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2010 JC H2 Prelims Exam Essay Questions

1) The growth of the Asia Pacific tourism market, fuelled by the growing middle class in China, India and
ASEAN as well as the emergence of low cost airlines, presents significant opportunities. Singapore has to
capture her fair share of the growing tourism pie because many countries in the region are moving quickly
to develop major tourist attractions and new tourism products.
Source: Ministry of Trade and Industry website

(a)Using relevant elasticity concepts, account for Singapore’s decision to open the Integrated Resorts. [10]

(b) Assess how related markets might be affected by the opening of the Integrated Resorts. [15]

2) “The behaviour of firms in reality is determined primarily by the need to maintain profits.” Discuss. [25]

3 (a) Explain why income inequality is a cause for government intervention, and how price controls can aid
in reducing the inequality. [10]

(b)Assess the various policy measures that the Singapore government currently adopts to reduce inequality
in income distribution and consider whether new policies will be required. [15]

4(a) Explain the possible relationships between interest rate and exchange rate. [8]

(b)Assess whether Singapore has more to lose than the USA from a rise in interest rates. [17]

5) The price of oil jumped and hit a new high of US$135 a barrel on 26 May 2008 and it is likely that global
food and oil prices would remain high in 2008. In addition, the jobless rate in the USA was at a 26-year high
on 5 Dec 2008. Sources: Asiaonenews, 26 May 2008 and The Straits Times, 5 Dec 2008

(a) Explain the causes of stagflation in the USA. [8]

(b) In light of stagflation in the USA, discuss the relative importance of fiscal and monetary policies for
Singapore. [17]

6(a) Explain whether globalisation could solve the economic problem of scarcity. [10]

(b)Discuss the extent to which correcting a balance of payments deficit is the major reason for protectionism
in the real world. [15]

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1) 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.

2) According to the United Nations (UN) Food and Agricultural Organization (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 Nov 07

(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.

3) 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.

(b) Discuss how such acquisitions might affect the consumers and producers in the industries of the
Western economies where these occur. [15]

4) 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]

5) 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]

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6(a) Explain the economic basis for specialization 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]

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1) In November 2008, political turmoil caused the closure of the Bangkok’s Suvarnabhumi International

(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]

2 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]

3 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]

4) 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]

5(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?

6(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]

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1) 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

(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]

2) 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]

3(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]

4) To what extent is a country’s macroeconomic priority dependent on the openness of its economy? [25]

5) 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.

6) 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]

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1) 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]

2 (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]

3) 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]

4) Assess whether the Singapore government currently adopts appropriate policies to achieve high
standard of living (SOL). [25]

5) 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]

6) 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 globalization. [15]

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1) 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]

2 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 togreater society’s welfare. [15]

3 The Gini coefficient of Singapore fell from 0.489 in 2007 to 0.478 in 2009.
Source : Singapore Department of Statistics, February 2010

3a) Analyse, with supporting examples, how income inequality and positive externalities can result in market
failure [10]

3b) Assess the extent to which government policies in Singapore can correct these causes of market
failure. [15]

4) How far do you agree that the recent policies implemented by the government are the most appropriate
to enhance Singapore’s global competitiveness.[25]

5a) Analyse the effects of changes in exchange rate and interest rates on an economy’s balance of

5b) Discuss the view that policies to correct the balance of payments deficit on current account always
result in lower standard of living in an economy.[15]

6(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 the
pattern of trade between Singapore and the rest of the world. [15]

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1) “Despite rising number of hotel rooms, room-rates in Singapore are still rising.”

(a) Explain the factors that contribute to the above market outcome. [10]

(b) Using relevant concepts of elasticity, discuss the effects of an indirect tax on tourist-related services in
Singapore. [15]

2) 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]

(c) How far do you agree that monopolistically competitive firms are more efficient and equitable
compared to oligopolistic firms? [15]

3) 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]

4(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]

5)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]

6) Globalisation presents both opportunities and challenges. Discuss why some countries gain more than
others. [25]

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1) 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

Assess how the hotel and its related industries might be affected by these developments. [25]

2(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.

3)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]

4) 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]

5(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]

6(a) Explain why protectionism still exists with globalization. [12]

(b) Discuss some measures a government can adopt when confronted with increasing protectionism.

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1) 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]

2) The market for package holidays in Singapore is served mainly by travel agencies such as Chan
Brothers, Dynasty and SA tours. The development of the Internet has enabled travelers to purchase
their holidays online, changing the way these markets work.

(a) Explain why profit levels can vary considerably across oligopolistic industries. [10]

(b) Comment on the assertion that the development of the Internet has resulted in better outcomes in the
market for package holidays for society and producers. [15]

3) 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]

4) 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]

5) Analyze the recent sources of inflation in Singapore and assess whether low inflation should be the main
macroeconomic objective of the Singapore government. [25]

6)While Singapore has always shared strong trade ties with manufacturing powerhouse China, it recently
forged closer economic relationship with mineral-rich Peru. In 2008, Singapore’s trade with China amounts
to S$6.92 billion while that with Peru stood at a meagre S$75.2 million.

(a) Explain why Singapore signs FTAs with countries as diverse as China and Peru. [10]

(b) Assess the extent to which globalization has changed Singapore’s pattern of trade. [15]

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1) 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]

2) “Consumers’ tastes and preferences is the most important factor in influencing a firm’s pricing behaviour.”
Discuss. [25]

3) 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]

4)“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]

5) “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]

6) 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.

(b) Discuss whether you agree with the above assertion. [15]

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1) “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]

2) 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.

3(a) Distinguish between public goods and demerit goods, making clear in each case how they cause
markets to fail. [12]

b)Discuss whether taxation is the best policy to correct the market failure resulting from demerit goods. [13]

4 ‘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]

5)The pursuit of rapid economic growth should be the macroeconomic priority of a government. To what
extent do you agree with this statement? [25]

6)Due to the global financial crisis, countries are quick to impose trade barriers to solve their domestic

(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]

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1) 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]

2) Assess the view that oligopoly is the best market structure to promote efficiency, equity and
innovation. [25]

3(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]

4(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]

5)Assess the view that raising labour productivity is the best way to achieve the macroeconomic aims of
Singapore. [25]

6) 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]

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1) 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.

2) 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]

3) 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]

4(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]

5)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]

(6)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]

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1 The government has announced better than expected economic data and a sizeable cut in the number of
certificate of entitlement (COE) in the next two quarters.

(a) Explain, with the help of a diagram, the concept of scarcity, choice and opportunity cost in view of the
underlying objective of the certificate of entitlement. [10]

(b) Assess the impact of the above announcements on the government and prospective car buyers in the
current quarter and the subsequent quarter. [15]

2 Discuss why price competition, product development and product promotion differ across industries and
whether they benefit the consumers. [25]

3 (a) Analyse why government should intervene in the market for healthcare. [12]

(b) Discuss whether the current interventions in the market for healthcare by the Singapore government are
sufficient. [13]

4 (a) Explain how a change in the U.S. interest rate can lead to a lower circular flow of income and
expenditure for Singapore. [12]

(b)Examine whether a lower circular flow of income and expenditure necessarily mean a lower standard of
living. [13]

5 The Monetary Authority of Singapore (MAS) is leaning towards tightening monetary policy by allowing the
Sing dollar to strengthen although no final decision has been made.

(a) Explain why MAS’s monetary policy is centred on the exchange rate and the factors that could influence
her monetary policy stance. [10]

(b) Discuss whether a tightening monetary policy is the best policy to maintain Singapore’s favourable
current account balance. [15]

6 Globalization is often regarded to be a double-edged sword.

(a) Explain the relevance of this statement to Singapore. [12]

(b) Discuss whether the Singapore government currently adopts appropriate policies to overcome the two
most harmful effects of globalization. [13]

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1)“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]

2)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 behaviour.

(b)Comment on whether pricing decisions should remain as the primary strategy for a telecommunications
firm. [15]

3)In 2009, the government announced a Resilience Package to provide support for Singaporeans during the
economic downturn. The Resilience Package and other government schemes added an estimated $1270
per household member on average in 2009.

(a) Explain why income inequality is a source of market failure. [10]

(b) Evaluate the various measures which the government has put in place over the years to reduce
income inequality in Singapore. [15]

4)“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]

5)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 Straits Times Dec 09

Assess whether the policies currently undertaken by the Singapore government to address declining
productivity would bring more harm than good to the economy. [25]

6)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. Straits Times Oct 08

(a) Analyse the impact 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]

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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]

2) Barriers to entry is the only factor influencing a firm’s pricing strategy and it would always lead to
inefficiency. Discuss. [25]

3(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]

4)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]

5(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]

6)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]

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1(a) Using the concept of opportunity cost, explain the essential problem of economics. [10]

(b) Discuss whether the free market is the best way to solve this problem.[15]

2)Discuss how the Singapore government might use the concept of price elasticity of demand to determine
the impact of a fall in exchange rates on the country’s balance of trade and the imposition of taxes on the
market for demerit goods. [25]

3)With rising affluence, Singaporeans are demanding more convenience and higher quality goods. A small
number of supermarkets dominate the grocery sector but there has been a rise in convenience stores due
to busy lifestyles. Online grocery shopping is also beginning to make inroads.
Adapted from KPMG,

(a) What can be learnt from perfect competition if the strict assumptions make this an unrealistic market
structure? [10]

(b) Discuss whether the interests of consumers are best served by supermarkets or the more prolific
convenience stores. [15]

4(a) Explain the necessary information an economist would require to determine whether the standard of
living of an economy has improved. [10]

(b)Consider whether high household savings is always beneficial to Singapore. [15]

5)In 2009, the United States banned flavoured cigarettes, arguing that they were particularly attractive to
children who are not aware of the harmful effects of smoking. But the ban excludes menthol-flavoured
cigarettes that are produced by American tobacco firms. Indonesia, the world’s largest producer of clove-
flavoured cigarettes, argues that this ban is protectionistic in nature and is protesting at the WTO.
Adapted from Reuters News. 12th April 2010

(a) Explain why, prior to the ban, trade in clove-flavoured cigarettes occurred between Indonesia and
the USA. [10]

(b) Assess the arguments for the above ban on flavoured cigarettes. [15]

6)The defining characteristic of Singapore is its high level of integration with the global economy. While it
has exposed the country to the onslaught of the current crisis, it is one of the key drivers of long-term
Singapore Competitiveness Report 2009

Given Singapore’s high level of integration with the global economy, discuss whether the government’s
attainment of long-term prosperity will conflict with the achievement of other macroeconomic objectives.

©2010 Adam Smith Economics Tuition Agency

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1)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 Toyota in their pursuit of profits. [15]

2) 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]

3(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]

4) 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]

5) 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]

©2010 Adam Smith Economics Tuition Agency

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6 "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 globalization 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]

©2010 Adam Smith Economics Tuition Agency

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1) Using appropriate examples, discuss the extent to which elasticity concepts impact the effectiveness of
microeconomic and macroeconomic policies of different governments. [25]

2) 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 the 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]

3.) “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]

4) 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 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]

5)In the face of the worst global economic recession since the 1960s, Singapore's export-dependent
economy is projected to register a 5% GDP decline in 2009.
The Economist, 23 Jan 2009

Discuss the possible impact of the global economic recession on a small and open economy such as
Singapore and whether fiscal policy is the best way to reduce the harmful effects of this impact.

©2010 Adam Smith Economics Tuition Agency

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6. 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

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]

©2010 Adam Smith Economics Tuition Agency

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1) The recent recovery in the world economies and the deregulation of airline markets have affected the
demand for and the supply of air travel and airplanes.

Discuss how the markets for air travel and airplanes are affected by these events. [25]

2(a) With the use of appropriate examples, explain why some industries are dominated by a few large
firms. [10]

(b) Discuss whether the profit maximising motive will always affect these firms’ pricing and output
decisions. [15]

3(a) Explain why governments throughout the world have been involved in the supply of electricity.

(b) Discuss whether economic efficiency is likely to be improved by the provision of such a product by a
private company. [15]

4(a) Explain the measures governments can implement to increase the level of foreign direct investment in
the country. [10]

(b) Do you agree that an increase in foreign direct investment will increase the welfare of the country? [15]

5)Asia’s export-dependent economies have pledged more than US$680 billion in extra public spending over
the next five years as demand for their products diminishes amid the recession in the US, Japan and

(a) Explain how an increase in public spending can be used to close a recessionary gap in a country. [10]

(b) Discuss whether the extra public spending is the best approach for Asia’s export-dependent economies
to adopt in order to deal with the recession. [15]

6)In October 2007, Singapore’s inflation hit a 16-year high, due mainly to rising prices for energy, food and
commodities. The Monetary Authority of Singapore said its policy of a modest and gradual rise in the
Singapore dollar was appropriate.
Adapted from Reuters, CNBC 23 November 2007

(a) Explain how and why Singapore uses exchange rates rather than interest rates to control inflation.

(b) Discuss whether a surge in inflation is more likely to affect the domestic or external sectors of the
Singapore economy. [15]

©2010 Adam Smith Economics Tuition Agency

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