Suggested Answers Outline to A Levels 9757 H2 2018 CSQ Question 2 by Mr Toh

Ai.        The Taka was depreciating


Aii.       In general, yes, the current account was generally worsening, which could mean that there was an increase in import expenditure contributing to the increase in supply of the Taka OR a fall in export revenue contributing to the fall in demand of the Taka.

            However, the change from 2005 to 2010 was not expected because the current account balance improved from a deficit to a surplus while the Taka continued depreciating


Aiii.      There was a slight fall in GINI coefficient which means income inequality has lessened but only marginally.


b.         A public good has to be strictly classified by its characteristics of ‘non-excludability’ & ‘non-rivalry’

            “A new road network” has a rather broad definition. How wide & extensive is this ‘new road network’. (for perspective, the MCE in SG is 5km long)

            A new road network could be ‘excludable’ – barriers could be established (say in the case of a 5km long road network) to charge users for usage

            A new road network could be ‘rivalrous’ – congestion could easily occur where only a certain number of cars are able to use the road network at any particular point in time (same case of a 5km long road network)

            Therefore a new road network should not be classified as a public good (at least, not for sure)


c.         In Australia, YED of electricity is likely to be positive but less than 1. This is because in Australia, electricity is a necessity. 

            In Bangladesh, YED of electricity is also positive but more than 1. This is because in Bangladesh, incomes are low, there is a high setup cost for electricity provision in homes which makes electricity relatively less accessible and considered more to be of a luxury good instead.


d.         Quite an open-ended question but here are some suggested themes to talk about

            -Size of spending

            -Likelihood of crowding out effect (which will lead to a fall in Investments) – SG doesn’t borrow to invest so unlikely to have crowding out effect, but Bangladesh may have more of a crowding out effect (poorer budget position)

            -Impact on investments may differ (infrastructural spending can likely affect investments more for Bangladesh than for Singapore, for e.g. if they improve electricity generation)

            No – this is not quite a question about multiplier cause we are talking about impact on AD and not national income.There might be a way to bring in multiplier, but not in the ‘standard’ approach.


e.         Requires discussion of at least 2 SSPs and compare, but I would definitely suggest bringing in FP with supply-side slant as the alternative policy.