ACJC H2 Prelim 2024 P1 CSQ2 Solutions

Question2:Thechallengesinapost-pandemicworld Table1:SelectedKeyEconomicIndicatorsforUnitedStates,2019-2023 2019 2020 2021 2022 2023 RealEffectiveExchangeRateIndex(USD) 116.4 118 115.6 126.6 127.3 Netcurrentaccount(inUSDbillions) -441.7 -597.1 -831.4 -971.6 -818.8 UnemploymentRate(in%) 3.7 8.1 5.3 3.6 3.6 GovernmentDebt(asa%ofGDP) 100.1 124.7 118.9 114.7 Nodataavailable Source: data.worldbank.org, accessedon23July2024 Table2:SelectedKeyEconomicIndicatorsforSingapore,2019-2023 2019 2020 2021 2022 2023 Currentaccountasa%ofGDP(in%) 16.0 16.6 19.8 18.0 19.8 ConsumerPriceIndex(baseyear2019) 100 99.8 102.1 108.4 113.6 Unemploymentrate(in%) 2.3 2.9 2.7 2.1 1.9 Ginicoefficientvalue(beforeaccountingfortaxandtransfers) 0.452 0.452 0.444 0.415 0.412 Source: Singstat.gov.sg Extract6:America’sCHIPSAct Signed into America's law in August 2022, the Creating Helpful Incentives to produceSemiconductors(CHIPS)Act isintendedtoluremicrochipmanufacturingbacktotheUnitedStates(US)afterdecadesofcompaniesoffshoringthistechnologytocheapercountriessuchasChina.AlthoughtheUSproducedcloseto40percentoftheworld’ssemiconductorsupplyinthe

1990s,thishasnowsincefallentojust12percent,withTaiwanontheotherhand,producingmorethan60percentoftheworld’ssupplyofsemiconductorchipsnow. The CHIPS Act allocated $53 billion in fiscal incentives for domestic semiconductormanufacturingandresearchanddevelopment,tobuildnewandexpandexistingsemiconductorfacilities.Companiesarealsoeligiblefora25percenttaxcredit.ThelegislationissparkingagreatdealofinvestmentactivityintheUSsemiconductorsector.Hundredsofcompanieshaverequestedmorethan$70billioninsubsidies—nearlydoubletheamount available. Privatecompanieshavemeanwhileannouncedmorethan$200billionininvestmentspendingsincethelawpassed. There'sanewfoundrealisationabout thegrowingimportanceof chipsandsemiconductorsbecause chips are one of the critical factor inputs to produce electricvehicles. Withanincreasedglobalemphasisonreducingcarbonfootprint,thishasmadesomesupportersseethis policy as a much-needed boost to America’s trade and its investment in criticaltechnologies. However, somecriticsaresceptical about theeffectivenessofthispolicychange.TherearelimitstohowmuchsemiconductorcanbeshiftedtotheUnitedStatesfromEastAsiaduetothecostoflabour,constructioncostandthelackoftrainedworkforceintheUSA.BuildinganewchipmanufacturingfacilityinUSAisestimatedtobe‘fourorfivetimesgreater’thaninTaiwan,whichbegsthequestiononthesustainabilityoftheCHIPSactespeciallywitharisingfederaldebt.EconomistsareworriedthattheCHIPSActexplicitlypullsinvestmentawayfromEastAsiaandriskshollowingout 1 majortechindustriesinEastandSoutheastAsiaregion.ThismayhavespillovereffectsonsmallerAsiacountrieswhichrelyonmajorEastAsiaeconomiesforexportgrowth.Inthelongterm,suchindustrialsubsidiesinviteretaliationfromothers,leadingtoanoverallmoreinward-lookingworld. Source: AdaptedfromCouncil onForeignRelations, accessedon14July2024&East AsiaForum, 26Nov2023 Extract7:Thechallengeoffoodsecurity Withworldfoodcostssur