EJC Econs N2022 H2 EQ6

1 2022 A-Level P2 Question 6 Singapore’s Prime Minister has stated that ‘Globalisation will be under pressure, but it is imperative for countries to cooperate, for businesses to operate across many geographies, to tap resources, to bring skills and talents and experiences together, and then serve markets all around the world.’ a) Explain the benefits and costs of globalisation to Singapore. [10] b) Discuss the most appropriate policy measures that the Singapore government should tackle to increase the benefits and reduce the costs of globalisation. [15] Part (a) - Question Analysis Approach Command Word Explain Question Type Consequences and effects Start point Increase trade, capital flow and labour movement due to globalisation End Point BUGPEES Content and Context Content - Benefits and costs of globalisation - AD/AS framework Context Singapore Introduction Globalisation, a double-edge sword, refers to the integration or inter -connectedness of national economies through trade of goods and services, capital flows and labour migration. Singapore will see an increase in trade, capital flows, labour flows and in competition. Globalisation will help Singapore achieve the four macroeconomic objectives of sustained economic growth, low inflation, low unemployment, and a healthy balance of trade (BOT) position. However, globalisation also makes Singapore more susceptible to threats from global recessions and foreign competition. Body Point 1: Benefits of globalisation to Singapore. 1. As a small and open economy, Singapore can benefit from access to external markets and capital due to the increase in trade. • Due to the differences in opportunities costs and factor endowments, it would be beneficial for countries to produce goods that they have comparative advantage in and to trade with each other. • With skilled labour and an increased access to capital, Singap ore has a comparative advantage in capital-intensive industries producing high-end chemicals and pharmaceuticals products. The production of these goods in Singapore will incur a lower opportunity cost which leads to an increase in trade with these goods.

2 • In addition, the signing of Free Trade agreements and the removal of tariffs have facilitated better trade relations between Singapore and other countries such as United States, South Korea, China. Etc. • Singapore will have greater access to the export mar ket where the rise in exports is greater than the fall in imports. Hence, there will be an increase in Singapore’s net exports (X -M), which in turn increases aggregate demand (AD) from AD1 to AD2 as shown in the Figure 1 below. • With an increase in trade due to globalisation, it will also enable Singapore to acquire imports of higher quality of factor of production which increases productive capacity and potential growth in Singapore. • In addition, with an increased in levels of trade, consumers in the