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Economics · Oct / Nov 2021 · Paper 21 · Question 5

0455

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The question as text

Some economists criticise high government spending and trade unions for creating market disequilibrium. However, trade unions may also play a key role in economic development. There are over 60 trade unions in Singapore, in both labour-intensive and capital-intensive industries.

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  • 5(a)[2]

    Define market disequilibrium. When quantity demanded does not equal quantity supplied (2). When there are shortages (1)

    or surpluses (1)

    of a product.

  • 5(b)[4]

    Explain the difference between labour-intensive and capital- intensive industries Logical explanation which might include: Labour-intensive industries rely more on human labour (1)

    i.e. workers (1)

    low-cost labour may be available (1)

    example of industry (1)

    Capital-intensive industries rely more on capital (1)

    i.e. machines (1)

    capital more efficient / cheaper than labour (1)

    example of industry

  • 5(c)[6]

    Analyse how trade unions could increase economic development. Coherent analysis which might include: Trade unions could help engage in collective bargaining on wages (1)

    higher wages (1)

    leads to higher purchasing power of workers (1). May increase motivation of workers (1)

    increase output (1). Better working hours (1)

    improved working conditions (1)

    protect workers’ rights (1)

    better health and safety (1)

    more job security (1)

    leads to higher standards of living (1)

    higher life expectancy (1). Increased productivity / efficiency of workers (1)

    decreases cost of production (1)

    decrease final price of goods and services produced in the country (1)

    increase competitiveness (1)

    higher output / economic growth (1). May help with training (1)

    raise quality of output (1).

  • 5(d)[8]

    Discuss whether or not high government spending can help a government achieve its macroeconomic aims. In assessing each answer, use the table opposite. Why high government spending can help a government achieve its macroeconomic aims:

    economic growth – increase total demand
    full employment/low unemployment – increase demand for workers through more government infrastructure projects
    government spending on education may raise workers’ skills and so lower unemployment
    balance of payments stability – through subsidies for producers
    redistribution of income – through spending on social welfare. Why high government spending cannot help a government achieve its macroeconomic aims:
    increased total demand could lead to increase demand-pull inflation
    too much government spending could lead to less private investments
    overreliance of government subsidies could lead to complacency
    high spending on social welfare could discourage the unemployed from trying to find jobs
    may be accompanied by higher taxes which could be a disincentive to effort and enterprise
    may increase budget deficit which could reduce confidence in the economy. Level Description A reasoned discussion which accurately examines both sides of the economic argument, making use of economic information and clear and logical analysis to evaluate economic issues and situations. One side of the argument may have more depth than the other, but overall both sided of the argument are considered and developed. There is thoughtful evaluation of economic concepts, terminology, information and/or data appropriate to the question. The discussion may also point out the possible uncertainties of alternative decisions and outcomes. 6–8 Guidance Level Description A reasoned discussion which makes use of economic information and clear analysis to evaluate economic issues and situations. The answer may lack some depth and development may be one- sided. There is relevant use of economic concepts, terminology, information and data appropriate to the question. 3–5 There is a simple attempt at u sing economic definitions and terminology. Some reference may be made to economic theory, with occasional understanding. 1–2 A mark of zero should be awarded for no creditable content.
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