H2 Prelims Paper 1 Q2 Suggested Answers

Question 2: The Impact of a Global Pandemic on Globalisation Suggested Mark Scheme: (a) Describe the trend in global trade as a percentage of GDP from 2011 to 2020.[2]General trend: Global trade as a percentage of GDP is decreasing from 2011 to 2020. [1]Refinement: However it increased from 2016 to 2018. [1] (b) With reference to Extract 4, (i) Using AD/AS analysis, explain how Singapore’s monetary policy canincrease national output. [4]● Singapore adopted a zero percent appreciation, allowing the Singapore dollar todepreciate. [1]● Thedepreciationof Singaporedollar wouldmakeexportscheaperintermsofforeigncurrency. [1]● Thisincreasesexportscompetitiveness, leadingtoanincreaseinexportrevenueandaggregate demand. [1]● Asaggregatedemandincreases, firmsrespondbyincreasingproduction,resultinginan increase in GDP. [1] Note: impact on imports not neededfor thisquestion. Useof elasticityconceptsalsonotrequired. (ii) Explain one possible unintended consequence of “further monetaryeasing”. [2]● Further monetary easing involves further depreciationof theSingaporedollar, whichwould increase the price of imports in terms of Singapore dollars. [1]● As the price of imports increases, imported rawmaterials become moreexpensive.This leads to an increase in cost of production and imported inflation. [1] (c) (i) Using the concept of price elasticity of demand, explain the impact ofimposing rice export restrictions on a domestic rice producer’s revenue.[4]● Riceexport restrictionsprevent riceproducersfromexportingtoother countries, andthus increase the domestic supply of rice [1]● Increaseinsupplyof ricesurplusofriceatthecurrentpricesdownwardpressureon price [1]● The demand is price inelastic (PED < 1) since food is a necessity in most riceproducing countries [1]● The decrease in price due to the rising supply leads to a less than proportionateincrease in quantity demanded.● The loss in revenue due to decrease in price outweighs thegaininrevenueduetoincrease in quantity sold, thus there is an overall decrease in revenue for riceproducers. [1] Note: for answers that explain a fall in demand due to a smaller market, maximumof 2marks since PED concept is not used. (ii) Discuss the impact on the economy in countries such as VietnamandCambodia of imposing export restrictions. [8] ©ACJC2022 Preliminary Exam 9757/01

2 Introduction:● The export restrictions are imposedwiththemainobjectiveof loweringthepricesofcommodities and food for the domestic economy.● Such restrictions can have both positive and negative effects on an economy. Requirement 1: Positive impact of export restrictions● As explainedin(ci), export restrictionsincreasethesupplyof important commoditiesand food in a domestic economy. This helpstoreducepricesof foodandother rawmaterials.● Thusfoodandcommoditieswill bemoreaffordabletodomestichouseholds.Withanincrease in purchasing power, material standard of living improves.● In addition, with cheaper rawmaterials, cost of production for firms is reduced. Asfirms are more willing and able to produce at each price, there is an increase inSRAS. Firmspassonthecostsavingstoconsumersresultinginalowergeneral pricelevel.Lower and more stable inflation rate Requirement 2: Negative impact of export restrictions● As firms are not allowed to export overseas, theyhaveasmaller consumer basetosell to. They are only able to sell domestically at a lower price, leadingtoalossinrevenue.● Thus firms may experience a loss of profits.● Withlower export revenue, thereisalsoafall inAD,especiallyifthecountryisreliantonexports. Thefall inADresultsinanunplannedincreaseinstocksfor firms. Firmsrespond by cutting down production, leading to a fall in GDP.● With lower output, firms demand less labour, especially in export industries. Someworkers may be laid off and there may be an increase in demand deficientunemployment.● In the long run, market share maybelost asother countriesthat producethesamecommoditiescanincreaseproductiontomeettheglobal demand.Thecountry’stradereputation may also be damaged. Other countries may choose to find more stablesourcestoimport from. Thus, export revenuemayremainlowerevenaftertheexportrestrictions are removed. Evaluation:● As extract 5 mentions, export restrictionsarea“kneejerk” reactiontoacrisis. Theymay be necessary in the short run to ensure a stable supply of food and othernecessities in a country.● However, export restrictionsarelikelytobemoreharmful inthelongtermasitleadsto a loss of export revenue.● Theextent of harmdependsonthenatureof thecountry.Foracountrythatisrelianton exports for economic growth, export restrictionsarelikelytobemoreharmful forthe economy. Level Descriptors MarksL2 ● Balanced answer that considers boththepositiveandnegativeimpacts of export restrictions.● Answer uses economic analysis and tools such as AD/ASanalysis to explain the impact on the economy.● Both requirements should be analytical to score 6 marks.● Good use of evidence and reference to the extracts. 4 - 6 L1 ● Answer maybeonesided, explainingeitherpositiveornegativeimpacts.● Answer may have insufficient economic analysis / be moredescriptive. 1 - 3 ©ACJC2022 Preliminary Exam 9757/01

3 ● Answer may be theoretical and lack application to the context.E2 Well-reasonedjudgement usingat least onecriteria, suchasshort /long term or nature of the economy 2 E1 Judgement is not well substantiated / the substantiation andreasoning is not convincing. 1 To be discussed during standardisation:A + A 6A + C 5C + C 4C + K / A + 0 3K + K / C + 0 2K + 0 1 (d) Discusswhether theCOVID-19pandemicwill slowdownoracceleratetherateof globalisation. [10]Note to markers: Students are expected to explainwhyandhowglobalisationmayslowdown, with analytical explanation. Introduction:Globalisation refers tothedevelopment of anincreasinglyglobal economy, characterisedby increases in trade of goods and services, international flows of capital, and labourmobility. Given the trend in global trade, globalisation has slowed down in the pastdecade. The COVID-19 may have further slowed down the rate of globalisation. Requirement 1: The COVID-19 pandemic may have slowed down the rate ofglobalisation.● Whycountriesmaytradeless:Countriesarewaryofvulnerableglobal supplychains.Withdisruptionstotheglobal supplychain,countriesarenotabletoimportimportantcommodities and necessities from their usual sources. This could lead to highimportedinflationduetothedecreasedsupplyof commodities. Thus,countriesmayswitch to domestic production for increased stability instead of relying on trade forsuch commodities.● Howglobal trademaybereduced: Useof measuressuchasexport restrictionswillreduce total world trade (as shown by figure 1). ●● Why investments may fall: In addition, to reduce vulnerability to external shocks,firmsmaydecidetore-shoretheir businesses. For example, USfirmssuchasDeltaChildren (Extract 6) considered moving their production back to the US to avoidsupply shortages caused by COVID-19 measures implemented in China. The ©ACJC2022 Preliminary Exam 9757/01

4 shortagesresult inhigher cost of productionandlossof profitsfor thefirms.Ifmorefirmsre-shoretheir businessestostabilisetheir profits, therecouldbeadecreaseinFDI globally.● Why labour movements may fall: The COVID-19 restrictions have also “broughtinternational travel to a standstill” (Extract 6). With travel restrictions in place toprevent the spread of the virus, people are less able to travel and take up jobopportunities overseas. Evaluation of above points:● Countries may choose not to use export restrictions inthelongterm, sinceit wouldreduce export revenue and result in slower economic growth. Thus the exportrestrictions may only lead to a short term, temporary, fall in global trade.● Firms may choose to diversify and shift their productiontodifferent countriesratherthanre-shore. For example, DeltaChildrenchosenot tore-shoreastheUShashighlabour costs and lack of suppliers. Instead, firms may choose to move someproductiontoSouthEast Asia.Thus,whilethedirectiono