AJC H1 ECONS QP

1 READ THESE INSTRUCTIONS FIRST Write your name, PDG and index number in the spaces provided on all the work you hand in. Write in dark blue or black ink. You may use a soft pencil for any diagrams, graphs or rough working. Do not use staples, paper clips, highlighters, glue or correction fluid. Answer all questions. Begin your answer to each question on a fresh sheet of writing paper. Fasten your answer to each question separately. Fasten this cover page in front of your answers to Question 1. The number of marks is given in brackets [ ] at the end of each question or part question. Name __________________________ ( ) PDG ______/16 This document consists of 8 printed pages and 1 blank page. [Turn over] Question Number Marks Awarded 1 / 30 2 / 30 3 / 4 / 25 Total Marks ANDERSON JUNIOR COLLEGE JC2 PRELIMINARY EXAMINATION 2017 Higher 1 8819/01 ECONOMICS Paper 1 29 August 2017 3 hours Additional Materials: Answer paper

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3 Section A Answer all questions in this section. Question 1 Challenging times ahead Extract 1: UK economic growth has slowed dramatically, latest survey suggests Britain’s economy is losing momentum, knocked by weaker household spending and worries about the global outlook, according to the latest in a string of downbeat business surveys. Business a ctivity grew at the slowest pace for more than two years in Britain’s dominant services sector last month, according to the closely watched Markit CIPS PMI report . “Weakness is spreading from the struggling manufacturing sector, hitting transport and other industrial-related services in particular. There are also signs that consumers have become more cautious and are pulling back on their leisure spending, such as on restaurants an d hotels,” said Chris Williamson, chief economist at survey compilers Markit. “Wider business service sector confidence has meanwhile also been knocked by global economic worries and financial market jitters .” The pound weakened against the euro and the dollar after the report, whic h economists saw as providing further reason for the Bank of England to hold off raising interest rates from 0.5%. Source: The Guardian 5 October 2015 Table 1: Key Economic Indicators in 2015 Indicators UK China Singapore Nominal GDP growth (annual %) 2.2 6.9 1.9 Inflation rate 0.05 1.4 -0.5 Exports as a % of GDP 27.6% 21.9% 177.9% Imports as a % of GDP 29.2% 18.4% 152% Source: The World Bank Data Table 2: UK’s trade with selected countries in 2015 Countries UK’s exports to (£) (Rank) UK’s imports from (£) (Rank) United States 96.4bn (1st) 59.3bn (2nd) China 16.7bn (8th) 38.4bn (3rd) Japan 10.5bn (11th) 9.6bn (14th) Germany 48.5bn (2nd) 70.4bn (1st) Singapore 7.1bn (17th) 3.9bn (27th) Source: Office for National Statistics; www.visual.ons.gov.uk

4 Extract 2: China pledges policy support to economy, reform in 2016 China will make its monetary policy more flexible and expand its budget deficit in 2016 to support a slowing economy, state media said on Monday . It cited top leaders who wrapped up the annual Central Economic Work Conference , a meeting keenly watched by investors for clues on policy priorities and main economic targets for the year ahead. The government will take steps to expand aggregate demand next year. The People's Bank of China has cut interest rates six times since November last year and reduced banks' reserve requirement ratios (RRR), or the amount of cash that banks must set aside as reserves. The government has also stepped up spending on infrastructure projects and eased restrictions on home buying to boost the sluggish property market. Top leaders also pledged to push forward "supply -side reform" to help generate new growth engines, while tackling factory overcapacity and property inventories. Source: Reuters, 21 December 2015 Extract 3: Shedding light on slowing growth: What ails Singapore's economy? Singapore's small, trade -dependent economy is under the weather . While the country has not yet sunk into a full -blown recession, its fortunes are tied closely to those of the world economy and the outlook there is far from cheery. The Sunday Times looks at four key contributors to slowing growth in Singapore. 1. Lacklustre Global Growth The world economy has yet to completely shake off the vestiges of the global financial crisis and continues to lack a strong growth driver. Singapore’s key trading partners have all been grappling with their own sets of challenges. 2. Protracted Oil Price Slump World oil prices had been fairly stable from 2010 until mid-2014, at around US$110 a barrel. But they have almost halved since, plunging the oil and gas industry into a crippling slump. Companies in Singapore have not been spared the effects of this protracted d ownturn. More than two years of tumbling oil prices have wiped over US$24 billion (S$33.5 billion) from the market value of Keppel, Sembcorp Marine and other listed oil-services companies - or about two-thirds of their pre-July 2014 capitalisation. Tens of thousands of jobs have been axed and some companies have defaulted on bond payments - sparking concerns over banks' exposure to the sector. The drag from this important sector is predicted to feed through to the rest of the economy. 3. Shifting Trade Flows International trade has fallen to its lowest level since 2009, alongside lacklustre economic growth. But some economists say the slowdown is not merely cyclical, and lower levels of global trade might become the new normal. This is because growth in developed economies like the United States is increasingly driven by services rather than the trade in goods. China is also becoming less exposed to international trade as it shifts away from an industrial-led growth model towards consumption and services. This means Chinese companies are increasingly sourcing from within the country, instead of importing. This trend could weigh on regional trade even in the long run - a gloomy prospect for Singapore, which depends not just on its own exports but which also does a bustling trade in re-exports.

5 4. Disruptive Change Prime Minister Lee Hsien Loong said in his National Day Rally speech in August that disruptive change is the "defining challenge" facing Singapore's economy. Technology has transformed almost every ind ustry - from food delivery to manufacturing. These developments have left both challenges and opportunities in their wake, most obviously in the labour market. There are thousands of jobs waiting to be filled in growing sectors like IT, precision engineeri ng, education and healthcare. But many workers who have been laid off lack the necessary specialised skills required in these roles. There is no easy solution to this - the ever-increasing pace of technological change means that jobs will more or less be in a constant state of flux. There is help available for laid -off workers - including the option to upgrade their skills with SkillsFuture, or programmes which help mid-career workers move to industries with the potential to grow. But companies and workers also have a part to play - both in terms of skills upgrading and shifting mindsets. Source: The Straits Times, 30 October 2016 Questions (a) Using data from Table 1, (i) Compare the balance of trade position of UK, China and Singapore. [2] (ii) Comment on the view that the Chinese economy performed well in 2015. [3] (b) Using data from Extract 1 and Table 2, explain and compare how ’weaker household spending and worries about the global outlook ’ in the UK may impact the balance of trade for China and Singapore. [4] (c) (i) Explain what is meant by a budget deficit. [1] (ii) Using the concept of the circular flow of income