SRJC H1 ECON P1

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3 © SRJC 8819/01/JC2PreliminaryExam/11 [Turn over 0 50 100 150 200 250 300 350 400 450 500 550 600 650 700 750 2007 2008 2009 2010 2011* Million tonnes Year Figure 2: Wheat production and consumption Global consumption Global production Stockpiles Source: The Straits Times, 11 September 2010 Extract 3: Australia affirms carbon emissions target amid growth concerns Australia’s government maintained its targets for reducing carbon emissions, resisting calls to delay plans that will detract from growth as the economy heads for a possible recession. Draft legislation to introduce carbon trading aims to cut emissions by between 5% and 15% of 2000 levels by 2020, Climate Change Minist er Penny Wong said today. This would help Australia meet its goal of a 60% reduction by the middle of this century, she said. “This includes a minimal and unconditional commitment to reduce emissions,” Wong said in a statement released in Canberra. That includes an emissions trading system, an expanded renewable energy target, investment in green technologies and carbon capture and storage, she said. Carbon trading, which forces companies to pay for excess pollution, is projected to trim Australia’s annual economic growth by 0.1% point after the system is introduced in July next year. The country’s emissions from fuel combustion rose 31% in the decade through 2000 and 45% in the 15 years ending in 2005, International Energy Agency data show. The government’s estimates for the impact on economic growth assume an initial price of A$25 (US$15.93) a metric ton of carbon when trading begins. U.S. President Barack Obama has reversed t he previous administrat ion’s climate-change policy. Obama’s budget plan includes US$75 billion in revenue in 2012 from the sale of * Forecasts

4 © SRJC 8819/01/JC2PreliminaryExam/11 [Turn over greenhouse-gas emission permits to polluters. The European Union is seeking to build momentum for a possible UN climate-change agreement, which would succeed the Kyoto Protocol after it expires in 2012. Source: Gemma Daley, Bloomberg, 10 March 2009 Extract 4: The governor, the markets and the tumbling pound It started with an innocuous-sounding article in the Bank of England’s quarterly bulletin, published last Monday. Called Interpreting Recent Movements in Sterling, it looked at why the pound had fallen so much in the past two years. One reason, it suggested, was the perception in the markets that Britain’s economy would be more seriously affected by the global financial crisis than those of other countries. Britain had, since the 1990s, run a deficit on its balance of payments’ current account averaging 2% of gross domestic product. Mervyn King, the governor, said rebalancing the British economy was “very necessary” and that “the fall in the exchange rate that we have seen will be helpful to that process”. The effects of the pound’s sharp moves have already been significant for business. Last summer, Jonathan Bellwood took a big gamble. The sudden fall in the value of the pound was making business much more expensive fo r PeopleVox, the stock-control technology company he had started just three months earlier in High Wycombe. Prices of the components PeopleVox was importing from America had shot up by 26% in just a few months so Bellwood decided that the company would make the equipment in the Midlands. “You naturally look to eastern Europe or the Far East but we found a big pool of talent in central England,” Bellwood said. “Their proximity was key because it meant it was quicker to bring products to market.” Not only that, the strengthening of the euro against the pound suddenly presented an opportunity to export to the larger European market. Instead of focusing on a UK customer base, the company switched focus almost overnight and the gamble paid off. “There we were worrying about the recession when actually there was this great opportunity on our doorstep,” said Bellwood. While the pound’s fall is providing a boost for exporters like Bellwood — though most overseas markets remain weak — it is bad news for importers. “In the short-run the fall in