Suggested Answers of BT2 Revision Package - ASKnLearn

In conclusion, a change in the U.S interest rate, specifically a hike in interest rate, can leadto a lower circular flow of income and expenditure.Level 3For a developed answer that shows the effect of an increase ininterest rate on Singapore’s circular flow of income and expenditure.10-12mAnswer should address relationship between U.S interest rate andinterest rate of Singapore. Answer should also consist anexplanation of how a fall in AE will lead to a fall in NY.Level 2For an undeveloped answer that shows the effect of an increase ininterest rate on Singapore’s circular flow of income and expenditure5-9mLevel 1 A smattering of valid points 1-4m(b)Standard of living in a society is a broad concept that refers to the well being of thepopulation. It encompasses both the quantitative and qualitative aspects of life. Thequantitative aspect focuses on the material well being whereas the qualitative aspectfocuses on the non-material well being.A lower circular flow of income and expenditure can imply deterioration in the quantitativeaspect of standard of living since it indicates a lower amount of goods and services peoplecan enjoy. However, it does not conclusively mean that the quantitative aspect of standard ofliving is lower. In fact, it is possible for SOL to be higher or remained at the same leveldespite the lower circular flow of income and expenditure, given a more accurate datacollection, a lower population, a lower price level, and a more equitable distribution ofincome or an improvement in the qualitative aspect of life.First, given that NY per capita measures the level of material well-being of the averagecitizen, it can be a more comprehensive indicator to measure SOL. Hence, another possibleargument that SOL may not have fallen even though the NY is falling is because thepopulation could have fallen at a more rapid rate, culminating in an increasing NY per capita.Population in a country could have fallen because of some successful family planningprogram being introduced. This will subsequently lead to a higher level of quantity of goodsand services available to each person on average and thus, does not necessarily mean a