P-cube SOW (updated) Term 3: Essays (Mondays, 3.

30 5pm, LT3) Week 4: Supply, July Week 5: July Week 6: 1 NID Aug Week 9: 22 Internal Goals & Policies Aug Week 10: 29 Internal Goals & Policies Aug Week 4: HCI 2009 C1 BT (a) Explain the factors which affect the demand for and supply of crude oil in the world. [10] (b) The Indian government fixes the prices of fuel sold by state firms whilst the Malaysia government provides fuel subsidies to control inflation and help lower income households. Evaluate the economic policies that are used by the Indian and Malaysian governments to help their people cope with rising fuel prices. [15] HCI 2009 Promos In 2007 the Singapore economy grew at 7.8%, goods and services tax went up from 5% to 7%, and there were active campaigns on healthy living. Assess the likely effects of the above changes on consumers expenditure on fast food. [25] HCI 2010 Promos In 2009, several luxury car makers offered lower prices for their existing range of models. In addition, they introduced smaller engine capacity cars at affordable prices and invested heavily on advertisements. As a result they did better in sales despite an on-going recession. Discuss the relevance of different elasticity concepts to luxury car makers aiming to increase profits. [25] Nov 2008 EQ1 Developments in modern technology, such as faster broadband internet connections, portable DVD players, iPods and MP3 players, have had major impacts on the demand for and supply of recorded music and associated products. Assess how the markets involved might be affected by these developments. [25] Topic 18 Demand, Application 25 NIA, NID

Week 5: Singapores GDP grew by 7.9 per cent in 2006. The investments that Singapore attracted last year will eventually add $13.4 billion annually to the economy. A booming performance at home and better-than-expected conditions overseas have led the government to project that the Singapore economy will grow by between 4.5 to 6.5 per cent in 2007.
Source: The Straits Times, 30 Jan 2007 and 15 Feb 2007

Discuss whether the growth of the Singapore economy by 7.9 per cent in 2006 reflects an improvement in the living standards of Singapore residents. [15] HCI 2010 Promos Japan is still one of the largest economies in the world with a real Gross Domestic Product (GDP) per capita of US$41,480 in 2008. In comparison, Singapore real GDP per capita stood at US$39,951. Singapore has a consistently high savings rates and its gross national savings increased over the past 5 years. (a) Explain whether real GDP per capita is a good comparison of standard of living between Singapore and Japan. [10] (b) Discuss the impact of an increase in household savings on the national income of Singapore. [15] Week 6: HCI 2008 C2 BT2 1. The Asian economies continued to see robust expansion, supported by strong domestic demand and external trade. Inflation is expected to remain strong in many countries despite possible slowdown in the global economy, as supply conditions in food and commodities markets remain tight.
Source: Economic Survey of Singapore, 2007

Explain the effect of a strong external trade sector on national income of an economy. [10] HCI 2009 Promos a) Explain the main determinants of investment in Singapore. [10] b) Discuss whether an increase in investment in Singapore will necessarily lead to an increase in employment. [15] Week 9: HCI 2009 Prelims 1 (a) Explain the likely causes of unemployment and inflation in Singapore. [10]

(b) Discuss the extent to which demand-side policies could be adopted to address the problems of inflation and unemployment in Singapore. [15] 2 (a) Explain why an economy is able to enjoy low rates of inflation. [10] (b) In 2008 inflation shot up to 6.5%. Discuss whether this necessarily brings about harmful effects on Singapore economy. [15] Week 10: Singapores GDP grew by 7.9 per cent in 2006. The investments that Singapore attracted last year will eventually add $13.4 billion annually to the economy. A booming performance at home and better-than-expected conditions overseas have led the government to project that the Singapore economy will grow by between 4.5 to 6.5 per cent in 2007.
Source: The Straits Times, 30 Jan 2007 and 15 Feb 2007

Discuss the effects of Singapore governments policies targeting at investment on the economy. [25] HCI 2010 Promos With the United States, the worlds largest economy, being hit by the sub-prime mortgage crisis, analysts have said that any signs of slowdown could impact those economies or industries highly dependent on the US. (a) Explain the effects of the sub-prime mortagage crisis on Singapores internal macroeconomic performance. [10] (b) Discuss whether fiscal policy is the best policy to overcome the most significant macro-economic problems experienced by the Singapore economy during the sub-prime mortgage crisis. [15] NJC 2010 Prelims 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 Singapore Institute of International Affairs (SIIA), 12 May 2008

(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]

Term 4 Week 1: HCI 2009 Promos CSQ Extract 1: Chinas Rise China's economy during the past 30 years has changed from a centrally planned system that was largely closed to international trade to a more market-oriented economy that has a rapidly growing private sector and is a major player in the global economy. Reforms started in the late 1970s with the phasing out of collectivized agriculture, and expanded to include the gradual liberalization of prices, increased autonomy for state enterprises, the foundation of a diversified banking system, the rapid growth of the non-state sector, and the opening to foreign trade and investment. China has generally implemented reforms in a gradualist fashion. Although it has opened up its economy in recent years, still China has invigorated its support for leading state-owned enterprises in sectors it considers important to "economic security," explicitly looking to foster globally competitive national champions. This is carried out while it still continued its effort to privatize the inefficient state owned industries that falter in the face of growing competition from the multinationals that have moved operations to China to take advantage of its low labour cost and huge domestic market. Today, China is one of the worlds largest recipients of foreign direct investment (FDI) which has not only provided employment opportunities for the locals, but has also become an important source for technology transfers. Measured on a purchasing power parity (PPP) basis that adjusts for price differences, China in 2008 stood as the second-largest economy in the world after the US, although in per capita terms the country is still lower middleincome. The Chinese government faces numerous economic development challenges, including: spending more to strengthen its social safety net, including pension and health system reform, to counteract a low domestic demand; sustaining adequate job growth for rural-urban migrant workers and those laid off from state-owned enterprises; reducing corruption and other economic crimes; and containing environmental damage related to the economy's rapid transformation. Economic development has been more rapid in coastal provinces than in the interior, and approximately 200 million rural laborers and their dependents have relocated to urban areas to find work. Adapted from Thomson Reuters Jan 2009 and CIA Factbook 2009 Extract 2: Can China save the World? With the U.S., Japan and all of Europe mired in the worst global recession in 30 years, China has shown a restorative strength that six months ago many doubted it had. A devastating slump in exports crippled growth late last year, but on the back of a US$586 billion government stimulus program, China has snapped back. The economy grew 7.9% in the second quarter and will now probably expand 8% or more this year. Factory production has begun to edge up, in part because Chinese consumers continue to spend money at a healthy pace.

Auto sales, helped significantly by government subsidies for small-car purchases, hit an all-time record in April. Overall, retail sales in China this year are up 16%. Nations that depend on producing commodities, such as Australia and Brazil, have benefited immensely over the past six months as demand from China has driven up the price of raw materials. Helped by trade with China, Asia's exportdriven economies are sputtering back to life. Overall, the International Monetary Fund (IMF) forecasts that in the three years from 2008 to 2010, China will, astonishingly, account for almost three-quarters of the world's economic growth. As Shanghai-based economist Andy Xie puts it, "Everyone wants to know the same thing: Can China save the world?" The speed and relative success so far of China's stimulus stands in stark contrast with that of the U.S. According to a recent study by the World Bank, Beijing's government spending will generate more than 80% of the country's overall economic growth this year. This is partly because China was already in the midst of a nationwide infrastructure program when the recession hit. Emergency spending measures simply added to existing schemes already under way. Still, the best possible answer to the question of whether China can save the world is: Not yet. Plenty of economists doubt that China's economy is as sound as it appears. Even though Chinas economy continues to power ahead, it will probably not, on its own, be enough to drag the rest of the world into a recovery. Ultimately, China is not yet the leader of the global economy, although it appears to be getting there. Moreover, economists do not believe that the relatively poor Chinese consumers have the purchasing power to rescue China's economy, let alone the rest of the world. Brisk though auto sales may be, most Chinese still can't afford a Volkswagen, let alone a BMW. Even as China's consumers feel richer, their share of its economy may not change much until Beijing enacts reforms to the rural infrastructure, health-care and social-security systems -- steps that would give people more confidence to spend rather than save. Some aspects of China's glimmers of economic turnaround do seem as though they might offer hope to the country's trading partners. Take car sales, which rose in March for the third straight month, once again making China the largest market for automobiles in the world, ahead of the U.S. Those statistics, you'd think, would bring good news to the worlds automobile industry; but the recovery may only be temporary. Without a recovery in China's hugely important export sector, the economy may resume its downward track later in the year. In addition, China still faces a number of internal challenges a massive shift of population from rural areas to cities, cleaning up decades of environmental degradation, continuing to provide the increase in prosperity that has underpinned political stability. Given their scale, it should surprise nobody that it is still most concerned with saving itself economically not anyone else. Adapted from Time, 10 Apr and 10 Aug 2009 Table 1: Selected Key Macroeconomic Indicators for China, 2000-2008 Real GDP (US$ bn) 2000 1457 2001 1578 2002 1722 2003 1894 2004 2085 2005 2303 2006 2570 2007 2904 2008 3165

Growth in real GDP (% change) FDI Inflows (US$ bn) Growth in FDI Inflows (% change) Budget balance (% of GDP) Consumer prices (% change)

8.4 193 3.8% -2.5 0.3

8.3 203 5.2% 2.3 0.7

9.1 217 6.9% 2.6 -0.8

10.0 228 5.1% -2.2 1.1

10.1 245 7.5% -1.3

10.4 272 11.0 % -1.2

11.6 293 7.7% -0.8

13 327 11.6 % 0.6

9 NA NA -0.4 5.9

3.8 1.8 1.8 4.8 Adapted from EIU Statistics

Table 2: U.S. Economy versus Chinas Economy Macroeconomic Indicator GDP GDP (as % of global GDP) United States US$14 trillion 21% China US$4.4 trillion 6.4% 40% US$6,000

Domestic consumption (as % of 70% GDP) Annual per capita income US$39,000

Adapted from Time, 10 Apr 2009 Questions (a ) (i) (ii) (iii) Using AD-AS analysis, explain how an increase in FDI inflows could affect economic growth. Describe the trend of growth in FDI inflows and growth in real GDP observed from Table 1. To what extent is the relationship described in a(i) consistent with the observation made in a(ii)? [3] [2] [3]

(b ) (c )

Discuss whether the data provided is sufficient to suggest an improvement in the living standard of an average Chinese resident from 2000 to 2008. (i) (ii ) Describe the trend in the Chinese government budget balance (% of GDP) from 2003 to 2008. With reference to the data, predict the change in the Chinese government budget balance in 2009.

[8]

[2] [2]

(d )

To what extent can Chinas government stimulus plan power her economy to lead the rest of the world to a recovery?

[10 ]

[Total: 30]

Week 2: HCI 2010 Prelims CSQ2 Singapore and U.S. economies Extract 4 The Specter of Stagflation Looms over U.S. economy

Lately, many people are hearing an echo - faintly perhaps but distinctly audible of the stagflation of the 1970s. Even as economic growth sags, oil and gasoline prices are surging to new heights. Gold prices are on the rise, along with the prices of basic commodities like wheat and steel. And there are signs that overall inflation, after years of only modest increases, may be breaking out of its box. For central bankers, especially the Federal Reserve chairman, Ben Bernanke, all this could not come at a worse time. With the credit markets in disarray from the collapse of the housing bubble, Bernanke is cutting rates in a headlong rush to blunt the risks of recession. Analysts say that by tolerating such price rises, and maybe even allowing them to escalate, the Federal Reserve is risking its hard-won credibility as an inflation fighter, which will ultimately require it to push interest rates higher than they would have had to in order to contain the damage. On one hand, officials are cutting interest rates to keep the economy growing. On the other hand, the fear of rising inflation makes it more difficult for the Fed to jolt the U.S. economy with another wave of cheap money. Like the Fed, economists generally remain more concerned about the immediate threat of recession than the more distant fear of higher inflation. The consensus view of economists is that the expected slowdown is likely to create enough spare capacity to suck inflationary pressures out of the economy. Once the interest rate cuts have nursed the economy through the next few difficult quarters, they say, the Fed can easily raise rates again to respond to any pickup in inflation. "They are going to fix the wound now," said David Durst, chief investment strategist of the Global Wealth Management Group of Morgan Stanley. "They are going to take care of the growth situation and then fight inflation when the economy gets stronger." Source: Adapted from The New York Times, Dec 1, 2008 Extract 5 high Singapore not facing stagflation, but inflation will remain

The Singapore economy is not facing stagflation, according to the Senior Minister of State for Trade and Industry, S Iswaran. Prices have been rising in Singapore with inflation hitting a 26-year high of 7.5 per cent in April and May. And according Mr Iswaran, prices will continue to go up, with inflation remaining at a rate that Singaporeans have not experienced until recently. However, he said that stagflation where rising inflation meets falling industrial production and high unemployment - is unlikely. Mr Iswaran said, "Singapore is not facing stagflation. Singapore's economy grew by 4.3 per cent in the first half of this

year. Our job market remained healthy in the first quarter of the year. More than 73,000 jobs were created, and unemployment remains low." Worldwide growth is expected to remain soft in the second half of this year, following months of cooling due to high oil prices and weakening consumer confidence. And this slowing growth is compounded by steps to contain accelerating inflation - a situation not unique to Singapore. However, the Singapore government remains upbeat. Mr Iswaran said, "In Singapore, the strong pipeline of foreign investments and tourism projects that we have secured will also provide a certain level of support to the economy for the rest of the year and beyond. These projects will give rise to new activities and help to create jobs." He said that we also have to take care that wage growth does not exceed growth in productivity so as not to set off a domestic wage-price inflation spiral. During this period of economic volatility, it is important that companies continue to upgrade business capabilities and enhance competitive edge. Monetary policy has been tightened further. Following a slight increase in the slope of its policy band for the nominal effective exchange rate of the Singapore dollar last October, in April 2008 the Monetary Authority of Singapore shifted the band up by an estimated 2 percent in response to inflation concerns and upward pressures on the exchange rate. Source: Adapted from Channel NewsAsia, 21 July 2008 and International Monetary Fund Public Information Notice, 13 Aug 2008 Extract 6 Spectre of the double-dip1 haunts uneasy US

A crippled housing market. Stubbornly high levels of unemployment. Falling consumer confidence. Slower growth in industrial production. No wonder Ben Bernanke, the world's most powerful central banker, appeared a worried man in his testimony to Congress about the state of the US economy last week. Cheap money, tax breaks, higher public spending and bank bailouts acted like a massive shot of adrenaline and appeared to do the trick. The US economy has traditionally had good self-healing properties, and after plunging into recession in late 2008 and early 2009 it returned to growth in the middle of last year. In the final quarter of 2009, it grew by 1.4%. But growth since the start of 2010 has dropped back, and leading indicators point to even weaker activity in the second half of the year. Stubbornly high unemployment and the bombed-out state of the housing market help to explain why consumer confidence has nose-dived recently. Those who fear a double dip warn that companies, even if awash with cash, are not going to invest unless they can expect strong demand for their products. Americans can expect the Fed to leave interest rates at current emergency levels for some time to come. But Stephen Lewis at Monument Securities says cheap money alone is unlikely to turn the economy around soon. "On the
1

A double-dip recession refers to a recession followed by a short-lived recovery, followed by another recession. Gross domestic product (GDP) growth slides back to negative after a quarter or two of positive growth.

balance of probabilities it seems that, in at least one quarter in the next three, US GDP will record a quarter-on-quarter decline. Such a development would excite talk of a 'double-dip' recession. But it should, more accurately, be interpreted as evidence of an economy in depression." Adapted from: http://www.guardian.co.uk, 25 July, 2010

Fig 1: Singapores Quarterly GDP Growth

Source: MAS Survey of Professional Forecasters: March 2010 Fig 2: US unemployment rate (%) Fig 3: US Consumer Price Index

Source: Bureau of Labour Statistics

Questions: a (i) Explain what is meant by GDP at constant prices? [2]

(ii Describe the trend in GDP in Singapore from 2007 (Q3) to 2009 [3] ) (Q3). b With the aid of a diagram, explain why the Minister of State [4] remains upbeat about future economic situation in Singapore despite the high inflation rate. Explain how the data suggest that the US is heading towards stagflation? [3]

c (i)

(ii economists generally remain more concerned about the [6] ) immediate threat of recession than the more distant fear of higher inflation. To what extent is the above view of the economists justified? d Examine the relative success of the rescue packages adopted [12] by the US and the Singapore governments to help the economies.

Total: [30m]