RI 2026 Key Economic Indicators T1W5 Class Test 1 Mark Scheme

Y6 H2 Economics T1W5 Class Test 1 – Key Economic Indicators (Mark Scheme) © Raffles Institution 1 Mark Scheme (a) (i) Define gross domestic product (GDP). • Gross domestic product (GDP) is the value of all final goods and services produced within the geographical boundary of a country over a given period of time. [1] [1] (ii) With reference to Table 1, compare the changes in real GDP across the countries from 2020 to 2022. • Similarity: All countries have an increase in real GDP from 2020 to 2022. [1] • Difference: In 2020, Vietnam has an increase in real GDP whereas the rest of the countries have a decrease in real GDP. [1] OR • Vietnam’s real GDP increased throughout 2020 to 2022 whereas the rest of the countries have a decrease in real GDP in 2020 then an increase in real GDP from 2021 to 2022. [1] [2] (b) Explain how “rising wages relative to productivity” could impact Vietnam’s balance of trade position in the future. • Rising wages relative to productivity will lead to an increase in firms’ cost of production. This will decrease Vietnam’s export competitiveness, which will reduce qty demanded for Vietnam’s exports (assuming PEDx>1) and hence export revenue. [1] • This will worsen Vietnam’s BOT position  may cause Vietnam’s balance of trade surplus to decrease in the future/ or if exports fall significantly, balance of trade may be in a deficit. [1] [2] (c) With reference to Table 2, identify whether Singapore or Vietnam has a higher increase in real wages in 2022. Explain your answer. • Vietnam. [1] • % change in real wage= % change in nominal wage - % change in consumer prices. • Since Singapore’s change in real wages is 6.5% -6.12%=0.38% is lower than Vietnam’s change in real wages of 6.9% -3.16%=3.74%, Vietnam has a higher increase in real wages. [1] [2] (d) With reference to Table 2, explain why Vietnam’s GDP per capita in purchasing power parity (PPP) terms exceeded its GDP per capita in USD. • PPP exchange rate equalises the purchasing power of different currencies, allowing the currency of one country to be converted into that of another country to buy the same amount of goods and services in the country. GDP per capita in PPP USD thus eliminat es differences in cost of living between countries and reflects the country’s purchasing power. Whereas GDP per capita in USD converts Vietnam’s GDP to a common currency (USD) by using official exchange rates. [1] [3]

Y6 H2 Economics T1W5 Class Test 1 – Key Economic Indicators (Mark Scheme) © Raffles Institution 2 • Since Vietnam’s GDP per capita in PPP is 13000 USD which is higher than GDP per capita in USD of 4500 USD. This means that 4500 USD allows the purchase 13,000 USD worth of goods and services in Vietnam. [1] • This means that cost of living in lower in Vietnam than in US [1]. (e) Discuss whether the data provided is adequate in making a comparison between the standard of living of