VJC_H1_ECONS_8823

1 VICTORIA JUNIOR COLLEGE PRELMINARY EXAMINATIONS 2018 H1 ECONOMICS 8823/01 13 September 2018 3 hours Additional Materials: Answer Paper READ THESE INSTRUCTIONS FIRST Write your name and class on every answer sheet that you hand in. Write in dark blue or black pen. You may use an HB pencil for any diagrams, graphs or rough working. Do not use staples, paper clips or correction fluid. Do not write in the margins. There are 2 questions in this paper. You are to answer all questions. At the end of the examination, fasten all your work securely together. The number of marks is given in brackets [ ] at the end of each question or part question. This document consists of 9 printed pages including the cover page [Turn over

2 Question 1: India’s Troubles Figure 1: Food price changes in India Source: Trading Economics, accessed 26 July 2018 Figure 2: India’s food expenditure (USD per capita) Source: Knoema, accessed 7 August 2018 Extract 1: Rising food prices to hit rural India India’s villages will face a sharp spike in food prices in 2016, as a second year of drought drives up the cost of ingredients such as sugar and milk, and poor transport infrastructure stops falling global prices from reaching rural areas. Prices of vegetables like onions, tomatoes and potatoes have already been rising, with some staples up as much as 20 percent in a month. Palm oil prices have also climbed in the last two months, while milk prices have risen by 10 percent. Food accounts for more than 50 per cent of rural consumer price inflation in India, compared with a third of urban inflation, while categories like fuel, which has seen a considerable price drop, has a much smaller impact in rural areas, where families use firewood or biogas from manure. Source: Reuters, 10 November 2015

3 Extract 2: Rising food prices push India’s December retail to 17-month high Rising food prices pushed India’s retail inflation to a 17-month high in December, breaching the central bank’s medium-term target for the second straight month, which could intensify pressure for it to raise interest rates in the next few months. India’s measure of consumer price inflation, the CPI index, rose 5.21 percent in December from a year earlier, against a backdrop of faster economic growth, the Ministry of Statistics said on Friday. Annual retail food inflation rose 4.96 percent in December from 4.35 percent in the previous month. The Reserve Bank of India (RBI) held its interest rate steady at 6.0 percent last month and said all possibilities were on the table, depending on how price pressures and growth panned out. The RBI, which has a medium-term inflation target of 4 percent, has raised its inflation estimate to 4.7 percent for the six months through to March 2018. But some analysts feel inflation could ove