MJC_H2_ECON_EQ4

MJC Preliminary Examination 2011 _ H2 Essay Qn 4 4. Singapore government supply-side policies have created a more dynamic and flexible labour market. Between 2003 and 2008, unemployment fell from 4.0% to 2.2% but inflation rate rose to 6.6%. (a) Explain how supply-side policies can lower the level of unemployment. [10] (b) Discuss whether the Singapore government should ever be concerned about the economic consequences of falling unemployment. (15) CONTENT Candidates should explain how reforms in areas such as education and training, tax/benefit system, labour market reforms ( e.g. Trade Unions) might increase flexibility and raise employment. Supply side policies can improve the way labour markets function by making them more flexible in a variety of ways. Such flexibility has a number of dimensions ( e.g. occupational , locational ) and should resu lt in a more highly-skilled, mobile and employable workforce that is better adapt to a changing economic environment. This is likely to lower the equilibrium level of unemployment (NRU or NAIRU). Knowledge, Application, Analysis and Evaluation Level Descriptors Marks L3 For an explanation of how supply side policies can lower the level of unemployment 7 – 10 L2 For application of knowledge and critical understanding of supply side influences on unemployment 4 - 6 L1 For descriptive knowledge if supply-side policies or a series of relevant assertions relating to falling unemployment 1 - 3 CONTENT Part (b) Answer to this question should discuss the costs and benefits of lower unemployment. Candidates should show awareness of the benefits of falling unemployment (lowering of the costs of unemployment) as well as the problems if unemployment falls ‘too far’. These problems are likely to emerge if unemployment falls below the equilibrium level of unemployment (NAIRU/NRU). The likely inflationary impact of such ‘overheating’ should comment on why rising inflation may be undesirable. Such concerns are likely to be reduced if the fall in unemployment is due to a fall in NAIRI/NRU. Knowledge, Application, Understanding and Analysis L3 For a coherent and balanced discussion of why a government should and should not be concerned about falling unemployment 9 - 11 L2 For an analysis of why a government should OR should not be concerned about falling unemployment 6 – 8 L1 For an application of knowledge and understanding of consequences of falling unemployment. 1 - 5 Evaluation E2 Reasoned evaluation 3-4 E1 Mainly unexplained judgement 1-2

MJC Preliminary Examination 2011 _ H2 Essay Qn 4 b) Discuss whether the Singapore government should ever be concerned about the economic consequences of falling unemployment. (13) Suggested Answer Model (a) Education and  Training Real   output  GPL AS1 AS2 Y1 Y2 AD1 AD2 P1 E1 A P2 Unemployment Definition : People in working ag