2010 JC2 Econs Unit]

 21

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]

[compiled by SRJC 2010 JC2 Econs Unit]

 22

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]

[compiled by SRJC 2010 JC2 Econs Unit]