C2 H1 Econ Prelim 2012 Question Paper Final

HWA CHONG INSTITUTION JC2 Preliminary Examinations Higher 1 CANDIDATE NAME CT GROUP 11A/S CENTRE NUMBER INDEX NUMBER ECONOMICS Paper 1 Additional Materials: Answer Paper 8819/01 30 August 2012 3 hours INSTRUCTIONS TO CANDIDATES Write your name and CT class clearly in the spaces at the top of this page and on every page you hand in. Write in dark blue or black pen on both sides of the paper. You may use a soft pencil for any diagrams, graphs or rough working. Do not use staples, paper clips, highlighters, glue or correction fluid and tape. Section A Answer all questions. Section B Answer one out of 2 questions. Begin your answer to each question on a fresh sheet of writing paper. At the end of the examination, fasten the answer scripts to Section A: Questions 1, 2 and Section B separately with the 3 cover pages provided. The number of marks is given in brackets [ ] at the end of each question or part question. You are reminded of the need for good English and clear presentation in your answers. This document consists of 8 printed pages. [Turn over

© Hwa Chong Institution 2012 8819/ 01 / JC2 Prelim 2012 2 Section A Answer all questions. Question 1 London Olympics 2012 Figure 1: Visitor arrivals (in millions) and total tourist spending (£ billion) to the UK, 2004 to 2011 (projected) P predicted Source: Office of National Statistics, 2010 Extract 1: A cautious boost in tourist numbers The trade body representing tour operators has warned that expectations of a boost in tourism from the London Olympics may not be met, after unveiling research that suggested previous games had a "toxic" effect on visitor numbers according to the European Tour Operators Association (ETOA). The Sydney games in 2000 anticipated 132,000 visitors and received 97,000 for the games period, while Athens hoped for 105,000 per night in 2004 and received fewer than 14,000. In 2008, Beijing anticipated more than 400,000 foreign guests and received 235,000 for the whole month of August. Lord Sebastian Coe, chairman of the London Organising Committee of the Olympic Games, has talked of 1 million "extra" visitors coming to the UK for the games, which may bring the total annual visitor figure to about 33 million. But the ETOA report claimed that the perception that the host city would be crowded with tourists and expensive was likely to tarnish the view of the country as a whole. It said its members were already dealing with the perception that the UK would be crowded and so best avoided in 2012. Most believe the (millions) (£ billion)

© Hwa Chong Institution 2012 8819/ 01 / JC2 Prelim 2012 3 transportation system is unable to cope with the forecasted numbers. This is likely to create huge inconvenience to Londoners daily life. Olympic organisers face an ongoing battle to convince overseas travellers that visiting London for the games will remain cost -efficient and have appealed to hotels not to try and cash in by increasing their prices. However, hotel operators are largely expected to raise their pric es by an average of 300% more than the usual summer holidays. Some quarters fear that not all the rooms may be filled. Source: The Guardian, 21 September 2010 Extract 2: The Olympic Park When the International Olympic Committee voted for London to stage the 2012 Olympic Games, the British celebrated by pouring taxpayers money into the construction of the Olympic Park which included 7 major arenas. However, it was near to impossible to find land in London large enough to accommodate the Olympic Park and as a result, a proposed 4000-unit housing development had to be given up to make the Olympic Park possible. Source: Adapted from The Guardian, 20 June 2010 Extract 3: The Multiplier Effects of the Games The most enduring effect of the 2012 Games will not b e the world records that are set at the various venues but the extent to which the economic activity generated by their construction helps to lift the country out of recession. At a time when many are calling for a Keynesian solution to the country's economic woes, the Games oblige the government to spend billions of pounds on one -off infrastructure projects. It is certainly true that thousands of people are employed directly in construction at the various competition sites, and thousands more are benefiti ng from the fillip of a deal with the Olympics Delivery Authority (ODA). It has awarded more than 1,000 contracts with a total value of £5 billion, and 98 per cent of the successful bidders for orders to supply everything from shuttlecocks to pedestrian bridges are UK-based. But much of the £9.3 billion Olympics budget will be spent on the venues that will stage the key events. These are vast structures designed by prestigious architects. And when the Games themselves begin, there will be a short -term contract workforce of 100,000 people in diverse fields such as hospitality and catering, security, information and communications t echnology, management services and transport. The Games may be a useful refresher for the economy at a difficult time but, if we are looking for a stimulus to go anywhere near rivalling postwar spending spree, we'd have to enter winning bids for the World Cup, Winter Olympics and a few more major competitions too. Source: Spectator Business, 1 Jan 2010 [Turn over

© Hwa Chong Institution 2012 8819/ 01 / JC2 Prelim 2012 4 Questions (a) (i) Compare the number of visitors and the total tourist spending to UK. [2] (ii) With the aid with a diagram, explain why hotel operators tend to charge high prices before the Olympic period but fail to have full occupancy during the Games itself. [4] (b) With the use of a production possibility curve and relevant economic concepts, explain the alternatives faced by the government when they decided to construct the Olympic Park. [4] (c) With reference to Extract 1, explain the likely source of negative externalities that may occur during the Games and assess one method that the government might use to curb it. [8] (d) (i) Explain what is meant by the term “a Keynesian solution” in Extract 3. [2] (ii) To what extent would the macroeconomic performance of the UK improve since winning the bid to host the Olympic Games? [10] [Total: 30 marks]

© Hwa Chong Institution 2012 8819/ 01 / JC2 Prelim 2012 5 Question 2 Unsynchronised Global Economic Recovery Extract 4: Disappearing stores of value Between 2005 and 2008, China played a constructive role in world economic arrangements, revaluing its currency by about 20% against the U.S. dollar and thereby shrinking its balance of payments surplus. Then at the end of 2008, the Chinese government undertoo k a massive "fiscal stimulus" program. China's rapid growth in 2009 brought down its balance of payments surplus, in fact the balance swung briefly into deficit in April 2010. However, as U.S. consumer and government spending, artificially stimulated by an excessive budget deficit and over -expansionary monetary policy, brought in Chinese imports once more, the U.S. balance of payments deficit with China widened again. Since the beginning of September the Chinese currency has appreciated about 1.8% against the dollar. However, the U.S. Adm