Revision Package
H2 Economics 2014
2
Theme 1: Scarcity, Choice & Opportunity Cost, Resource Allocation in Competitive Markets
Syllabus Objectives
1. Market System
This theme provides an introduction to the nature of economics and examines the operation of
markets for goods and services. It also focuses on how consumers and producers make decisions
about the choices they face, recognising that in the market economy, both are motivated by selfinterest. Candidates should be able to understand the price mechanism as a means of allocating
resources and be able to apply demand and supply analysis to real world situations.
Syllabus Content
1.1 Scarcity, Choice and Opportunity Cost

Scarcity, choice and resource allocation
 Concept of scarcity
 Inevitability of choices at all levels
(individual, firm, government) and
concept of opportunity cost

Applications of concept of opportunity
cost
Production possibility curve: shape
and shifts
 Comparative advantage and
exchange
 Specialisation and division of
labour
 Rational decision-making by
consumers, firms and government
1.2 Resource Allocation in Competitive
Markets

Determinants of demand and supply
for goods and services

Determination of equilibrium market
prices

Role of price mechanism in resource
allocation in a market based economy

Applications of demand and supply
analysis to various markets
 Concept of elasticity of
demand and supply
 Factors
influencing
the
elasticity of demand and
supply in the short-run and
long-run
Candidates should be able to:
 Explain the problem of limited resources and
unlimited wants
 Explain the concept of opportunity cost and the
nature of trade-offs in the allocation of resources
using production possibility curve analysis
 Apply the basic concept of comparative advantage in
everyday living and explain its benefits in terms of
specialisation, division of labour and exchange
 Explain that economic agents make decisions to
arrive at the best alternative based on their
objectives
 Understand that economic agents weigh the
incremental benefits against incremental costs in
decision-making
[An awareness that equality between Price (P) and
Marginal Cost (MC) may not hold in reality is required.]
[A broad understanding of why demand curve is generally
downward sloping and why supply curve is upward
sloping is required. A brief description without numerical
illustration will be sufficient.]
 Identify the main influences on demand and supply in
product markets
 [Knowledge of the theoretical derivation of demand
and supply curves is not required but the goals of
consumers and producers in the market should be
made explicit.]
 Understand that consumers and producers use the
marginalist principle in decision-making
 Apply knowledge of basic model of demand and
supply to various markets
 Understand the significance of demand and supply
factors in influencing the price and quantities traded
 Explain elasticity concepts and its applications e.g. an
understanding of why and how changes in prices of a
product affect the business sales and revenue
[Elasticity characteristics of straight line demand and
supply curves are not required.]
Raffles Institution
Economics Department
3
Practice Questions
1
GCE ‘A’ Level 2011
Singapore is facing an ageing population issue. By 2030 senior citizens are
expected to comprise almost 20% of the population.
Using economic analysis, discuss the likely effects of this demographic change on
product markets in Singapore.
2
[25]
GCE ‘A’ Level 2010
The price of sugar, an ingredient in many canned soft drinks, dropped dramatically
by 32% between July 2006 and October 2008. Healthy living campaigns meant
consumers became more aware of the possible health dangers of consuming too
much sugar and they switched to ‘diet’ drinks that do not contain sugar.
Discuss how the combination of the fall in the price of sugar and the healthy living
campaigns might affect expenditure by consumers on ‘non-diet’ and diet canned
soft drinks.
[25]
3
GCE ‘A’ Level 2009
There have been large changes in the prices of crude oil over the past few years.
4
5
Discuss what determines whether consumers or producers are more likely to bear
the cost of these oil price changes.
[25]
AJC 2012
Assess the likely effects of a shift from direct tax to indirect tax on the markets for
different type of goods and its impact on consumers and producers.
[25]
DHS 2012
Rising fertiliser prices are causing more farmers to switch from non-organic
farming, which produces higher fields in a shorter time period through the use of
chemical fertilisers, to organic farming. The media is also reporting that organic
vegetables do not necessarily yield more health benefits than non-organic ones.
(a)
Explain the factors that would determine the extent to which non-organic
vegetable farmers are able to pass their rising cost on to consumers.
[10]
(b) Discuss the overall impact of the above developments on consumer expenditure in [15]
the markets for organic and non-organic vegetables.
6
7
IJC 2012
Discuss the likely effects of rising oil prices and the Eurozone debt crisis on tourism
and its associated markets in Singapore.
PJC 2012
To sustain our economic growth, Singapore could need more than 100,000 more
foreign workers this year. However, this has also led to concerns about
competition for jobs, houses and transport on MRT.
(PM Lee’s National Day Speech, 30 Aug 2010)
Raffles Institution
Economics Department
[25]
4
Using economic analysis, discuss the likely effects of the above scenario on various
markets and the distribution of incomes and wealth in Singapore.
8
(a)
[25]
TJC 2012
Explain why prices of some goods experience greater price fluctuations than
others.
[10]
(b) The Thai government has committed to a rice pledging programme that pays
farmers unconditionally up to 15,000 baht a tonne for white rice paddy. The
World Trade Organisation has raised concerns about the excess stockpile of rice in
Thailand.
To what extent is it effective and desirable for governments to influence the price
of rice?
9
VJC 2012
Food prices are set to rise as much as 40% over the coming decade amid growing
demand from emerging markets and for biofuel production, according to a United
Nations report today which warns of rising hunger and food insecurity.
(a) Account for the sharp rise in the price of food.
(b) Should the government intervene in the determination of food prices?
10
[10]
[15]
YJC 2012
Rising affluence raises the level of environmental awareness and health
consciousness among consumers in Singapore. Many firms recognising this trend
have introduced more environmentally-friendly products as well as health
products.
Using economic analysis, discuss the likely effects of these developments on
product markets in Singapore.
11
[15]
[25]
ACJC 2011
Half of the world's population enjoys fuel subsidies. The cheapest petrol is in
Venezuela, at 5 cents per litre. That makes China's subsidised pump price of 79
cents seem expensive, but even this is a bargain compared with $1.04 in the
United States and $2.35 in Germany where fuel taxes are imposed.
Explain the economic case for these two different approaches and assess whether
the pricing of fuel should instead be left to market forces.
[25]
12
VJC 2011
As the world experiences soaring international oil prices, countries like Malaysia
and Indonesia have provided fuel subsidies while Singapore and Australia have
not.
Discuss the impact of soaring international oil prices and fuel subsidies on society.
Raffles Institution
Economics Department
[25]
5
Theme 2: Firms and How They Operate (Market Structure)
Syllabus Objectives
1.3 Firms and How They Operate





Objectives of firms
 profit maximisation
 alternative objectives
Costs of production
 short run vs long run
 fixed cost vs variable cost
 internal vs external economies of scale
Understand the concept of profit as the
difference between total revenue and total cost
Understand that firms make price and output
decisions based on the marginalist principle
[An awareness of other possible objectives of firms is
required.]
[An understanding of the concepts of Average
Revenue (AR), Marginal Revenue (MR), Average Total
Spectrum of market competition
Cost (ATC) and Marginal Cost (MC) will be sufficient.
 features of the different market Concepts on product curves and derivation of the cost
structures
curves are not required.]
 barriers to entry
 behaviour of firms
[An understanding that total cost incorporates a
 price discrimination
necessary minimum economic reward for firms to
 price vs non-price competition
remain in the market is required.]
 collusion vs competition
 mutual interdependence in the [An understanding of the significance of variable costs
case of oligopolies
and irrelevance of fixed costs in the pricing and
 comparison on the basis of productive output decisions of firms is required. The diagram to
and allocative efficiency, equity, explain short-run shut-down condition is not
innovation and consumer choice
required.]





Explain the key features of each of the market
structures
Explain how firms compete in the respective
market structures based on their features
Understand the relevance of barriers to entry in
explaining differences between market structures
Apply these models in analysing and comparing
markets and evaluate their usefulness as
explanations of real world competitive behaviour
Use the concept of profits to illustrate real world
competitive behaviour of firms (in protecting their
profits)
[The geometrical explanation of the kinked demand
curve is not required.]
Raffles Institution
Economics Department
6
Practice Questions
1
(a)
GCE ‘A’ Level 2011
Explain how the different features of monopolistic competition and oligopoly
affect price and output determination in these market structures.
[10]
(b) Recession will affect firms in different ways depending, for example, on what they
produce and the market structure in which they operate. Discuss the likely effect
of a recession on different firms.
[15]
2
GCE ‘A’ Level 2009
A very popular band is due to play one concert at a 5000 capacity venue. The plan
is to charge different prices according to the area in which the seat is located.
(a)
3
Explain whether this pricing policy could be considered to be an example of price
discrimination.
[10]
(b) Discuss the problems that are likely to be faced in determining the prices to be
charged for the seats.
[15]
GCE ‘A’ Level 2008
(a) Firms’ pricing and output decisions depend on barriers to entry and the behavior
of competitors.
[10]
(b) Explain why barriers to entry are a key determinant in firms’ pricing decisions. [10]
Discuss the extent to which the behavior of firms depends in reality on the actions
of their competitors.
4
(a)
GCE ‘A’ Level 2009
Explain, how in economic theory, a monopolist would determine the price that
would maximise profits.
(b) Discuss whether firms in the real world set prices at profit-maximising levels.
5
[15]
[8]
[17]
ACJC 2012
In the Adult Fares structure of train and bus services in Singapore, per-ride fares
differ between the card and cash modes of payment.
(a)
Explain what is meant by price discrimination and consider whether the above
situation is an example of price discrimination.
(b) Discuss whether essential services such as the mass rapid transit should be run by
public monopolies.
6
(a)
DHS 2012
Explain the benefits of price discrimination.
(b) The level of profits a firm can earn is dependent upon the strength of entry
barriers in its industry. Assess the likely effects of a rise in steel prices on the
profits of different firms.
Raffles Institution
Economics Department
[10]
[15]
[10]
[15]
7
7
(a)
JJC 2012
Explain how and why an oligopolistic firm such as Golden Village, which provides
cinema movies in Singapore, practices price discrimination.
(b) Assess whether oligopoly is a better market structure than monopolistic
competition in achieving efficiency, innovation and consumer welfare.
8
[15]
NJC 2012
It is often argued that what is important in determining the performance of firms
in a market is the level of competition that exists within it.
(a)
Explain why different levels of competition exist in different markets.
[10]
(b) Assess the validity of the view that the performance of firms in a market is
determined by the level of competition.
[15]
9
NYJC 2012
Explain how economies of scale determine the market structure in which a firm
operates in the real world.
[10]
(b) Discuss whether monopolies should be disallowed on the basis that they exploit
consumers.
[15]
(a)
10
11
(a)
12
[10]
PJC 2012
Discuss the significance of costs in the pricing and output decisions of firms.
[25]
TPJC 2012
Using relevant examples in the Singapore context, explain how barriers to entry
determine the degree of competition and market power in imperfect markets.
[10]
(b) ‘Increased market concentration in transport markets is always desirable’.
Discuss.
[15]
VJC 2012
The model of monopolistic competition best explains firm behavior and
performance in Singapore. Discuss.
[25]
13
AJC 2011
‘Monopolistic competition is the more prevalent market structure than oligopoly
in an increasingly globalised world.’ Discuss.
14
[25]
HCI 2011
With growing environmental awareness, large cosmetic companies advertise they
have invested in research to ensure their products are environmentally friendly.
The aim is to increase demand and profits.
(a)
Explain what might happen to the fixed and variable costs in the above companies
and how any changes might affect their profit maximising prices and output.
[10]
(b) Discuss whether the profits of such companies will increase, and whether in the
real world they will set prices and output at profit maximising levels.
[15]
Raffles Institution
Economics Department
8
15
TJC 2011
A regulated natural monopoly achieves allocative and productive efficiency in an
equitable manner, hence it is better than all other market structures. Discuss.
16
[25]
IJC 2011
Explain the relevance of barriers to entry in determining the key differences
between oligopolistic competition and monopolistic competition.
[10]
(b) Consider different retailers in Singapore and assess the extent to which barriers to
entry may be detrimental to competition and economic welfare.
[15]
(a)
17
(a)
MJC 2011
Explain whether it is always advantageous for a firm to grow in size.
(b) Discuss how you would decide if a firm is exerting its monopoly power.
18
(a)
[12]
[13]
NJC 2011
Explain the pricing decisions of firms in both collusive and competitive oligopolistic
markets.
[10]
(b) Discuss the view that firms in the oligopolistic market structure are the most likely
to differentiate their products from those of their rivals.
[15]
RVHS 2011
Explain how the existence of economies of scale can affect the behaviour and
performance of firms.
[10]
(b) Discuss the extent to which economies of scale determines the types of market
structure in Singapore.
[15]
19
(a)
20
VJC 2011
Barriers to entry confer more market power on firms in their pricing and output
decisions and behaviour.
(a)
Using examples, explain how barriers to entry will confer more market power on
firms.
[10]
(b) Discuss whether greater competition should be introduced into markets in
Singapore.
[15]
Raffles Institution
Economics Department
9
Theme 3: Market Failure and Government Intervention
Syllabus Objectives
2. Market Failure and Government Intervention
This theme examines the nature of market failure, its causes and possible policy remedies.
Candidates should be able to understand why markets may not allocate resources efficiently and
the methods of dealing with market failure, together with an evaluation of their effectiveness.
Syllabus Content
2.1 Market Failure
 Meaning of
efficiency

Candidates should be able to:
 Analyse why market dominance, imperfect
market failure and
information and immobility of factors of
production can lead to inefficiency
 Understand that externalities exist when there is
Why markets may not work efficiently
a divergence between private and social
 Market imperfections
costs/benefits
 Positive and negative externalities  Illustrate positive and negative externalities in
 Public and merit goods
both production and consumption using simple
 Inequalities in the distribution of
demand and supply diagrams
income and wealth
[An understanding of what is meant by deadweight
loss is necessary when discussing market failure.
However, the analysis of deadweight loss using the
concepts of consumer and producer surplus is not
required.]
2.2 Government Intervention in the Market
 Rationale for government intervention

Methods by which government
intervene in markets and the impact
on market outcomes

Government failure
Raffles Institution
Economics Department

Understand what is meant by a cost-benefit
approach in the context of externalities
[Knowledge of the technical methodology of CostBenefit Analysis (CBA), including discounting is not
required.]
 Explain why governments intervene in the
markets to correct market failures
 Examine the various methods by which
governments intervene in markets
 Discuss how governments may create
inefficiencies when they intervene in markets due
to factors such as political objectives,
administrative costs and lack of information
10
Practice Questions
1
GCE ‘A’ level 2011
Consumers and producers are generally assumed by economists to be motivated
by self-interest.
(a)
Explain, how, according to economists, the pursuit of self-interest can help to
address the problem of limited resources and unlimited wants.
[10]
(b) Assess whether the price mechanism will always allocate resources in the most
efficient manner for all goods and services in a market economy.
[15]
2
(a)
GCE ‘A’ Level 2010
Explain why government intervention is advocated in the markets both for public
goods and fro goods where externalities are present. [10]
(b) In the UK, entry to national museums and art galleries is free of charge and tickets
to see the opera are heavily subsidised. In contrast, in Japan, entry to national [10]
museums and art galleries come at a high price and a ticket to see the opera is
among the most expensive in the world.
Assess the economic case for these two different approaches.
3
[15]
GCE ‘A’ Level 2009
Governments around the world protect consumers against market failure due to
market dominance.
(a)
Analyse, with supporting examples, how market dominance might lead to market
failure.
[10]
(b) Assess the extent to which market dominance, rather than any other potential
market failure is the major cause of government intervention in the markets for
goods and services within Singapore.
[15]
4
GCE ‘A’ Level 2007
With reference to examples, discuss whether there is need to change the current
policies adopted by the Singapore government to deal with market failure caused
by externalities.
[25]
5
(a)
CJC 2012
Explain how, according to economists, the market seeks to allocate resources to
address the problem of scarcity.
[10]
(b) Discuss if government intervention in the free market will worsen, instead of
solving the problem associated with merit goods.
[15]
6
(a)
DHS 2012
Explain the different causes of market failure in the Singapore economy.
(b) Governments are able to create the conditions necessary for markets to work
efficiently. It is therefore best if they intervene in markets as much as possible.
Raffles Institution
Economics Department
[10]
11
Discuss whether you agree with this view.
7
[15]
PJC 2012
Negative externalities arising from carbon emissions have caused governments
worldwide to implement carbon taxes on producers and increase subsidies on the
development of renewable energy.
(a)
Explain why the market fails in the presence of negative externalities.
(b) Evaluate the use of the above two policies in correcting the market failure due to
carbon emissions.
8
[8]
[17]
YJC 2012
Arts enthusiasts are lobbying for low ticket prices for plays and operas to bring the
arts to the masses.
(a)
Explain the economic reasons why a theatre may charge different customers
different prices for tickets to see a play.
(b) Discuss the view that cultural events such as plays and operas should be
subsidized by the government.
9
(a)
AJC 2012
Using the concepts of production possibility curve, opportunity cost and choice,
explain the problem of scarcity and whether a country should only produce only
capital goods.
[10]
[15]
[10]
(b) Evaluate the current microeconomic policies adopted by the Singapore
government to achieve a more efficient allocation of resources.
[15]
11
HCI 2012
Economists like to think at the margin. They consider the incremental benefits
versus the incremental cost in every decision they make.
(a)
Explain how ‘thinking at the margin’ aids decision making for consumers and
producers.
[8]
(b) Discuss the extent to which ‘thinking at the margin’ would lead to the efficient
allocation of resources.
[17]
12
JJC 2012
(a) Explain how market dominance and externalities may lead to market failure.
(b) Discuss whether there is a need to change the current policies adopted by the
Singapore government to deal with market failure in public housing.
13
[10]
[15]
PJC 2011
Sometimes, prices fail to reflect costs fully.
(a)
Explain why the above would be of concern to a government.
Raffles Institution
Economics Department
[10]
12
(b) Assess the use of taxation by the Singapore government to deal with the above
problem.
14
[15]
RVHS 2011
Public Utilities are privately owned in some countries while publicly owned in
some others.
(a)
Explain how the provider of a good can be determined from the characteristics of
the good.
[10]
[15]
(b) Discuss whether electricity should be provided by the public or private sector.
15
2011 DHS
The bottom 30% of working families in Singapore has now experienced stagnating
real household incomes for eight to ten years. If wages continue to stagnate, there
is a limit to poverty alleviation through working longer and harder, or driving the
unemployment rate lower.
(a)
16
Explain the case for government intervention in the market for vocational training.
[10]
(b) Discuss whether you agree that employment creation is no longer the best
method to alleviate poverty in Singapore.
[15]
2011 HCI
Discuss the effectiveness of government intervention in resource allocation in the
provision of merit goods and when market dominance exists.
[25]
Raffles Institution
Economics Department
13
Theme 4: Key Economic Indicators
Syllabus Objectives
3. National and International Economy
This theme provides an introduction to the key indicators of economic performance, the basic
AD/AS and AE-Income analysis, and the main objectives and instruments of government policy.
Candidates should be able to acquire a good knowledge of recent economic trends and
developments in Singapore and the international economy. Candidates should also be able to
appreciate the possible underlying causes of these trends and developments and to evaluate the
effectiveness of government policies in the light of these events.
Syllabus Content
Candidates should be able to:
3.1 Key Economic Indicators
 Understand the model of national income as a circular flow
 National Income Statistics
involving households, firms, government and the foreign
[Gross Domestic Product
sector
(GDP) and Gross National
 Explain the significance of each of the key economic
Product (GNP)]
indicators
 Interpret statistical data
 Inflation rate
 Use the key indicators to assess the economic performance
of an economy, including international comparisons
 Unemployment rate
 Analyse the limitations of using the indicators to measure
economic performance as well as standard of living of an
 Balance of Payments (BOP)
economy including international comparison
[The construction of Consumer Price Index (CPI) is not
required.]
[A broad understanding of the role of foreign direct investment,
as a component of BOP, in the Singapore economy is relevant.]
[The construction and computation of BOP account is not
necessary but candidates should have a broad understanding of
the main accounts such as current and capital accounts, and
reserves.]
Practice Questions
1
HCI 2011
In 2009, Singapore experienced a negative growth of 1.3% and a current account
surplus of US$32 billion while the United States had a negative growth of 2.6% and
a current account deficit of US$378 billion.
Discuss to what extent such economic data indicate that the standard of living for
the average person in both countries had declined
[25]
2
NJC 2011
“To attract investment, improve incomes and achieve a higher standard of living,
Singapore targets to raise labour productivity by 2 to 3 percent each year for the
next decade.”
Discuss the extent to which an increase in labour productivity will lead to an
increase in Singapore’s standard of living.
Raffles Institution
Economics Department
[25]
14
Theme 5: How the Macroeconomy Works, Macroeconomic Aims, Issues and Policies
Syllabus Objectives
3.2 How the Macroeconomy Works
 Income
and
Employment
Determination
 Key determinants of aggregate
demand (AD) and aggregate
supply (AS)
 Determination of equilibrium level
of output and price
 Meaning,
components
of
Aggregate Expenditure (AE) and
their determinants
 Income determination using AEIncome approach

Macroeconomic Aims, Issues and Policies
 Aims and issues
o Inflation
o Unemployment
o Economic growth
o Balance of Payments







Explain what is meant by equilibrium in the
macroeconomy using the circular flow of income
and how the equilibrium output is determined
Explain the Multiplier Effect and recognise its
limited effects in the Singapore economy
Use AD/AS or AE-Income analysis to determine
equilibrium level of output and price
Explain government macroeconomic objectives in
relation to inflation, employment, economic
growth and the balance of payments
Analyse the causes of economic problems in these
areas, including the significance of cyclical
fluctuations in the level of economic activity, and
the economic consequences of failure to achieve
these objectives
Use AD/AS or AE-Income analysis to illustrate
macroeconomic problems in an economy
[Labour productivity should be discussed as one of
the influences on macroeconomic outcomes.]
Macroeconomic policies
o Fiscal policy
o Monetary Policy in the context of 
Singapore
o Supply-side policies


Explain how the AD/AS or AE-Income approach
may be used to analyse the way fiscal, monetary
and supply side policies, can affect the levels of
employment, rate of inflation, economic growth
and the balance of payments position
Define monetary policy in a broader context
whereby interest rates and exchange rates are
alternative instruments
Understand monetary policy framework in a small
open economy such as Singapore (i.e. openness
to trade and capital flows)
 Explain objectives of monetary policy
(inflation versus growth)
 Explain Singapore’s choice of using exchange
rates rather than interest rates as an
instrument for its monetary policy
 Explain the causes and effects of changes in
exchange rates and interest rates on the
economy
[An understanding of the exchange rate as a key
indicator for a small open economy like Singapore is
required. Introduce the concept of exchange rate as a
price of foreign currency linked to balance of
payments.]
Raffles Institution
Economics Department
15


Discuss the possible conflicts in government
objectives and the links between macroeconomic
problems and their inter-relatedness
Evaluate the effectiveness of government’s
macroeconomic policies using the AD/AS
approach or AE-Income approach, especially with
reference to the Singapore economy
[Interest rate determination and graphical illustration
of the transmission mechanism are not required. A
descriptive explanation of how monetary policy works
will be sufficient.]
Practice Questions
1
GCE ‘A’ Level 2011
Explain the process whereby an increase in government expenditure can lead to a
bigger change in national income.
[10]
(b) Discuss the extent to which conflicts in government macroeconomic objectives limit
the scope for the use of fiscal policy in any economy.
[15]
(a)
2
GCE ‘A’ Level 2011
In the study of macroeconomics, investment can take many forms including foreign
direct investment, fixed capital investment and investment in human capital.
(a)
Explain what is meant by these different types of investment.
[10]
(b) Discuss how far supply-side policies can be used to stimulate these different types
of investments.
[15]
3
GCE ‘A’ Level 2010
The recent worldwide recession caused many governments to re-assess their use of
fiscal policy in order to stimulate their stagnating economies.
(a)
4
Explain what would reduce the effectiveness of fiscal policy as a stimulus to the
Singapore economy.
[10]
(b) Assess alternative policies that might be more appropriate in managing the
Singapore economy when faced with a worldwide recession.
[15]
GCE ‘A’ Level 2010
When there are large increases in the prices of oil and other primary products, they
are usually expected to lead to rising inflation throughout the world’s economies.
Discuss the extent to which these factors are likely to affect the rate of inflation in
Singapore.
Raffles Institution
Economics Department
[25]
16
5
GCE ‘A’ Level 2009
The relative importance of the components flow of income for a small and open
economy such as Singapore is likely to be different from a large and less open
economy such as the USA.
(a)
Explain this statement.
[10]
(b) Assess whether a change in the external value of its currency is more likely to have a
larger impact on Singapore or the USA.
[15]
6
GCE ‘A’ Level 2008
Discuss the relative significance of the multiplier, the price elasticities of demand for
exports and imports and crowding out in influencing macro-economic policy
decisions.
[25]
7
GCE ‘A’ Level 2006
In the fourth quarter of 004 Singapore’s unemployment rate rose to 3.7%.
Discuss whether supply-side policies are the best way of achieving full employment
in Singapore.
8
[25]
GCE ‘A’ Level 2007
(a)
Explain the potential causes of a balance of payments deficit on current account.
(b) Discuss which measures, if any, a government should adopt when confronted with a
current account deficit.
9
[10]
[15]
GCE ‘A’ Level 2006
In October 2005 the Monetary Authority of Singapore stated that its policy of
allowing the Singapore dollar to strengthen against a basket of currencies would be
maintained.
(a)
Using a diagram, explain what might cause a country’s exchange rate to appreciate
in a floating exchange rate system.
[10]
(b) Discuss the extent to which problems are likely to result from an appreciation from
an appreciation of Singapore’s exchange rate.
10
(a)
HCI 2012
Explain what is meant by the equilibrium level of national income.
(b) To what extent do different savings rates between countries affect changes in
national income, given an autonomous increase in autonomous expenditure?
11
[15]
[10]
[15]
JJC 2012
Singapore experienced a quarterly growth rate of -0.7% from April to June 2012.
However during the same period, inflation rate remained high at about 5%.
(a)
Explain why inflation can remain high despite a slowdown in economic growth in
Singapore.
Raffles Institution
Economics Department
[10]
17
(b) ‘Inflation is harmful to an economy and hence it should be the priority of the
Singapore government to reduce inflation’. Discuss.
12
(a)
DHS 2012
Explain the factors that would affect government’s fiscal position. [10]
(b) Fiscal prudence is always desirable and governments should always strive to at least
balance its budget. Discuss the validity of this assertion.
13
(a)
IJC 2012
Explain what is meant by equilibrium in the macroeconomy using the circular flow
of income.
(b) Discuss the extent to which the Singapore government’s approach to fiscal policy
could be used in reducing conflicts between economic objectives.
14
[15]
[10]
[15]
[10]
[15]
NYJC 2012
The tight labour market and external factors, including potential shocks to global
trade and commodity prices, posed considerable downside risks for Singapore’s
very open economy.
(a)
In the light of the above statement, explain the challenges faced by the Singapore
economy in recent years.
[10]
(b) Discuss the measures that the Singapore government can adopt to overcome these
challenges.
[15]
15
NJC 2012
Discuss the relative significance of interest rates, exchange rates and tax rates as
instruments for economic policy in Singapore.
[25]
16
SRJC 2012
Discuss the extent to which being a small and open economy affects the policy
decisions to achieve price stability and full employment in Singapore.
17
[25]
TPJC 2012
Falling prices in japan are likely to remain. Government borrowing at US$486 billion
is forecasted to exceed tax revenue. It also means that the gross debt to GDP ratio,
already the highest in the rich world at 190%, will continue to rise.
(The Economist, 8 April 2010)
(a)
Explain whether monetary policy can help to alleviate the problem of falling
aggregate demand.
[10]
(b) Discuss whether a government should be more concerned with deflation or fiscal
budget deficit.
[15]
18
(a)
TPJC 2012
Explain the meaning of internal stability and external stability for an economy.
(b) Discuss the policies that can be undertaken by Singapore to increase its economic
Raffles Institution
Economics Department
[10]
18
19
20
(a)
resilience.
[15]
TJC 2012
Discuss the view that supply side measures are more effective in managing an open
economy like Singapore.
[25]
AJC 2011
Explain how the equilibrium level of national income is determined.
[8]
(b) Discuss the impact of an increase in the level of spending by households and firms
on a country’s national income.
21
[17]
DHS 2011
Whenever the government announces a rising trade deficit, the media routinely
declare it "bad news" that the trade gap has "worsened" – no matter how good the
accompanying economic news may be on inflation, employment, and growth.
Cato Institute
(a)
Explain how a rising trade deficit could impact the circular flow of income.
[10]
(b) Discuss whether a government should actively pursue policies to correct a trade
deficit.
[15]
22
(a)
IJC 2011
Analyse the impact of globalisation on Singapore’s balance of payments.
(b) Assess whether exchange rate policy is the most effective policy in managing the
balance of payments in the light of a rise in globalisation.
23
[10]
[15]
MJC 2011
Some economies have balance of payments deficits while others have balance of
payments surpluses.
(a)
Explain the importance of a sound balance of payments to Singapore.
[10]
(b) In 2009, the government ran a budget deficit while the Monetary Authority of
Singapore pursued a zero appreciation of the exchange rate to stimulate the
stagnating economy.
Discuss the factors that would affect the success of these two policy measures to
boost economic growth in Singapore.
24
[15]
NJC 2011
“There are several potential risks to Asia’s outlook: Unrest in the Middle East has
caused oil prices to soar and the weaker growth in advanced economies could
potentially affect Asia through the trade channel.”
(a)
Explain how the events mentioned may have an impact on Singapore’s economy. [10]
(b) Discuss the policy measures that the Singapore government can undertake to [15]
address the impact of the above mentioned events.
Raffles Institution
Economics Department
19
25
PJC 2011
Assess the view that monetary policy centred on exchange rate is the most effective
measure to overcome the main macroeconomic problems faced by Singapore in
recent years.
[25]
26
(a)
RVHS 2011
Explain why maintaining domestic price stability is likely to be more important than
other macroeconomic aims in small, open and resource-scarce economies.
(b) Discuss the extent to which exchange rate policy is the most effective measure in
maintaining domestic price stability in Singapore.
27
28
(a)
[15]
SAJC 2011
Discuss whether maintaining low unemployment rate will lead to an improvement
in the standard of living in an economy.
[25]
SRJC 2011
Explain the main causes of a balance of payments deficit of a country.
[10]
(b) Discuss whether Singapore has the most to gain as a result of a depreciation of the
Singapore dollar.
29
[10]
[15]
TJC 2011
In December 2010, Singapore’s inflation rate rose to the highest level in two years,
adding pressure on MAS to dampen price gains by allowing the Singapore dollar to
appreciate further.
(a)
Explain the likely causes of inflation in Singapore.
(b) Discuss whether an appreciation of the exchange rate is the best way to achieve
price stability in Singapore.
30
[10]
[15]
VJC 2011
Singapore’s real GDP growth was 13.9% and current account surplus growth was
32.8% in 2010.
(Source: Department of Statistics, Singapore)
(a)
Explain why real GDP and current account balance are indicators of living standards
in Singapore.
[8]
(b) Discuss the most appropriate policies that a government could adopt to achieve
sustained economic growth.
[17]
31
SAJC 2012
Many governments have used the exchange rate policy to achieve a low and stable
inflation rate, but have not succeeded.
(a)
Explain then factors that would reduce the effectiveness of the exchange rate policy
to achieve a low and stable inflation rate.
(b) Assess alternative policies that might be more appropriate in helping an economy
Raffles Institution
Economics Department
[10]
20
achieve a low and stable inflation rate.
32
(a)
TJC 2012
Inflation is once again rearing its ugly head. But this recent round could yet be the
hardest one to tame as experts pointed out that a large part of the problem is made
here in Singapore.
(The Straits Times, 27 April 2012)
Explain the main causes of inflation.
[10]
(b) Discuss whether the Singapore government should change its policies for
controlling inflation.
33
[15]
[15]
VJC 2012
A weakening of the external value of a country’s currency is always detrimental to
its economy.
With reference to the Singapore economy, how far do you agree with the above
statement?
34
[25]
YJC 2012
(a)
Explain the causes of inflation in Singapore.
[10]
(b) To what extent is a gradual appreciation of the exchange rate sufficient to steer the
Singapore economy ahead in the light of persistent inflationary pressures and
slower global growth.
[15]
35
(a)
CJC 2012
Explain the effects of a capital and financial account deficit in the balance of
payments of an economy.
[10]
(b) Discuss if an improvement in labour productivity would reduce a balance of
payments deficit.
36
(a)
SRJC 2012
Explain how a change in a country’s labour productivity can influence its balance of
payments.
(b) Assess whether a government should be concerned when faced with a deficit in the
budget balance and the current account balance.
Raffles Institution
Economics Department
[15]
[8]
[17]
21
Theme 6: International Economics
Syllabus Objectives
3.3 International Economics
 Benefits from trade

General pattern of trade between
Singapore and the rest of the world.

Free trade and barriers to trade

Globalisation and capital flows

[Theory of absolute advantage is not required.]



• Free Trade Agreements (FTAs)
Explain the gains from international trade using
the concept of comparative advantage


Use demand and supply analysis to explain
pattern of trade between countries
Explain Singapore’s pattern of trade with the rest
of the world and recent developments (e.g. FTAs)
Explain why protectionism exists
Explain the trend towards globalisation and
examine its impact on trade in goods, capital
flows and international movement of labour
[An awareness of the role of World Trade
Organisation (WTO) in promoting free trade is
required.]
Practice Questions
1
GCE ‘A’ Level 2011
The Singapore economy is open to the world, in trade and investment. This is both
a matter of policy and necessity because of our size and limited resources. In 2008,
our trade to GDP ratio was 360%, the highest in the world.
Ministry of Trade and Industry, Singapore 2009
Discuss whether the openness of the economy is beneficial or harmful to the
standard of living in Singapore.
2
[25]
GCE ‘A’ Level 2010
There is a general consensus among economists tat protectionism is a bad thing.
(a)
Explain why protectionism exits.
[10]
(b) Assess the extent to which the Singapore government’s approach to international
trade may need to be adjusted to a growth in worldwide protectionism.
[15]
3
(a)
GCE ‘A’ Level 2008
Explain the determinants of the pattern of trade between Singapore and the rest of
the world.
[10]
(b) Discuss whether the Singapore government should change its policies for managing
the balance of payments.
4
ACJC 2012
Singapore is not without challenges and problems. One broader issue is a widening
income gap. This is affecting many countries, under the impact of globalization,
Raffles Institution
Economics Department
[15]
22
competition from emerging economies and new technology.
(Prime Minister’s Office Singapore, 1 March 2011)
Discuss whether Singapore should keep its economy open to foreign competition.
5
[25]
HCI 2012
In order to improve international competitiveness in the areas of trade and foreign
investment, Singapore is trying to shift towards improving labour productivity,
instead of relying on foreign workers.
Discuss whether a shift towards improving labour productivity will help Singapore
improve international competitiveness.
[25]
6
(a)
HCI 2012
Explain the factors affecting import expenditure in an economy.
(b) Discuss the impact of a worsening trade balance on different economies.
7
[10]
[15]
JJC 2012
Singapore was ranked 3rd in Ernst and Young’s Globalisation Index 2011 – a survey
that measures the degree of globalization of 60 large economies relative to their
GDP.
Discuss the impact of globalisation on Singapore and the policy measures that the
Singapore government could adopt in response to globalisation.
[25]
8
NYJC 2012
The threat of losing comparative advantage due to the emergence of developing
economies poses serious balance of payments problems to most developed nations.
(a)
Explain the causes of balance of payments deficit of a country.
[10]
(b) Discuss the extent to which protectionism can help developed nations correct the
balance of payments problem arising from the emergence of developing nations.
[15]
9
(a)
PJC 2012
Use demand and supply analysis to explain the pattern of trade between countries.
[10]
(b) Free trade agreements aim to remove barriers to trade and investment.
Discuss the view that the signing of FTAs with more trading partners can only be
beneficial to the Singapore economy.
10
TPJC 2012
Protectionism is more desirable than globalisation. Discuss.
11
[15]
[25]
SRJC 2012
Economists forecast a world trade growth of 9.5% for 2010, with developing
countries’ trade growing by 115 and developed countries’ trade growing by 7.5%.
[10]
(a)
Explain why it is important for a country to attain its macroeconomic goals.
Raffles Institution
Economics Department
23
(b) Discuss whether developing countries have more to gain from globalisation than
developed countries.
12
[15]
TJC 2012
Non-tariff barriers such as physical and technical barriers have acquired growing
importance as tariffs have come down through multilateral, preferential or
unilateral actions. Countries are choosing to shield producers from import
competition through more subtle means.
(adapted from World Trade Report 2012)
(a)
Explain why trade occurs between Singapore and its partners.
(b) In light of the above, assess whether the use of free trade agreements is sufficient
in managing Singapore’s balance of payments.
13
[10]
[15]
VJC 2012
Weakening prices are not unique to Japan, Mr Sakakibara noted. ‘Look at the US, or
even Europe. The US is experiencing what could be disinflation. Price inflation
there is about 1 %; 10 years ago, it was 4-5%. Inflation in Europe is about 2%.
Because of globalization, prices in the developed countries have come down.
(Mr Eisuke Sakakibara, Japan’s former vice-finance minister for international affairs
in the Business Times 29 Oct 2010)
(a)
Explain why inflation is a macro-economic objective of a government.
(b) Discuss whether globalisation will always help to lower the inflation rate of a
country.
14
[10]
[15]
YJC 2012
We are concerned about the global economic crisis and its impact on the
developing countries and poor countries. We must at all cost avoid competitive
devaluation and resist any resurgence of protectionism.
(PM Manmohan Singh, addressing the Plenary Session of G20 Summit, 12 Nov 2010)
(a)
Explain how currency devaluation can address a worsening balance of payments
position of a country.
[10]
(b) Discuss whether countries should resist the resurgence of protectionism at all cost.
15
[15]
AJC 2011
In economics, globalisation broadens the free market to include many nations to
which it had not previously reached. However, protectionism has recently been
rearing its head in the form of tariff hikes by some countries in response to the
global economic crisis.
(a)
Using demand and supply analysis, explain the pattern of trade between countries.
(b) Discuss whether you agree that protectionism is the best approach to deal with the
challenges posed by globalisation.
Raffles Institution
Economics Department
[10]
[15]
24
16
(a)
HCI 2011
Explain how globalisation has affected Singapore’s pattern of trade with the rest of
the world.
[12]
(b) Singapore should not continue to rely on an export-led growth strategy as it causes
much volatility to economic growth.
17
(a)
To what extent do you agree with the above statement.
[13]
JJC 2011
Explain the economic basis for embracing free trade in Singapore.
[10]
(b) In the light of the economic downturn, discuss the importance of Free Trade
Agreements (FTAs) in influencing trade patterns between Singapore and the rest of
the world.
[15]
18
PJC 2011
“Rapid globalisation has brought about greater market access and partners for
development, but has also placed some economies in a more vulnerable position.”
Discuss.
[25]
19
(a)
RVHS 2011
Explain how determinants of globalization have changed the pattern of trade
among countries.
[10]
(b) Discuss the policies currently adopted by the Singapore government to deal with
structural unemployment and widening income inequality as a result of
globalization.
[15]
20
SAJC 2011
Globalisation is a double-edged sword, as the increased interconnectedness not
only creates opportunities but also presents risks.
(Speech by Mrs. Lim Hwee Hua, Minister Of State For Finance And Transport At The
CPA Forum, Aug 2007)
(a)
Explain how globalisation could bring opportunities and risks to an economy.
(b) Discuss whether the Singapore government currently adopts appropriate policies to
reduce the risks of globalization.
******END******
Raffles Institution
Economics Department
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