2012 H1 Econs Prelims (Finalised)

1 © DHS 2012 Name: Index Number: Class: DUNMAN HIGH SCHOOL Preliminary Examination Year 6 Economics 8819/1 Higher 1 Section A Case Study Section B Essay 17 September 2012 3 hours Additional Materials: Writing Papers PLEASE READ THE FOLLOWING INSTRUCTIONS FIRST Write your name and class on all the work 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. Please start on a fresh sheet of paper for a new question. Section A Answer all questions. Section B Answer one question. At the end of the examination, fasten all your wo rk securely into two separate bundles for Section A and Section B. The number of marks is given in brackets [ ] at the end of each question or part question. Circle the question number you have attempted. Section A Section B Q1 Q2 Q3 Q4 This document consists of 9 printed pages including this cover page. [Turn over

2 © DHS 2012 Section A Answer all questions in this section Question 1 Debt Time Bomb Extract 1: Public Finances in Dismal State European Union (EU) figures showed that public finances across Europe were in a dismal state after governments spent heavily to keep their economies afloat. The combined deficit for all 16 eurozone countries more than trebled in 2009 to 6.3 per cent of Gross Domestic Product (GDP) from 2.0 per cent in 2008, more than twice the level permitted under EU budget rules. Ireland was the worst offender, followed by Greece. There are fears that Greece's troubles in the international financial markets will trigger a domino effect, toppling other weak members of the eurozone such as the so-called "Piigs" – Portugal, Ireland, Italy and Spain as well as Greece – all of whom face challenges rebalancing their books. And Greece's woes mean there are fresh fears about whether Portugal and Spain can repay their debts. That's because they all could face higher costs, as investors get nervous about lending money to governments through buying government bonds. Consequently, everybody's interest rates are heading higher as governments have to pay a greater risk premium to borrow money. Source: Channel News Asia, 23 April 2010; BBC News, 16 February 2010 Table 1: Overall Fiscal Balance (Percent of GDP) 2008 2009 2010 2011 (est) Greece -12.2 -15.6 -10.5 -9.2 Ireland -7.3 -14.0 -31.2 -13.1 Italy -2.7 -5.4 -4.5 -3.9 Portugal -3.7 -10.2 -9.8 -4.2 Spain -4.5 -11.2 -9.3 -8.9 Source: IMF Extract 2: 'Austerity' Named Word of the Year 2010 As Greece faced a debt crisis, the government pa ssed a series of strict austerity measures, including taxes hikes and cutting public sector pay. The move sparked angry protests, strikes and riots across the country as unempl oyment skyrocketed and the crisis