2024 DHS Economics Preliminary Examination 9570

© DHS 2024 9570/01/2024 Name: Centre/Index Number: Class: DUNMAN HIGH SCHOOL Preliminary Examination Year 6 Economics (Higher 2) 9570/01 Paper 1 Case Study Questions 16 September 2024 2 hours 30 minutes No Additional Materials are required. READ THESE INSTRUCTIONS FIRST An answer booklet will be provided with this question paper. You should follow the instructions on the front cover of the answer booklet. If you need additional paper ask the invigilator for a continuation booklet. Answer all questions. The number of marks is given in brackets [ ] at the end of each question or part question. This document consists of 7 printed pages including this cover page. [Turn over

© DHS 2024 9570/2024 Answer all questions. Question 1: The impact of soaring prices Table 1: Wheat production (million metric tons) Country/Year 2018 2019 2020 2021 2022 Australia 17.6 14.5 31.9 36.2 40.5 China 131.4 133.6 134.3 136.9 137.7 Russia 71.7 73.6 85.4 75.2 92.0 Source: US Department of Agriculture, accessed 18 August 2024 Extract 1: Ukraine war to cause biggest price shock in 50 years The war in Ukraine is set to cause the "largest commodity shock" since the 1970s, the World Bank has warned. It said disruption caused by the conflict would contribute to huge price rises for goods ranging from natural gas to wheat and cotton. The increase in prices "is starting to have very large economic and humanitarian effects", a senior economist at the World Bank added. He said, "households across the world are feeling the cost of living crisis. We're particularly worried about the poorest households since they spend a larger share of income on food and energy, so they're particularly vulnerable to this price spike". Wheat price is forecast to increase and reach new record highs in dollar terms. "Wheat is one of the hardest agriculture exports to replace," according to a research note from the Bank of America. It points out that poor weather conditions in North America and China are likely to exacerbate the impact of Ukrainian supplies being reduced, something which will continue because the war has disrupted the spring planting season. Demand was also shifting as importers rushed to find alternatives to Russian and Ukrainian grain. Thailand's rice shipments in the first two months of 2022 soared from the same time last year, according to Thai Rice Exporters Association data. Source: adapted from Ukraine war to cause biggest price shock in 50 years - World Bank, BBC News, 27 April 2022 and Thai rice exports surge as Ukraine war roils global food supply, Nikkei Asia, 21 April 2022 Extract 2: Kellogg hikes sales forecast Kellogg Co raised its 2022 sales forecast banking on more price increases to help counter the impact of supply shortages stemming from the war in Ukraine. Kellogg, which also makes Pringles and Eggo waffles, said it was increasing the pace of price hikes it pushes to consumers as costs soar. Regarding shoppers swapping out Kellogg products for cheaper items, CEO Steve Cahillane said "we haven't seen evidence yet of that but as we look forward - just because inflation is so intense - our forecast is it will have pressure."

© DHS 2024 9570/2024 The company plans to emphasise the affordability of a bowl of cereal and milk as a meal in marketing and merchandising, Cahillane said. "It's convenient and it's very affordable when you think about the number of bowls," in a box, he said. Russia's invasion of Ukraine is expected to hurt supplies in the second half of the year, Kellogg said, as that part of Europe is a major source of ingredients for packaged food companies. Kellogg has relied on palm oil from Indonesia due to the lack of sunflower oil from Ukraine, after the Russian invasion earlier this year, Cahillane said. "There's been a lot of concern about Kellogg's ability to maintain profit, especially given the company’s possible exposure to wheat from Eastern Europe," an economic analyst said. Source: adapted from Kellogg hikes sales forecast as price increases offset impact of strike, Reuters, 5 May 2022 Extract 3: Policy moves curbing rising prices, but Singapore cannot fully escape impact of global inflation: MAS Government actions here to combat inflation will dampen its pace over the next year but the Republic cannot completely insulate itself from global rising prices, said Mr Ravi Menon, managing director of the Monetary Authority of Singapore (MAS). Inflation is surging in many countries around the globe owing to factors such as higher energy costs caused by the Russia -Ukraine war, and supply chain disruptions as many countries bounced back economically from the impact of COVID-19. Over the past nine months, the MAS has tightened monetary policy through adjustments to the exchange rate for the Singapore dollar against a basket of the country's main trading partners. Mr Menon explained that MAS allows the trade- weighted exchange rate to appreciate faster when inflationary pressures build up to reduce imported inflation and restrain export demand. “Strengthening the exchange rate to try to fully offset the impact of global prices runs the risk of sharply curtailing growth and creating unemployment,” he said. Another key lever for controlling inflation is sound labour market adjustments to prevent entrenching inflation, said Mr Menon. “The relaxation of our border restrictions and resumption of foreign worker inflows should help to moderate labour cost pressures. To prevent a further build-up in labour cost pressures, it is important that the inflow of non- resident workers continues unimpeded,” he said. Source: Policy moves curbing rising prices, but S'pore cannot fully escape impact of global inflation: MAS, TODAY, 19 July 2022

© DHS 2024 9570/2024 Questions (a) With reference to Table 1, compare the trend of wheat production in China, Russia and Australia from 2018 to 2022. [2] (b) With reference to Extract 1: (i) using a demand and supply diagram, explain two reasons why the price of wheat is expected to “reach new record highs”. [5] (ii) explain how the expected price spike could worsen inequity. [2] (c) With reference to Extract 1, explain the likely cross price elasticity of demand between wheat and rice. [3] (d) With reference to Extract 2, discuss the extent to which Kellogg will face a fall in profits amidst the various developments. [8] (e) With reference to Extract 3, discuss the policy options for Singapore to combat inflation. [10] [Total: 30]

© DHS 2024 9570/2024 Question 2: The market dynamics and demographic shifts in Southeast Asia (SEA) Extract 4: Philippine peso: Catch me, I’m falling. The Philippines peso has been hitting record lows, driving domestic inflation, and burdening Filipinos with rising prices of basic needs amidst floundering incomes and earnings. This trend has been exacerbated by the aggressive interest rate hikes by the United States (US) Federal Reserve since early 2022. However, the peso's decline also highlights underlying weaknesses in the economy of T he Philippines. The acceleration of the peso's decades -long depreciation coincides with liberalisation policies that have weakened domestic a