ACJC Macro Policies Tutorial

©ACJC Econs Dept/2024/H2 Macroeconomic Policies Tutorial Worksheet 1 Anglo-Chinese Junior College JC2 Economics 2024 H2 Macroeconomic Policies TUTORIAL WORKSHEET SECTION A: ESSAY QUESTIONS Question 1 The recent worldwide recession caused many governments to re -assess their use of fiscal policy in order to stimulate their stagnating economies. (a) Explain the possible demand-side and supply-side reasons for a recession in an economy. [10] (b) Assess the relative importance of fiscal policy and exchange rate policy to manage Singapore economy when faced with a worldwide recession. [15] Question 2 In 2017, the annual rate of inflation in Singapore was significantly lower than the average rate for Southeast Asia. (a) Explain a possible demand side reason and a possible supply side reason for a rise in the rate of inflation. [10] (b) Assess whether policies designed to prevent a large and continuing rise in inflation in Singapore are the most appropriate policies for all economies. [15]

©ACJC Econs Dept/2024/H2 Macroeconomic Policies Tutorial Worksheet 2 Question 3 Singapore's economy expanded a faster -than-expected 1.8 per cent in the last quarter of 2016. Moving ahead, growth remains uncertain. Internally, Singapore has adopted a policy of restricting foreign labour and restructuring towards productivity-driven growth. Externally, higher US interest rate may lead to higher interest rates in Singapore. Source: Adapted from Channel Newsasia, 3 January 2017 (a) Explain the possible conflicts in government macroeconomic objectives caused by a policy of restricting foreign labour and restructuring towards productivity-driven growth. [10] (b) Assess the impact of higher US interest rate on Singapore’s macroeconomic performance. [15] Additional Essay Practices: Question 4 The rate of unemployment in more than 50 of the world’s countries, including several European countries, exceeds 10%. Governments face a difficult decision about whether income tax rate cuts are the most effective policy measure to reduce unemployment to more acceptable levels. (a) Explain how a reduction in the rate of income taxes paid by workers and firms might have consequences on an economy’s aggregate demand and aggregate supply. [10] (b) Discuss whether a reduction in the rate of income taxes is likely to be the best policy measure to reduce high unemployment in a country. [15] Question 5 In Singapore in 2018, the resident population below the age of 20 fell by 1.5% while the resident population over 65 grew by 6.0%. If these population changes continue into the future, there are likely to be significant consequences for Singapore’s economy.