TJC_H1_ECONS_EQ4_Ans

Suggested Answer for H1 Prelim EQ4 The creation of the ASEAN Economic Community (AEC) has potentially significant consequences for the Singapore economy. ASEAN leade rs established the AEC, one of whose aims is to promote freer movement of trade an d capital in the region. Mr. Guy Harvey-Samuel, chief executive of HSBC Singapore, s aid that if the AEC is well implemented, Singapore’s gross domestic product (GD P) would be 9.5 per cent higher by 2030. a) Explain how you might use GDP to assess a countr y’s living standards. [10] b) Discuss whether the AEC would benefit Singapore’ s economy. [15] Question Dissection a) Explain how you might use GDP to assess a country’s living standards. [10] Schematic Plan Explain a process: Identify the start & end point Start point: Manipulate GDP statistics End point: evaluate living standards material & non-material Introduction • Define living standards and GDP. • Establish the link between the 2 concepts. • Provide an overview of the answer. Body • Explain how GDP, when accounted for inflation and population growth, can be used to assess a country’s living standards. o Explain the need to account for inflation use ‘real GDP’ o Explain the need to account for population growth use ‘real GDP per capita’ o Explain how real GDP per capita can be used to assess both material & non- material living standards Conclusion (summary)

Suggested Answer for H1 Prelim EQ4 Suggested Answer Comments Standard of living can be divided into two categori es, material and non-material. Material standard of living refers to the bundle of goods and services available to the average citizen per year. Non- material living standard can be defined as the qual ity of life and measurements usually include stress levels, healthc are and education standards, and the state of environment. Although gross domestic product (GDP) is not a perfect indicator o f standard of living, it is a measure that is commonly used. GDP is defined as the value of all output produced by factors located within the geographical boundary of the country, re gardless of the ownership of factors of production, over a given ti me period. GDP is widely used as a measure of national income. After accounting for inflation and population growth, real GDP per capit a can be used to assess a country’s living standards. As GDP measures the total spending on goods and ser vices in all markets in the economy, if total spending rises fro m one year to the next, the economy must producing a larger output of goods and services, and/or goods and services are being sold at higher prices. To measure the total quantity of goods and services available to citizens more accurately, price changes have to be accounted for. Real GDP is GDP measured in constant prices, i.e., in terms of the pric