2025 EJC Paper 1

[Turn over EUNOIA JUNIOR COLLEGE JC2 Preliminary Examination 2025 General Certificate of Education Advanced Level Higher 2 ECONOMICS Paper 1 9570/01 28 August 2025 2 hours 30 minutes Additional Materials: Answer Booklet 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 answer 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 and 1 blank page.

2 9570/01 [Turn over Question 1: Artificial intelligence (AI) and data centers Figure 1: Total electricity consumption in the United States (US) from 2018 to 2030 Source: statista.com, accessed 1 July 2025 Extract 1: AI is pushing data center energy demands through the roof The rapid rise of artificial intelligence (AI), catalyzed by OpenAI’s ChatGPT launch in November 2022, has transformed the digital landscape, driving an unprecedented surge in electricity consumption by US data centers. The primary driver is the proliferat ion of AI workloads, particularly generative AI models, which rely on energy -intensive graphics processing units (GPUs) that consume up to 10 times more power than traditional servers. The International Energy Agency (IEA) projects that US data center electricity demand could triple to 606 terawatt-hours (TWh) by 2030, equivalent to the annual power needs of 56 million households. This growth is fueled by the expansion of hyperscale data centers operated by tech giants like Google, Microsoft, and Amazon, which are investing heavily in AI infrastructure. As a result, electricity prices across the US rose by 4.5% in 2023. Supply constraints, such as limited grid capacity and long lead times for new power infrastructure, have also intensified electricity price increases. This increase in electricity prices does not only have cost implications for operators of data centers; it also impacts the households. Households across the country are now grappling with noticeably higher electricity bills. Some families are beginning to reduce their electricity usage, such as limiting the use of high-energy appliances by delaying laundry cycles or turning to LED lighting that is more energy efficient. Other families may need to adjust their overall consumption patterns , so that they can pay for the higher electricity bills yet keep to their budget. Source: Adapted from Forbes, 31 May 2024 Extract 2: First time that AI has been blamed for layoffs The advent of artificial intelligence (AI) has significantly disrupted the US labor market, with automation increasingly replacing human workers in various sectors. In May 2023, the U S Labor

3 9570/01 [Turn over Department reported that approximately 3,900 workers lost their jobs explicitly due to AI -driven automation, marking the first instance where AI was officially cited as a cause of unemployment in government data. This figure represents a small but growing share of the 236,000 total layoffs recorded that month, underscoring the rapid integration of AI tools by major companies like Microsoft, Meta, and IBM. These firms have adopted generative AI technologies, such as ChatGPT, to automate tasks in customer ser vice, data entry, content creation, and even software development . The International Monetary Fund (IMF) notes that 60% of jobs in advanced economies, including the US, are exposed to AI, with entry-level roles most vulnerable due to their routine nature. But analysts note that as with previous technolog ies that have replaced human workers, generative AI technologies are already creating new jobs , and the emerging industry is just getting started. According to a report by the US Chamber of Commerce, demand for AI-related roles, such as machine learning engineers, AI ethicists, prompt engineers, and data annotator s, has surged, particularly in the technology, healthcare, and finance sectors. Companies are also providing AI courses for existing employees, allowing them to take on higher-value roles that require human judgment, creativity, and oversight of automated systems. Source: Adapted from CBS News, 3 June 2023 Extract 3: Benefits and costs of AI In 2019, Singapore was one of the first countries in the world to introduce a national AI strategy to power Singapore’s future. It represents the next phase of the country’s economic transformation and growth. More than $500 million has been invested in research and development through the national research programme AI Singapore since 2019. Now known as National AI Strategy 2.0 (NAIS 2.0), the new plan is needed to gear the nation to deepen AI adoption across many sectors while mitigating its risks. Since then, Singapore has witnessed significant breakthroughs in AI, resulting in the development of enhanced capabilities, new products and transformative interactions. The influx of AI tools in industry transformation, healthcare, education, security and other sectors is “not by chance” but comes on the back of years of planning and investment. One of the risks is the rapid expansion of data centers. It poses a severe threat to global climate goals due to their heavy reliance on fossil fuels. In 2023, US data centers consumed approximately 147 terawatt-hours (TWh) of electricity. Of this, 56% were powered by fossil fuels, with 40% from natural gas and 16% from coal, according to the International Energy Agency (IEA). This fossil fuel dependency resulted in carbon dioxide emissions equivalent to Brazil’s annual output, estimated at 435 million metric tons, contributing to significant environmental degradat ion given the increasing local air pollution and greenhouse gas emissions. This perpetuation of fossil fuel reliance exacerbates climate-related damage, such as rising sea levels and heatwaves. The m ost ambitious legislative effort to combat environmental damage through clean energy initiatives by the US include the Investment Tax Credit (ITC) and Production Tax Credit (PTC), which offer a 30% cost deduction for eligible solar and wind projects for clean energy production. These tax credits have catalyzed significant private sector investment, with companies like Google and Microsoft committing over US$15 billion in 2023 to new solar and wind projects to power their AI -driven data centers. While this is a good start, these sources of energy are intermittent, and data centers will still require energy to continue processing when the wind is not blowing and the sun is not shining.

4 9570/01 [Turn over Similarly, Singapore’s Green Plan 2030, launched in 2021, represents a comprehensive strategy to incentivise clean energy. A cornerstone of the Green Plan is the carbon tax. It targets large emitters, including Singapore’s 70 over data centers, which are critical to the city-state’s role as a global tech hub hosting AI operation for companies like Google and Amazon. To enable a smooth transition to a low-carbon future, Singapore plans to raise the carbon tax levels progressively to send the right price signal and minimize possible disruptions to businesses and individuals as they reduce their carbon footprints. Sources: Adapted from The Straits Times, 4 Dec 2023 TIME, 3 March 2024 National Climate Change Secretariat, 12 April 2024 Questions (a) Describe the trend in the actual total electricity consumption in the US from 2018 to 2023 and in the projected consumption from 2024 to 2030 in Figure 1. [2]