VJC econs 2020 Promo QP and SAMS

2020 Promo QP 71 H2 ECONOMICS – PROMOTIONAL EXAM 2020 QP Section A: Case Study [30 marks] The economic miracle of Vietnam Figure 1: Real Gross Domestic Product Growth (%), Vietnam Source: The Global Economy, 2020 Extract 1: Vietnam – An economic miracle Today, Vietnam is one of the stars of the emerging economies. Since 2010, Vietnam’s gross domestic product (GDP) growth has been at least 5 per cent per year. With such rapid economic growth, the country grew from one of the poorest countries in the world to a comfortably middle - income one. Its GDP per capita has increased ten-fold from US$230 in 1985 to US$2,343 in 2017. Vietnam’s economic growth rivals China’s, and its exports are worth as much as the total value of its GDP. With multinational corporations having set up factories, anything from Nike spor tswear to Samsung smartphones are manufactured in Vietnam. So how did Vietnam’s growth miracle happen? One key reason, among others, is that Vietnam has invested heavily in human and physical capital, predominantly through public investments. Vietnam made large public investments in primary education and also invested heavily in infrastructure, ensuring cheap mass access to the internet. Armed with the necessary infrastructure and with business-friendly policies in place, Vietnam became a hub for foreign investment and manufacturing in Southeast Asia. Adapted from World Economic Forum, 11 Sep 2018 %

2020 Promo QP 72 Extract 2: Vietnam is getting old Vietnam has a median age of only 26. But it is greying fast. Over -60s make up 12 per cent of the population, a share that is forecast to jump to 21 per cent by 2040. This shift in Vietnam’s population structure brings headaches. The most recent survey of the old, in 2011, found that 90 per cent of them had hardly any savings. Government spending to support the aged in t he country will therefore be on the rise. The International Monetary Fund predicts that pension* costs, at the present rate, could raise government spending as a share of GDP by eight percentage points by 2050. Adapted from The Economist, 8 Nov 2018 * A pension is an amount of money paid regularly by the government to a person who does not work anymore because they are too old or have become ill. Extract 3: Vietnam is entering its ‘golden period’ Vietnam’s GDP growth is projected to decelerate in 2020, remaining nevertheless robust at around 6.8 and 6.9 per cent. Her economic growth momentum will continue in 2020 on the back of strong macroeconomic forecast, a growing middle class, rapid adoption of cutting -edge technologies, and a surging manufacturing industry. Consumption, a key driver of Vietnam's economic growth, will continue to play a major role in the years to come. With trade tensions between the United States (US) and China still ongoing, Vietnam will remain a favoured destination for shifts in trade flows and foreign direct investment, said analysts. Vietnam has so far taken advantage of emerging opportunities created by the friction and will likely continue to do so because Vietnam has a lot of advantages for US firms wanting to shift manufacturing away from China, including a skilled workforce, and reasonable salaries. One key challenge for Vietnam will be to increase labour productivity. Vietnam’s labour productivity is below regional peers, and the country needs to increase labour productivity by roughly 40 to 50 per cent in order to sustain the economic growth over the next few years. Adapted from Business Times, 30 Dec 2019 Extract 4: Air pollution in Vietnam threatens economic growth Vietnam is waking up to the gravity of the country’s air pollution problem. People in cities such as Hanoi regularly wear surgical masks. Companies and households have also been installing air purifiers and water filtration systems for their offices and ho mes. Additionally, they are becoming increasingly concerned about the horrific air pollution caused by tens of thousands of motorbikes and vehicles on the roadways of the capital city and want something done to reduce harmful emissions. The Vietnam government has formed a panel to address the problem. To address the air pollution from vehicles, the most straightforward and practical solution is for the government to levy a high national fuel tax. Definitely, the behaviour of people will change with such a tax, Fulbright University Vietnam environmental economist Le Viet Phu told the government panel. If people are required to pay more, they will drive less and that will reduce harmful carbon emissions. At the same time, the debate over a motorbike ban continues to rage in both Hanoi and the southern metropolis of Ho Chi Minh City. Adapted from Vietnam Net Bridge, 19 June 2017

2020 Promo QP 73 Extract 5: Rising motorcycle market revving up The Vietnamese motorcycle market in 2018 broke its sales record set seven years ago with nearly 3.4 million units sold , reflecting a year-on-year increase of 3.5 per cent. With sustained economic growth, the incomes of the Vietnamese have been increasing, leading to increased demand for new vehicles. In urban areas with narrow streets and long alleys, public transportation meets a very small portion of travel demand. Experts said this deficiency means motorcycles will remain an essential means of transportation because their flexibility and convenience make them suitable for the road conditions of Vietnam. Source: Vietnam News, 22 January, 2019 Questions a. Describe the change in Vietnam’s GDP between 2015 and 2018. [2] b. (i) Explain why GDP per capita could be used to measure a country’s living standards. [2] (ii) With reference to Extract 1, explain one reason why the increase in Vietnam’s GDP per capita could have overstated the improvement in Vietnam’s living standards. [2] (iii) Explain one additional indicator you would use to determine the extent of improvement in the living standards of the Vietnamese. [2] c. Using the concept of opportunity cost and a diagram, explain how increased spending by the Vietnam government on pensions for the aged (Extract 2) will impact the country’s potential economic growth. [4] d. Using the evidence in Extract 3, discuss the view that Vietnam’s economic growth is expected to remain robust in 2020. [8] e. If you were an economic advisor to the government of Vietnam, discuss whether you would propose a ban on motorcycles or a fuel tax to reduce vehicle usage, given the country’s air pollution problem. [10] Total: 30 marks

2020 Promo QP 74 Section B: Essays [50 marks] Answer two questions out of the three choices provided. You have 1h 30 minutes to complete this section. 1. In 2019, there was an increase in rice prices in Indonesia. Paddy fields across Java, the main rice growing region in the country, was parched by the unusually long period of dry weather. In the same period, there was a rise in the global price of wheat, another main staple food in Indonesia. As the land in Indonesia is unsuitable for wheat production, the country is fully reliant on imports of wheat. Source: Various (a) Explain possible considerations by a government in deciding whether to implement price controls to help more households consume rice. [10] (b) Discuss the impact of the above developments on the market for rice in Indonesia. [15] 2. Early detection of obesity, diabetes and high blood pressure is important. Making lifestyle changes and treatment of these conditions early can reduce health complications and improve productivity at work. That is why the Singapore government has enhanced the subsidies for Screen for Life, Singapore’s national screening pro