TMJC 2022 A Level H2_EQ6

2022 A Level H2 Economics Suggested answer to Paper 2 EQ6 © TAMPINES MERIDIAN JUNIOR COLLEGE Essay 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 generations, to tap resources, to bring skills and talents and experiences together, and then serve markets all around the world.’ Source: pmo.gov.sg/Newsroom/PM-interview-with-BBC-for-Talking-Business- Asia, 2 March 2021 (a) Explain the benefits and costs of globalisation to Singapore. [10] (b) Discuss the most appropriate policy measures that the Singapore government should take to increase the benefits and reduce the costs of globalisation. [15] Suggested answers: Part (a): Introduction: Globalisation is the process through which an increasingly free flow of goods and services, capital, labour, and technology leads to the integration of economies and societies. It is brought about by improvements in information and communication technology, lower transportation costs and economic liberali sation, allowing countries to enhance their comparative advantage. Development #1: Explain at least two benefits of globalisation to Singapore Due to the nature of its economy, Singapore is likely to benefit significantly in terms of her macroeconomic aims. Benefit 1: Actual and potential growth Firstly, globalisation brings about an increase in trade volumes. As a small economy, Singapore lacks natural resources . However, she has the factor endowments such as capital goods and a skilled workforce compared to other countries. Since she has a lower opportunity cost in producing higher value-added goods such as petrochemicals, she is therefore able to produce these goods with lower opportunity cost and export them to the rest of the world. With globalisation, she now has access to larger foreign markets and if she can maintain her comparative advantage and engage in trade, it is likely that the increase in export revenue would be more than the increase in import expenditure. An increase in (X -M) will lead to an increase in AD. With reference to Figure 1 below, assuming that the Singapore economy is operating below full employment . The rise in income from the initial rise in AD causes a rise in income-induced consumption resulting in a further increase in AD. As one’s sp ending becomes another’s income there will be multiple increases in AD until a new equilibrium is reached whereby there will be a multiple increase in real national income from Y1 to Yf1, bringing about actual growth.

2022 A Level H2 Economics Suggested answer to Paper 2 EQ6 © TAMPINES MERIDIAN JUNIOR COLLEGE Figure 1: