AJC_H1_ECON_P1

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. Section A Answer all questions. Section B Answer one question. 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 Question 3 / 25 Total Marks / 85 ANDERSON JUNIOR COLLEGE JC2 PRELIMINARY EXAMINATIONS 2011 HIGHER 1 8819/01 ECONOMICS Paper 1 13 September 2011 3 hours Additional Materials: Answer paper [Turn over

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3 Section A Answer all questions. Question 1 A look at Japan Extract 1: 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 on a year-average basis, but to slow somewhat in the second half of the year. 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. The Bank of Japan should fight deflation through a strong commitment to keep interest rates at their very low current levels and to implement quantitative measures effectively until underlying inflation is firmly positive. Given Japan’s very hi gh public debt, the government should scale back expenditure increases in Financial Year 2011 and develop a credible and detailed medium-term fiscal consolidation programme, including tax reform, to bring the budget into balance. The Growth Strategy should focus on reforms that will boost productivity growth, particularly in the service sector, to improve living standards in the face of a shrinking working-age population. Table 1: 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 Gross fixed capital formation (% of GDP) 23.3 23.4 23.1 22.8 22.7 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 General government debt (% of GDP) 172.1 167.1 172.1 192.8 197.5 Public expenditure on health (% of GDP) 6.6 6.6 6.7 6.5 6.6 CO2 emissions from fuel combustion (million tones) 1202 1236 1247 1261 1279 [*Projecte