VJC econs 2019 Promo QP and SAMS

2019 Promo QP 41 H2 ECONOMICS – PROMOTIONAL EXAM 2019 QP Section A: Case Study Question [30m] Economic growth in Ethiopia and South Korea Chart 1: Real GDP growth rate (%) for Ethiopia Source: Federal Reserve Bank of St. Louis, Federal Reserve Economic Data Extract 1: Ethiopia is Africa’s fastest-growing economy Ethiopia has an image problem. For decades , the mere mention of the country has conjured up images of famine and conflict. But a new Ethiopia is emerging from troubled times and the latest International Monetary Fund (IMF) forecast says Ethiopia will be the fastest -growing economy in sub-Saharan Africa in 2018. Ethiopia’s rise has been largely driven by an increase in industrial activity, including investments in infrastructure and manufacturing. Much of the investment in Ethiopia has come from overseas , especially China. Ethiopia’s growth has been fuelled by Chinese firms building factories, bringing in new technology that raises labour productivity. Despite its high rate of growth, Ethiopia still has plenty of spare capacity. Adapted from World Economic Forum Regional Agenda, 04 May 2018 Extract 2: Ethiopia’s economic miracle is an environmental tragedy Ethiopia is doing all it can to attract foreign investors, with water and electricity almost free and rents at 10 percent of market rate. France’s Castel Group has established vineyards, a nd the Dutch multinational Afriflora Sher has set up the world’s largest ros e farm, employing 1,500 workers who earn US$83 a month. These companies pay nothing for water from the Bulbula river, which flows into Lake Abijatta. But the rural population and the environment are the biggest losers. More than half of Lake Abijatta has disappeared in the past 30 years, and fish have vanished because of the remaining water’s 0 2 4 6 8 10 12 14 2010 2011 2012 2013 2014 2015 2016 2017 2018

2019 Promo QP 42 increased salinity, as a result of the activities of these foreign businesses . The other lakes in the central part of the Great Rift Valley (Ziway, Shalla, and Langano) face the same threat. Two million people depend on Lake Ziway, the region’s only freshwater lake, but its level is falling relentlessly. Lake Ziway’s water quality is deteriorating, driving treatment costs up. Amdemi chael Mulugeta of the non-governmental organisation Wetlands International said, “At this rate, the water won’t be drinkable in a decade, and the lake will be gone in 50 to 70 years. The town of Ziway used to use lake water, but now purification would be too complex to be done locally and, above all, too costly.” Source: The Nation, 01 May 2019 Extract 3: Rising inequalities in South Korea Just a few decades ago, South Korea was seen as a model for achieving both growth and equity. In the past half-century, South Korea has gone from being one of the poorest societies in the world to an advanced industrialised economy. During the industrialisation process, the government promoted the large conglomerates (LCs) that came to be known as chaebols, which operate many business lines simultaneously and are often controlled by a single owner or family. These chaebols expanded quickly as they grew by exporting to foreign markets. As a result of rapid chaebol-led industrialisation, South Korea’s small and medium-sized enterprises (SMEs) became technologically outdated and domestic oriented . The low labour productivity of SMEs contributes to a wide salary gap between SMEs and LCs. This is one reason why South Korea’s high growth in recent years have been accompanied by rising income inequality. Adapted from East Asia Forum, 10 Aug 2016, and The Guardian, 02 Aug 2017 Extract 4: South Korea’s soaring minimum wage South Korean workers don’t often have cause for cheer. They slog for more hours than their counterparts in any other member of the OECD, apart from Mexico. Yet the worst-off will soon be far better rewarded for their toil. Next year the country’s minimum w age will leap by 16.4 percent to 7,530 won (US$6.65) an hour, the most vigorous hike since 2000. The higher minimum wage is the most striking component of President Moon Jae -in’s plan to deliver what he calls “people -oriented growth”. It will probably reduce income inequality, too. Mr Moon also argues higher wages are good for their own sake, saying a 10,000 -won minimum wage will give workers “the right to live like humans”. Small businesses claim the proposed increase in minimum wage will force them to la y off workers, as they are often unable to pass on the higher costs to their customers. A survey by the Korea Federation of Micro Enterprise found 92.4% of respondents are considering cutting back on workers. This could pose a serious problem, since most people on the minimum wage work for smaller firms, not large conglomerates such as Samsung. The South Korean government has planned 3 trillion won in subsidies for small businesses to cushion the impact of minimum wage hike. While the government has experienced budget surpluses in recent years, shrinking tax revenues and increasing expenditures are expected in the future, with an increasingly ageing population and global uncertainties. Adapted from The Economist, 25 Oct 2017, and Reuters, 9 Nov 2017

2019 Promo QP 43 Questions (a) Describe the change in real GDP of Ethiopia from 2010 to 2018. [2] (b) Using an AD-AS diagram, explain how “Chinese firms building factories, bringing in new technology that raises labour productivity” (Extract 1) has affected Ethiopia’s GDP. [6] (c) Using demand and supply analysis and evidence from Extract 3, account for the wage differential between the workers in chaebols and those in SMEs in South Korea. [4] (d) With reference to Extract 4, discuss the impact of South Korea’s increase in minimum wage on workers, firms and the government. [8] (e) To what extent does actual growth for a country mean that its residents are enjoying a higher level of well-being? [10] [Total: 30] Section B: Essay questions [50m] Answer two questions. 1. Recent years have seen a significant expansion of the healthcare services market in Singapore. These services range from clinics for normal colds to expensive diagnostic check -ups for the rich; palliative care for the aged and complex surgical services that require high level of technology. Discuss the demand and supply factors that determine the output for healthcare services and evaluate which is the most important factor. [Note: 25m single stem essay questions exist in the old syllabus, but not in the current syllabus, where essay questions come with two parts - part (a) carrying 10 marks and part (b) carrying 15 marks. That said, the content tested here is still relevant to your syllabus.] [25] 2. (a) Explain why there is allocative inefficiency in the market for alcohol. [10] (b) Discuss the view that government intervention in the market for alcohol may not always result in an improvement in efficiency. [15] 3 (a) Explain the factors that affect the components of aggregate demand. [10] (b) Discuss the effect of an increase in export revenue on the national income of different countries. [15] ---------- End of paper ------------

2019 Promo Suggested Answers 44 H2 ECONOMICS – PROMOTIONAL EXAM 2019 SUGGESTED ANSWERS, MARK SCHEMES & MARKERS’ COMMENTS Section A: CSQ (a) Describe the change in real GDP of Ethiopia from 2010 to 2018. [2] Real GDP for Ethiopia increased [1] at a decreasing rate [1] from 2010 to 2018. Markers’ comments: Content Change in GDP levels over time (each year) gives rise to GDP growth rates per year. As long as it is above zero, GDP levels have risen. Skills ● A few students are still not sensitive to whether the data/question specifies GDP level or growth. ● A few students segmented and