MJC_H2_ECON_CSQ2

JC2 H2 Economics Prelim Exam Paper 1 _CS2_MJC_110911 a (i) Summarize the growth rates in GDP for selected countries in Table 1. [2] All selected countries are forecasted to experience increase in output/GDP However All selected Asian countries are forecasted to grow faster than all the selected G7 countries. OR However China is forecasted to grow 5 times that of US whilst Singapore is forecasted to grow 6.3 times that of UK and Germany. (ii) With reference to data, explain one possible reason why growth rates differ from country to country. [2] Differences in investment levels. Observed from Figure 1: Investments as a % of GDP /barb2right rising trend for the Asian countries but decreasing trend for G7.Increased investments within China, India and Singapore /barb2right implies firms expectations of higher demand for domestic output in the future /barb2right increase C and I /barb2right increase in AD /barb2right hence explains why China, India and Singapore are forecasted to have relatively higher growth rates than UK, US, Germany and Japan. (iii) Is there enough evidence to support the view that t here has been an improvement in the economic situation of Asian countries? [2] Largely insufficient evidence. 1. Data in Table 2 only representative of selected Asian countries 2. Extract 4 suggests that Asian economies are reco vering faster from the global downturn /barb2right qualitative nature of data /barb2right insufficiency 3. Quantitative indicator such as the forecast GDP growth rates gi ven in table 2 is insufficient as they are forecasted growth rates b To what extent does the data suggest that the Chinese government should allow the currency to appreciate in 2010? [6] Advantages of appreciation: 1. Extract 5 : an appreciation of its currency will help to “lift consumers’ real purchasing power” /barb2right Chinese consumers will be able to buy more imported goods and services 2. Appreciation is also needed to discourage exces sive investments into manufacturing /barb2right loss-made export firms will exit the industry /barb2right more resources channelled to other industries, for instance, service industries as quoted in extract 7 /barb2right which will help to increase employment of workers 3. Appreciation is also help to “reduce the trade deficit further, alleviate the risk of a protectionist backlash abroad” /barb2rightin fig 5, trade surplus was accumulating from 2005 to 2008 with the highest trade surplus recorded in mid 2008 Disadvantage of appreciation: 1. Table 2: Fall in trade surplus /barb2right extract 6 evidenced that China’s exports as a percentage of GDP are 32% /barb2right still relatively reliant on exports earnings as a source of national income /barb2right figure 5 showed

[Type text] [Type text] [Type text] that when yuan appreciated in June 2008, trade surplus started to fall significantly as showed in figure