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Raffles Junior College JC2 Preliminary Examinations 2007 ECONOMICS Higher 2

Paper 2 Essays 10 September 2007 2 hours 15 minutes
Additional Materials: Answer Booklet/Paper


READ THESE INSTRUCTIONS FIRST Write your name, index number and CT class on all the work you hand in. Write in dark blue or black pen on both sides of the paper. You may use a soft pencil for diagrams, graphs or rough working. Do not use staples, paper clips, highlighters, glue or correction fluid. Answer three questions in total, of which one must be from Section A, one from Section B and one from either Section A or Section B. At the end of the examination, fasten all your work and the cover sheet securely together. Place the cover sheet on top. The number of marks is given in brackets [ ] at the end of each question or part question. You are reminded of the need for good English and clear presentation in your answers.

COVER SHEET Name Index No CT Class : : : Please indicate the questions that you have attempted. Question No.
For Official Use Only




This document consists of 2 printed pages.
JC2Prelims 9732_02 © RJC 2007

Raffles Junior College
D e ve l o p i n g t h e T h i n k e r , L e ad e r & P i o n e e r

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2 Answer three questions in total. Section A One or two of your three chosen questions must be from this section. 1 It is unrealistic to rely on the price mechanism to achieve efficiency in resource allocation. Discuss. [25]


‘The booming property market will drive prices of private housing above the 1996 peak by the middle of next year.’
Source: The Straits Times, 16 Jul 2007

(a) Using demand and supply analysis, explain why housing prices are rising. [10] (b) With reference to relevant elasticity concepts, discuss the impact of the booming property market on the developers of private housing. [15] 3 Besides the large numbers of small pizza outlets across the country, there are at least 18 popular pizza chains (such as Pizza Hut and Canadian Pizza) in Singapore. (a) Explain the market structure in which pizza outlets are likely to operate. [10] (b) Discuss why a small outlet like Rocky’s Pizza can survive while a larger company such as Domino’s Pizza has failed. [15] Section B One or two of your three chosen questions must be from this section. 4 “Thailand’s economic growth has continued to slow down … consumption and investments have recovered slower than we have expected, export growth will also slow… Thailand’s Central Bank has cut its interest rate to spur economic growth …”
Source: The Straits Times, 19 January 2007

(a) Explain the factors that determine the equilibrium level of national income. (b) Evaluate the extent to which a cut in interest rate will spur economic growth. 5

[10] [15]

“PM Lee Hsien Loong hopes a free trade agreement (FTA) between Singapore and China would be concluded soon … Such a pact would not only enhance links between the two countries, but also would strengthen China's ties with Asean.”
Adapted from The Straits Times, 11 July 2007

Explain the rationale for free trade and discuss the extent to which FTAs are beneficial. [25] 6 “Amidst robust economic growth, MAS has ensured that the monetary policy stance is appropriate to ensure low and stable inflation … it would maintain the current policy of a modest and gradual appreciation of the S$NEER policy band in the period ahead … this policy is consistent with the continued expansion in the economy and provides the anchor for (price) stability … “
Source: MAS Annual Report 2006/07

Explain and assess the effectiveness of the above mentioned policy.
© RJC 2007 9732/02/S/07