VICTORIA JUNIOR COLLEGE 2007 JC2 PRELIMINARY EXAM H2 ECONOMICS PAPER NO.

9732/02
11 September 2007 2:00 4:15 pm

READ THESE INSTRUCTIONS FIRST Write your name and class on all the work you hand in. Write in dark blue or black pen. You may use a soft pencil for diagrams. Do not use staples, paper clips, glue or correction fluid on the work that you hand in. Answer three questions in total, of which one must be from Section A, one from Section B and one from either Section A or section B.

The number of marks is given in [ ] at the end of each question or part question.

At the end of the examination, fasten your work securely, by question, using the strings provided.

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This document consists of 3 printed pages.

Answer three questions in total

Section A
One or two of your three chosen questions must be from this section

1.

According to the American Automobile Association, oil prices have increased and now average 2.60 dollars a gallon. Some motorists however were paying in excess of three dollars per gallon, as petrol prices shot up to record highs. AFP World News, 25th August 2005 (a) Account for the rise in the price of oil. (b) Explain how the government can help those affected by the high petrol prices and discuss the impact of such government intervention on society. [10] [15]

2.

All large firms gain economies of scale which they will pass on as benefits to their consumers. Hence, society will be much better off with large firms. Comment on the above statement. [25]

3.

(a) Use examples to distinguish between i) a merit good and a public good ii) a positive externality and a social benefit. (b) Discuss the measures which the Singapore government has undertaken to correct market failure found in merit goods and public goods.

[10]

[15]

Section B
One or two of your three chosen questions must be from this section

4.

In response to the high unemployment in 2003, the Singapore government increased its spending to help businesses and Singaporean households. (a) Analyse the effectiveness of the above policy in reducing unemployment in Singapore. Discuss other policies that the government may use to reduce unemployment. [12]

(b)

[13]

5.

Singapores saving rate has been very high relative to other countries. The gross national saving rate increased from 37% in 2001 to around 45% in 2004.
Source: www.imf.org, May 2006

Discuss the compatibility of a rise in savings with the macroeconomic goals of full employment, growth, stable prices and BOP equilibrium in Singapore.

[25]

6.

(a) Explain the relevance of the concept of opportunity cost in explaining trade between India and USA. (b) Assess the effects for the signatories if a free trade agreement was signed between India and USA.

[10]

[15]

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