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government’s co-operation and ability to contain its pollution problemsespecially when these problems are trans-boundary.L3A reasoned explanation in concluding the likely effectwith respect to the case materials.5-6L2 For a balanced answer with respect to themacroeconomic objectives.L1 For a one-sided discussion with respect to themacroeconomic objectives.3-41-2Maximum 1 mark for an incomplete analysis that doesnot relate to the macroeconomic objectives.P.S. ASEAN members consist of Singapore, Indonesia, Malaysia,Thailand and Philippines, and subsequently Brunei, Cambodia, Laos,Myanmar and Vietnam.(d) (i) Explain real effective exchange rate. [3]An exchange rate is simply the price of one currency in terms of anothercurrency. E.g. US$1=S$1.38. This is called the nominal rate ofexchange.An effective exchange rate is a trade weighted exchange rate, ameasurement in index form of changes in the value of a country’scurrency against a basket of other currencies weighted according to therelative importance in trading terms for the country of each of the othercurrencies.The real effective exchange rate is the rate at which a person can tradegoods and services of one country for the goods and services of othercountries. It is the effective exchange rate index adjusted for rate ofinflation for the country’s exports and the weighted average inflation rateof imports it buys from other countries.1 mark only for definition of nominal exchange rate.Up to 2 mark for meaning of effective exchange rate.The last 1 mark for meaning of real effective exchange rate.
(ii)With reference to the data, assess whether the rising rupee poses athreat to India’s exports.Thesis - theoretical analysis of likely fall in Xs given a stronger currencyCeteris paribus, a rising rupee would lead to a higher foreign currencyprice of India’s exports which would dampen the demand for India’sexports. This concern about India’s export competitiveness was raisedin Extract 6 ‘…pressures on competitiveness likely to arise from anyemergent currency appreciation pressures.’Anthesis – however, Xs did not fallShown in Fig. 2• As shown in Fig.3 and also stated in Extract 6, overall the rupeeappreciated since 1992 (mildly by about 3%) while India’s share inworld goods exports has roughly doubled. Moreover, the trendpersisted over a long 15-year period with a higher rate ofimprovement in India’s share of world goods exports.India’s non-price competitiveness or rising rupee due to better exportperformance• In addition to the exchange rate, there are likely other factorsinfluencing India’s export competitiveness.• While a stronger rupee may erode India’s price competitiveness, Indiacould have improved its non-price competitiveness in terms of qualityor product image. India’s comparative advantage in highly-skilledlabour could also be moving up in value-addedness towards high-techindustries in information technology. In other words, India’s exportperformance could well be the reason behind the rising rupee asIndia’s exports become more competitive and enjoy rising demand.• This is implied in Extract 6 stating ‘the need for ‘continued’ efforts tomaintain strong productivity growth to cope with any pressures oncompetitiveness likely to arise from rising rupee’. To the extent thatIndia is able to maintain its strong productivity growth to support therising rupee, erosion of its exports competitiveness from a risingrupee is limited.Difference between nominal and real effective exchange rate• In Extract 6, the concerns raised about competitiveness due tosignificant appreciation of rupee during 2007 ‘In nominal terms… particularly notable… ‘ was clearly referring to theappreciation in nominal terms.• Hence, the comment that export performance remainedfavourable despite the significant rupee appreciation could bebecause of a lower inflation rate of India’s exports relative to theweighted average inflation rate of imports it buys from othercountries. In other words, India’s real exchange rate of rupeecould have fallen.[5]
Page 1 and 2: ST ANDREW’S JUNIOR COLLEGEH1 ECON
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Page 17 and 18: with the large amount of subsidies
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Page 39 and 40: The higher spending, translating in
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Page 43 and 44: This will increase SOL of Chinese a
Page 45 and 46: 2. Appreciation is also needed to d
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Page 57 and 58: ConclusionSummarise and link to par
Page 59 and 60: Explain causes ofan increase in pri
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Page 64 and 65: Take astandConclusionPrice ceiling
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Page 72 and 73: Internet broadband connectionFoodEf
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Page 76 and 77: EvaluationE2For a reasoned judgemen
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Subsidies to ConsumersWith governme
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Therefore the market is said to be
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(b) INTRODUCTIONTo address the prob
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However, a total ban does not makes
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Besides the above, an increase in t
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lower standard of living. This is e
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Explain how policies bring about ac
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ConclusionTo have sustained actual
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full employment, a country also
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è The boost to exports & FDI impro
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(11) 2011 HCI Prelim H1 Paper Q4Inf
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Thesis (3) -Threat to improvement i
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2 different approach to conduct mon
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Trade PoliciesIn the light of an im
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• Real-‐wage unemployment o
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Knowledge, Application, Understandi
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aggregate demand in U.S. and decrea
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Marking SchemeL3Well developed expl
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Conclusion on demand management pol
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Long run• Provided higher course
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• Exchange rate policy may not be
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economic growth, a fall in demand-d
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Illustration:Assumptions:• Only t
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Singapore does not specialise c
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2010 IJC Prelim 2010 H2 Paper Q6(a)
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