NANYANG JUNIOR COLLEGE 2020 JC2 Preliminary Examination H1 ECONOMICS Paper No: 8823/01 18t September 2020 Time 0800 — 1100 hrs Tuesday Duration 3 hours INSTRUCTIONS TO CANDIDATES Do not turn over this paper until you are told to do so. ‘Write your name, class and the name of your Economics tutor in the space provided on the answer booklet You are required to answer ALL questions. ‘The number of marks is given in the brackets at the end of each part question. ‘Write your answers on the answer booklet provided, Ifyou use more than one answer booklet, slot the additional booklets into the first booklet. You are advised to spend several minutes reading through the questions and data before you begin writing your answers. There are 9 printed pages including this cover page. JC2 H1 Economics 8823/01Question 1: Educating Singaporeans Table 1: Total Expen Year _| Total Expenditure On Education (S$ Thousand) 2008 8,229,694 2009 8,685,056 2010 9,875,445 2011 10,740,250 2012 10,496,911 2013 11,638,313 2014 11,598,458 2015 11,934,956 2016 12,468,854 2017 12,690,630 2018 13,090,000 Source: Data.gov.sg Extract 1: Admi istration and Finance of Education in Singapore Public education in Singapore is almost entirely financed by the government from the general revenues. The importance of education in government and public expenditure is illustrated by the annual allocations to education which are nearly 25 percent (23.7 percent in 1996) of the entire budget. Primary education is free. There is a nominal fee for secondary and junior college level education of less than US$5.00 per month. The preschool education is subsidized by the state to the extent of about 50 percent of the cost. As for higher education, there are a number of scholarships and "bursaries" provided by the Ministry of Education to those who cannot afford the cost. A major initiative in educational finance involving planning and cooperation by parents has been the EduSave Account introduced in 1993. Under the scheme, the Ministry of Education deposited a certain amount of subsidy, approved by the parliament from year to year in the child's Edu-Save Account, which could be used by the child's parents to pay for enrichment and remedial classes or saved for the child's higher education. Source: Education Encyclopaedia, 2018 JC2 H1 Economics 8823/01Extract 2: Private Tuition an industry worth over $1b a year Education experts said it is difficult to establish how much of a role tuition has in academic success or if it has contributed to Singapore's stellar showing in Pisa, a global benchmarking test which 15-year-olds here topped last year. But what is beyond dispute is the growth of the shadow education industry. Tuition is worth more than a billion dollars annually here, almost double the $650 million spent on it in 2004. ‘Some parents spend several hundreds or thousands of dollars on tuition each month, despite knowing that having tuition may not raise their children's grades significantly. This stems from ® qgkooa georuninentg ages ionESNTEBporeengtaTIED - doing well at national exal ions is a priority for many parents and students. The number of tuition centres in) GhospormhensiescNaciniom a list of 700 MOE-registered tuition agencies in 2012, to 800 in 2013 and more than 1000 in 2015. However, the growth of services provided by these agencies eet ried by pup of qualified tutors available. Experts said tuition will exist as long as takes national examinations. Dr Seah said tuition should not be lightly dismissed. "For students whose families can afford better-quality tuition and enrichment, it could be a big part of why they continue to do well.” Source: The Straits Times, 25 December 2016 (Adapted) Extract 3: Cause of thi education costs \creast Consumer Price Index has remained relatively stable since 2013 compared to the cost of college tuition. University tuition has been increasing faster than CPI growth. Increase in tuition costs in universities and tertiary institutions could be a result of various factors such as demand and supply. The number of students has overly overgrown relative to the available slots in institutions. The institution may be facing lower admission rates, and that might be the reason for hiking costs. For instance, between 2007 and 2014, admission rates to publicly-funded degree courses increased by over 5%. Equally, other post-secondary institutions also experienced an increase. In Singapore, government subsidies play a vital role in making education affordable to its citizens. There is a possibility that the cost of education is growing because the available subsidies are not able to keep up with growing education demand. Education expenditure grew between 2007 and 2014 by 47% to S$11,719. Recurrent expenditure for colleges and universities has grown even faster by 77%. It shows that the government is trying to spend more to keep up with the rising cost of education. Labour cost could also be one of the causes of rising cost in education. Institutions also face increasing cost as a result of wages since the median household income in Singapore has been growing. Besides labor costs, institutions also spend on utilities, infrastructure, and research equipment. The cost of running education institutions has been growing, which means student have to pay more to finance projects and program. Other factors, like pure price increased, may be contributing to an increase in ecucatign. JC2 H1 Economics 8823/01Extract 4: Advantages and Disadvantages of Studying Overseas for Singaporeans, There are many options these days when it comes to receiving a tertiary education. One of the more common decisions to consider is whether to pursue your university education locally or overseas. One of the biggest reasons Singaporeans choose to study overseas is to gain a competitive edge over their peers. In fact, 6 out of 10 employers around the world give extra credit for an international student experience, and more than 80% said they actively sought graduates who had studied abroad. Another reason is that some local courses are available only in public universities (such as Medicine in NUS or Criminology in SIT). Some are not even available in Singapore (nuclear engineering anyone?). Even amongst public universities, many specialised courses are exclusive to just one university (like Dentistry in NUS). Studying overseas often means adapting to a new culture, living alone and managing your own budget. These are invaluable skills that will benefit you in every aspect of your life. It also nurtures empathy, open-mindedness and independence. Some might even say it is this that makes an overseas degree the most rewarding, Studying overseas also introduces you to students from many other cultures and nationalities. This helps you develop skills such as communication and teamwork, which translate well to your career in the future. However, all this independence and new culture could also result ina big con — homesickness. Without the support network of your friends and family, life can get tough. Depending on the country, the culture shock could also be a learning curve to overcome. One such example is addressing your lecturers by their first name, common in Australia or UK! But with an open mind and willingness to lear and experience new things, dealing with culture shock can be easier. One of the biggest factors when it comes to considering an overseas education is the expenses involved. Depending on the country you choose to study in, expenses and course fees can vary greatly. The most popular countries to study abroad in — Australia, UK and the United States — can have much higher living expenses than if you were to study in Singapore. In the UK, a combined course fee and living expenses can cost S$60,000 per year. Most of these expenses are living expenses, which may not be covered if you are pursuing your degree with a scholarship. These high expenses also mean that any unexpected expenditures or emergencies can put a lot of stress on both your finances and your studies. It helps to budget extra for emergencies, or to purchase an insurance policy that covers these unexpected situations. Source: MSIG, 2018 Extract 5: Benefits of Education Formal schooling increases earnings and provides other individual benefits. However, societal benefits of education may exceed individual benefits. Research finds that higher average education levels in an area are correlated with higher earnings, even for local residents with minimal education. Science, technology, engineering, and mathematics graduates appear to generate especially strong external effects, due to their role in stimulating innovation and economic growth. ‘Source: lowa State University, 2018 JC2 H1 Economics 8823/01Questions (a) Explain whether free primary school education possesses the two characteristics ofa public good. (4 oo Extract 2 stated that “tuition is worth more than a billion dollars annually here, almost double the $650 million spent on it in 2004.” ‘Account forthe @F6waof the billion dollar Private Tuition industry. 5 Explain the likely opportunity cost of parents spending several hundreds or thousands of dollars on tuition each month. ie} (ii) Explain the likely value of price elasticity of supply for tuition services. (3) (c) In Extract 3, the author claims that ‘available subsidies are not able to keep up with education demand”. Explain how this affects the affordability of education to students. 5 (4) Discuss the factors one should consider in deciding whether to pursue an overseas education. (8) (e) (i) With the aid of diagrams, explain why there is an inefficient allocation of resources in the market for secondary and junior college education. (6) (ii) Using evidence from the case study and/or your own knowledge, discuss whether free provision is the best approach in addressing the inefficiencies in the market for secondary and junior college education. (12) [Total: 45 marks] JC2 H1 Economics 8823/01Question 2: Inclusive Growth in China and US Table 2: Selected 2018 Economic In Indicators China Us Unemployment Rate 43 39 Manufacturing (% of GDP) 28 1 Final Consumption Expenditure (% of GDP) 55 82 24.9 26 Imports of goods and services (% of GDP) 18.3 15.3 C02 emissions (metric tons per capita) 75 16.5 Source: The World Bank Figure 1: China and US GDP Annual Growth Rate ‘CHINA GDPANNUAL GROWTH RATE 4 6 2012 2014 2016 2018 Source: Trading Economics Extract ‘a can no longer be counted on for emerging market growth China accounts for 70 per cent of all manufacturing in Asian emerging market economies, according to JPMorgan. Yet China's overall expansion this year is expected to be no more than 6.5 per cent — the slowest pace since 1990 — and just 6 per cent next year. The services sector is displacing manufacturing as the economy becomes far less resource-hungry. In the first half of this year, the services sector contributed more than 4 percentage points to JC2 H1 Economics 8823/01mainland Chinese GDP, while manufacturing represented only half that amount, according to lender ANZ in Hong Kong. Source: Financial Times, November 2018 Extract 7: China’s Al push raises fears over widespread job cuts Automation has replaced the jobs of up to 40 per cent of workers in some Chinese industrial companies over the past three years, highlighting the effects of Beijing's push to upgrade its technological base and become a world superpower in artificial intelligence. Beijing is pursuing an ambitious policy to upgrade manufacturing technologies. However, authorities have quietly raised concerns about the lay-offs caused by such policies. China's Ministry of Human Resources and Social Security previously warned that unemployment would increase as a result of industrial upgrades, as well as from lay-offs in industries with excess capacity such as steel and coal, where many small-sized mines are still mainly on manual labour. Such lay-offs can also be seen in healthy manufacturing companies. This rise in unemployment is the result of the mismatch between the supply of low-skilled elderly workers, and under- educated young workers, and the shift in demand towards the higher-skilled. Many workers have lost out to automation due to a lack of education. Despite great gains in making compulsory education universal in China in the past three decades, there is still high income and educational inequality across regions. The average migrant worker under 30 completes only 9.8 years of education, meaning they do not finish upper-secondary school The state is improving vocational training. The State Council earlier this year urged local authorities and companies to build a life-long vocational skills training system to relieve the lack of skilled workers caused by structural unemployment. ‘Source: Various, August 2018 Extract 8: US manufacturers struggle to attract ‘coo!’ millennials Struggling to compete for workers in a tight labour market, manufacturers in the US are battling an extra disadvantage when recruiting millennial and younger workers to replace baby boomers exiting the workforce: many young people do not want to work in factories. Difficulty recruiting staff, partly reflecting an unspoken stigma attached to factory jobs, is “my number one limiter of growth’, says Patrick Bass, US chief of ThyssenKrupp, the German company. “Through the late 1970s and all of 1980s it was drilled into households that if your children do not go to college, they will not have successful after-school years,” he said. “A certified welder after four years can be earning $85,000 to $100,000 a year without anywhere near the debt. But most households wil still say the engineer has a successful career while the welder does not. That's a fundamental issue we need to work on.” Thyssenkrupp is trying to tackle this problem with its own apprenticeship programmes in the US, drawing on the experience of its German home, where industrial apprenticeships are a ‘common and respected career path. The underlying challenge for US manufacturers is that their workforce is ageing. In the next decade, largely as a result of retirements, there will be 3.4m manufacturing job openings, many of them in “digifacturing’: highly automated and data- driven manufacturing. Introducing millennials to this opportunity remains a work in progress. The problem in the US has been exacerbated by the fact that industrial arts classes that were required in prior generations — and gave students at least a taste of skills such as carpentry or welding — have taken a back seat in recent decades to university-bound academic work, industry experts say. JC2 H1 Economics 8823/01Source: Financial Times, July 2018 Extract 9: China’s Spending Puts Domestic Security Ahead of Defense While China's stepped-up military posture has resulted in increasing confrontations with India, the U.S., Japan and other countries, Beijing has actually been pouring even more resources into domestic security than external security. China's annual spending on domestic security has more than tripled since 2007, to reach 1.24 trillion yuan ($193 billion), according to an analysis published on Monday by Adrian Zenz, who researches Chinese policy in Tibet and Xinjiang at the European School of Culture and Theology in Korntal, Germany. By his calculations, the total was about 19% more than both the comparable figure for the U.S. and the amount China spent on external defense. Source: Nikkei Asian Review, March 2018 Extract 10: China plans income tax cut to boost consumption and reduce inequality China's parliament has drafted a tax cut that will slash tax for most individuals, as part of the government's efforts to boost consumption and reduce inequality. China is seeking to reduce excessive rates of savings and investment and generate a higher share of growth from household consumption. Economists say that raising post-tax household income is crucial to encouraging consumers to open their wallets. China is also one of the most unequal in the world, with a Gini coefficient for income of about 0.40, according to official data — a level defined by the World Bank as the threshold for “severe inequality’ The latest plan also includes new measures to combat tax avoidance, which is rampant in China for individuals. These include measures to strengthen real estate tax collection, prevent use of offshore tax havens, and crack down on “unreasonable commercial arrangements" designed to avoid taxes. The tax cut will not have a significant impact on China's fiscal budget because the country relies less on individual income taxes for fiscal revenue than other large economies. Individual income tax raised $180bn in China last year at the current exchange rate, equal to 8 per cent of total tax collections. In the US, the share is about half. Value-added taxes are the largest component of Chinese tax revenue, comprising 39 per cent of tax collections last year. Corporate income taxes contributed 22 per cent. Source: Financial Times, July 2018 Figure 2: China’s Gini coefficient woos 0s OO 8) TSS g JCS HP ECSRaIES BBsSource: Nikkei Asian Review, February 2018 Questions (a) Using the indicators in Table 2, can you conclude that US's multiplier size is larger than China's? (4) (b) With reference to Figure 1, compare the GDP trends for China and US from 2011 to 2018. ()_ Using Extract 6, explain whether the statement that “services sector is, displacing manufacturing as the economy becomes far less resource-hungry” is a normative one. ()_Using a production possibility curve diagram, explain the trade-off that exists between allocating resources for automation and manual labour. (e) With reference to Extract 7 and Figure 2, explain how automation can affect China's Gini coefficient from 2015 to 2017. Assess the extent to which the citizens in China have a better standard of living than those in the US in 2018. (9) Explain the various types of unemployment in China and US and comment on whether China has a much worse unemployment situation than in the US. (h) Discuss whether 1e most appropriate measure to achieve [Total: 45 marks] M7 (12) JC2 H1 Economics 8823/01