AJC_H2_ECON_P1_CASESTUDY

READ THESE INSTRUCTIONS FIRST Write your name, PDG and index number on all the work you hand in. Write in dark blue or black pen on both sides of the paper. 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 question parts. At the end of the examination, fasten your answers 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 ______/10 This document consists of 8 printed pages, including 1 “blank page”. Marks Question 1 / 30 Question 2 / 30 Total Marks / 60 ANDERSON JUNIOR COLLEGE JC2 PRELIMINARY EXAMINATIONS 2011 HIGHER 2 9732/01 ECONOMICS Paper 1 13 September 2011 2 hours 15 minutes Additional Materials: Answer paper [Turn over

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3 Answer all questions. Question 1 A look at Korea and Japan Extract 1: Korea Following the severe contraction in late 2008, Korea has achieved one of the earliest and strongest recoveries in the Organisation for Economic Co-operation and Development (OECD) area, led by exports and its stimulus package. The sustained pick-up in exports, together with a rebound in domestic demand, is projected to help boost output growth to 5 to 6 per cent in 2010. Extract 2: Japan The severe recession triggered by the global crisis has bottomed out, thanks in part to a rebound in exports, although production remains well below capacity. Growth is projected to pick up gradually to around 3 per cent in 2010. Nevertheless, the unemployment rate is likely to stay around 5 per cent through 2010 and deflation will persist, indicating that consumers will be reluctant to spend and business confidence will remain weak. Table 1: Korea’s Macroeconomic Indicators 2006 2007 2008 2009 2010* GDP (US$ billion, PPP) 1191 1287 1344 1375 1459 Real GDP Growth (annual % change) 5.2 5.1 2.2 0.2 6.1 Inflation rate (%) 2.2 2.5 4.7 2.8 4.1 Unemployment rate (%) 3.8 3.3 3.2 3.7 2.9 Current account balance (% of GDP) 0.6 0.6 -0.7 3.1 2.5 [*Projected] Table 2: Japan’s Macroeconomic Indicators 2006 2007 2008 2009 2010* GDP (US$ billion, PPP) 4080 4297 4358 4146 4310 Real GDP Growth (annual % change) 2.0 2.4 0.7 -6.3 2.9 Inflation rate (%) 0.2 0.1 1.4 -1.4 -0.7 Unemployment rate (%) 4.1 3.5 4.0 5.1 5.2 Current account balance (% of GDP) 3.9 4.8 3.2 3.4 3.8 [*Projected] Source: Organisation for Economic Co-operation and Development, Economic Outlook 2010 Extract 3: South Korea in dispute over withdrawal of stimulus South Korea's finance ministry and central bank appear on a collision course over when and how to exit economic stimulus measures, with signs of a growing recovery in As