Millennia Institute PU3 Economics 2011

MOCK EXAMINATION I (9732/02) Answer two questions in total. Section A One of your chosen questions must be from this section. 1 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] (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] Section B One of your chosen questions must be from the section. 3 (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] 4 While integration into the world economy continues to underpin Singapores economic success, its exposure to the global business cycle is posing considerable challenges at present. (a) Explain how Singapores 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 countrys balance of payments deficit. [15]