SRJC_H2_ECON_P1

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2 © SRJC 9732/01/JC2PreliminaryExam/11 [Turn over Answer all questions. Question 1 Recession and Prices Extract 1: Food prices to stay high, volatile: FAO Food commodities prices are likely to stay high and volatile in the medium term, while a repeat of the 2007-2008 price spikes is seen as a realistic possibility, the U.N. Food and Agriculture Organisation (FAO) said on Monday. By mid-2008, food prices on international markets reached their highest level in nearly 30 years. Graphics published in the report showed prices for commodities such as rice, oilseeds, raw and refined sugar were expected to hold above pre-2006 levels through to 2018. FAO said the global food commodities market was also likely to remain volatile "in the foreseeable future" and a new surge in prices like the one seen in 2007-08 was a "realistic possibility." Insufficient investment in productive capacity, and further demand growth for biofuels were some factors that could keep prices firm in the medium term. Source: Silvia Aloisi, Reuters, 12 October 2009 Extract 2: Expect flour prices to go up, says importer The effects of a Russian ban on wheat exports will soon ripple through Singapore: Prima Limited, the largest importer of the grain here, is planning to hike flour prices, a move that will impact a wide variety of industries, from bakeries to noodle-makers, as well as consumers. Prima, the main supplier of flour to businesses here, declined to say when prices would rise, or by how much. But its executive director, Mr Lewis Cheng, told The Straits Times yesterday that the recent surge in global wheat prices had a 'definite impact' on the company. “With this huge jump in material costs, we have no choice but to increa