(a) Explain the term dependency ratio. [3]

(b) What would cause an increase in the dependency ratio? [4]

(c) How would the increase in the dependency ratio affect the followings?
(i) a government,
(ii) firms, and
(iii) the growth of the economy. [5, 5, 3]


Answers:

(a) Dependency ratio: formula = 2 marks: number of dependants (1 mark)
to the working population (1 mark) “ratio of dependants to working population” = 2 marks. 3m

(b) High birth rate 1 mark explanation/reason 1 mark,
low death rate 1 mark explanation/reason 1 mark.
Also accept change in school leaving age and change in retirement age.
2 x 2 marks 4m

(c)
(i) a government: Each problem identified 1 mark, development up
to 2 marks e.g. increase in government expenditure (1 mark) on
schools (high birth rate) (1 mark), health care (low death rate) (1
mark). Other problems include decrease in revenue from income
tax (1 mark), balance of payments problems (1mark) due to
decrease home production (1 mark) and increased imports (1
mark). 5m

(ii) firms: Each problem identified 1 mark, development up to 2
marks e.g. fewer workers (1 mark), increase in wages (1 mark),
decrease in profits. Other problems include change in demand for
goods and services (1mark), problems of ageing population being
reluctant to adopt to new ideas (1 mark). 5m

(iii) the growth of the economy: Each problem identified 1 mark,
development up to 2 marks. e.g. fewer workers (1 mark), less
production (1 mark), lower GDP (1 mark). Other problems include
less innovation (ageing population). 3m

1 Which one of the following could explain a shift to the right of the supply curve for a good?

A The imposition of a tax on the good
B A new supplier entering the market
C A rise in firms’ wage costs
D A rise in the price of the good

2 Which one of the following is an example of market failure?

A Prices do not reflect the full social costs of production.
B Prices rise so that consumers cannot afford to buy all the goods that they used to purchase.
C Demand falls so that firms have to make workers redundant.
D A firm goes out of business because it cannot find a market for its products.

3 In August 2000 the World Health Organisation said that a 10% increase in cigarette prices worldwide would reduce consumption by 4% in high-income countries and by 8% in low-income countries.

The above statement suggests that

A smokers in high-income countries are twice as addicted as those in low-income countries.
B demand for cigarettes is price elastic in both low-income and high-income countries.
C income elasticity of demand for cigarettes is higher in low-income than in high-income countries.
D price elasticity of demand for cigarettes is negative in both high-income and low-income countries.


4 The diagram below shows the production possibility boundaries for Countries X and Y respectively.

The opportunity cost of cars in terms of bicycles


A is greater for Country X than for Country Y.
B is greater for Country Y than for Country X.
C increases as more cars are produced.
D increases as more bicycles are produced.





5 The National Grid is a system which distributes electricity throughout Britain. It is currently a monopoly. A possible advantage of this monopoly position to electricity customers is that

A a lack of competition in the electricity distribution industry encourages lower prices.
B the monopolist is able to offer lower prices to customers because it can exploit economies of scale.
C by charging high prices, the monopolist is able to ensure an efficient allocation of resources.
D there will be no need for innovation and invention in the electricity distribution industry and so customers can enjoy lower prices.

6 To benefit from specialisation, it is necessary

A to have an efficient means of exchanging goods and services.
B for labour productivity to be high.
C for the production possibility boundary of the economy to be moving outwards over time.
D for significant economies of scale to be gained in all industries.

7 Which one of the following statements involves a value judgement?

A The supply of coffee is likely to be inelastic in the short run.
B Economies of scale can lead to lower prices.
C Inferior goods have a negative income elasticity of demand.
D The government was wrong to introduce university tuition fees.

8 The diagram below shows the demand and supply curves for milk, where P1 is the initial equilibrium price.

The increase in price from P1 to P2 is most likely to be a result of

A an increase in milk production costs and a decrease in the price of complementary goods to milk.
B a successful advertising campaign for a milk substitute and a tax on milk.
C a decrease in the population and an increase in the subsidy on milk.
D a decrease in wages paid to all workers, including farm workers.


9 An external benefit is most likely to arise when

A firms are able to reduce their costs of production by undertaking research and development.
B a reduction in the tax on profits increases the amount of money firms have available for investment.
C the government subsidises commuter rail services in order to reduce road congestion.
D a firm is able to dispose of waste products into rivers free of charge.

10 Government failure occurs when

A government intervention leads to a net welfare loss compared to the free market solution.
B social costs in a market are greater than social benefits.
C the government fails to intervene in the market.
D externalities exist in a market.

11 The table below shows benefits and costs of a new motorway.




From the table it can be concluded that

A the social costs are £80 million.
B the social costs are less than the private costs.
C the social costs are less than the social benefits.
D social benefits are £20 million.

12 Price elasticity of supply for games consoles is likely to be higher

A the higher the income of consumers.
B in the long term than in the short term.
C the slower the rate of change in technological progress.
D the less firms are able to switch resources from the production of other goods into the production of games consoles.

13 All other things being equal, if strawberries and cream are complementary goods, a fall in the price of strawberries will

A shift the demand curve for strawberries to the right.
B cause a movement along the demand curve for cream.
C cause a fall in the price of cream.
D shift the demand curve for cream to the right.


14 The supply and demand diagram below relates to the market for a merit good.

The demand curve for the merit good shifts from D1 to D2, raising the market price from P1 to P2.

To reduce the price back to P1, the government could introduce a

A minimum price of OP1 per unit.
B subsidy of P1P2 per unit.
C subsidy of EF per unit.
D subsidy of GH per unit.




15 In a market economy, the market mechanism can achieve all the following except
A signalling changes in consumer tastes.
B causing supply to respond to changes in demand.
C eliminating excess supply and demand.
D ensuring a fair distribution of all types of good.

Answer:
1. B 2. A 3. D 4. B 5. B 6. A 7. D 8. B
9. C 10. A 11. C 12. B 13. D 14. C 15. D

Monetary Authority of Singapore closely monitoring property prices, inflation to stay tame

Inflation continues to be a key concern for MAS. It noted that business costs like wages and rentals have risen rapidly recently. CPI is expected to pick up in the second half, with the GST hike in July and some price increases in food and transport. The central bank expects CPI for the full year to come in at the upper end of its forecast range of 0.5-1.5%. It foresees inflation creeping up by 1-2% next year.

It's also keeping a close eye on rising property prices. "Impact of the rise in property prices and CPI - the first round effect is small. We'll watch the second round, to see if high prices will pass through to inflation as rental costs get passed on into prices of goods and services. On the financial stability front, the banking sector's exposure to property and construction sectors, as well as housing loans, is significant," said Heng Swee Keat, MD of MAS.

The central bank is maintaining its policy of allowing a modest and gradual appreciation of the Singapore dollar. The Singapore dollar is now hovering at 10-year highs against the greenback.

Source: Channel News Asia, 25th July 2007 (Extracted)


1a) Identify and explain the cause of inflation mentioned in the news article.
· Cost push inflation
· Cost of production has increased as the article mentioned that such as labour cost (wages) and rentals have increased
· The increase in GST would also cause tax push inflation as it raise the cost of living.
· Producer will increase prices to maintain profit.
· Increase in prices results in inflation.

b) Briefly explain what the Consumer Price Index (CPI) is.
· The CPI shows the general increase in the price level.
· The prices of a basket of goods are measured.
· The prices of the basket of goods in the current year are then compared to that of the base year.

c) (i) Explain what is meant by the ‘appreciation of the Singapore dollar”.

· The increase in the value of the Singapore dollar.
· Against other currencies such as the US Dollar.

(c) (ii) Discuss two impacts on Singapore that will arise from an appreciation of exchange rates.

· When S$ appreciates, prices of exports increase in overseas markets.
· If demand is elastic then foreign currency earnings will fall.
· This will lead to a smaller BOP surplus. Reverse for inelastic demand.
· When S$ appreciates, quantity demanded for S$ increases.
· This cause the BOP surplus to become bigger.
· Only if demand is inelastic will there be no change in foreign exchange expenditure.
· In the long run, the demand for Singapore exports will decrease and demand for the cheaper imported goods will increase. This will then lead to worsening of balance of payments.
· It will increase purchasing power of residents abroad e.g. real estate purchasing.
· Reliance on importer goods which are cheaper. Local industry is adversely affected .


d) Explain the roles of the central bank (MAS) as mentioned in the news article.
· One of its role is shown by the phrase “maintaining a gradual appreciation of the S$”
· it will intervene to prevent excessive fluctuation of S$ exchange rate
· MAS use the exchange rate as the main tool of monetary policy.
· It is “keeping an eye on the rise of property prices” because If the prices of goods and services are distorted by inflation, then there will not be clear signs and guides to efficient allocation of resources.
· Inflation will also discourage saving and investment as the value of assets can be eroded by unexpected inflation.

Useful sites:

INFORMATION
Ministry of Manpower is http://www.mom.gov.sg/Statistics/
Singapore Statistics http://www.singstat.gov.sg/

Newspapers
1. Straits Times / Business Times - http://www.asiaone.com.sg/
2. BusinessWeek - Articles for the classroom - http://www.resourcecenter.businessweek.com/
3. CHEER - Computers in Higher Education Economics Review http://www.ilrt.bris.ac.uk/ctiecon/cheer/

Singapore Government Departments
1. Singapore Government Online Portal - http://www.gov.sg/
2. Inland Revenue Authority of Singapore - http://www.iras.gov.sg/
3. Ministry of Finance - Govt budget, Fiscal policy & Press Releases -http://www.mof.gov.sg/cor/index.html
4. Monetary Authority of Singapore - Economic Research Unit - http://www.mas.gov.sg/
5. Economic Development Board - http://www.sedb.com.sg/
6. Ministry of Trade and Industry - http://www.mti.gov.sg/

PEDAGOGY & RESOURCES
Economics Educators
http://www.bized.ac.uk/educators/16-19/economics/firms/lesson/buseconomics.htm
· Introduction to Microeconomics

· Markets
· Firms
· Wages

· Market Failure
· Introduction to Macroeconomics
· AD & AS Model
· Government Policy
· Macroeconomic Controversies
· International Economics
· Development Economics

Lesson Plans
http://www.eduref.org/cgi-bin/lessons.cgi/Social_Studies/Economics

Conceptual Analysis In Economics (gr. 9-12) The purpose of this activity is to involve students in making decisions and pursuing their own interests within a social and economic environment. Students should develop skills such as critical thinking, decision making, and assertiveness; attitudes, intuition, and the kinds of knowledge and understanding that will enhance continuous change and growth.

Consumer Borrowing and Saving (gr. 11-12) To give students the needed background in the positive and negative aspects of credit, its impact upon individuals and the nation, and practical knowledge and understanding of the wise use of credit.

Division of Labor (gr. 4-12) When studying about the Industrial Revolution and its effects on workers and productivity a short simulation will help students understand why the concept of division of labor was utilized in the fledgling industries.

Entrepreneur (gr. 10-12) This activity is used as a group activity. The students work in groups of four to establish a profitable business that also helps the economy of the community. Give students 2-4 days to do research-- then schedule presentations.

Government and Economics: The Ties That Bind (gr. 11-12) The purpose of this activity is to expand the understanding of students in the areas of both economics and government. It is to also show the relationship between these two subjects and how, over the course of time, our views regarding these two subjects have changed. Its third purpose is to show the relationship of these ideas to current political and economic issues.

Interpreting Economic Indicators (gr. 8-12) Economic indicators are characteristics of an economy that economists use to determine the health of the economy. This activity allows students to explore the many indicators our government follows in order to measure regional and national economic activity.

Microeconomics - Personal Budgeting (gr. 9-12) The purpose of the class is to show students that life in the "real world" away from the secure confines of home is drastically different. Decisions must be made with your spouse or, if you're single, by yourself. The outlook changes when the money comes out of your pocket and not someone else's.

School Store (gr. 4) 1.To understand the need to define categories of store items as a fundamental part of the organization of the store. 2. To use the computer to manage, organize, and access information. 3. To determine which jobs are better handled by computers and which by humans.

Teaching Basic Banking Principles (gr. 11-12) This is a lesson that is intended to be used as a method of teaching basic banking principles. Rather than a dry textbook lesson, this lesson (which is probably best done orally, but can be utilized as a take- home or in-class reading assignment) provides an interesting approach to showing how banks "create" money, what reserves are, and what a "run" on a bank is. The lesson is adaptable to whatever the needs are in your particular situation.

Ups and Downs of the Stock Market (gr. 9 -10) To introduce students to the ups and downs of the stock market
Economics: unlimited wants, goods, services

http://ecedweb.unomaha.edu/lessons/mouse.htm

Games Economists Play
http://www.marietta.edu/~delemeeg/games/games61-70.htm
Game: #61
Course: Micro
Level: Principles and up
Subject(s): Public goods provision.
Objective: Illustrate why the government provides public goods and subsidizes other goods that generate positive externalities
Reference and contact:
O'Sullivan, Arthur and Steven N. Sheffrin. Economics. Upper Saddle River, New Jersey: Prentice Hall, 1997 (p. 289); arthur.osullivan@orst.edu; smsheffrin@ucdavis.edu
Abstract:
Large classes are divided into small groups of students who have the opportunity to support public education through their voluntary contributions. Each group begins play with a $30 balance. Student groups must decide how much to contribute to the public good. Contributions may not exceed $10 per period. Each dollar contributed to the public good reduces the government's expenditures on welfare and criminal justice by $3, so the government enjoys budget savings equal to three times the sum of contributions. The government promises to refund the savings equally among all citizens. The experiment is run for five periods.
Class size: Any size.
Time: 30 minutes.
Variations: None indicated

See also:
Public goods games

Glossary of Economic Terms
http://www.bized.ac.uk/virtual/economy/library/glossary/
http://www.tutor2u.net/default.asp

Other Useful Links: General Economics Education Sites
Business Education on the Internet - http://www.bized.ac.uk/
EconEdLink - http://www.econedlink.org/
Economics LTSN - Catalogue of on-line teaching materials for Macroeconomics, Microeconomics, Introductory Economics and Statistics. http://econltsn.ilrt.bris.ac.uk/teaching/welcome.htm

Federal Reserve Bank of San Francisco - Economics Education Links - http://www.frbsf.org/education/curriculum/index.html

National Council on Economic Education - http://www.economicsamerica.org/

SCORE – Principles of Economics - http://score.rims.k12.ca.us/
http://score.rims.k12.ca.us/resources/grades/?u=196

Tutor 2U Economics - Geoff Riley, Royal Grammar School, Newcastle-upon-Tyne - http://www.tutor2u.net/default.asp

The Singapore Economy
1. Singapore Government – Finance & Economy - Information & Policies - http://www.gov.sg/pol_fin.htm
2. Report of the Economic Review Committee, 2003 – “Singapore Economy : New Directions” - http://unpan1.un.org/intradoc/groups/public/documents/apcity/unpan004878.pdf
3. Remaking Singapore – Speech by DPM Lee Hsien Loong to Singapore Economics Society, 8 April 2003
4. Economic Issues - MAS Publications and Papers
5. MAS Economics Explorer Series
6. MAS Monetary Policy Statement, 2 Jan 2003
7. National Wages Council (NWC) Wage Guidelines For July 2003 To June 2004

Projects, WebQuests & Simulations
WebQuest – Search page - http://webquest.sdsu.edu/wqSearch.html
ThinkQuest Internet Challenge Library

- http://library.thinkquest.org/
Fixitup Faucet Company's Overseas Move - Students play the role of the Secretary of Commerce of different countries and undertake an investigation into the country's demographic & economic characteristics. Objective: to get a company - Fixitup Faucet Company - to establish its plant in the country. Product: a business brochure. The activity concludes with a role-play in which the Board of Directors of Fix-it-up Faucets discuss the merits of each country's proposal and vote on the best option. http://score.rims.k12.ca.us/activity/faucet/


G8 Online Seminar - Internet-based forum designed to have student participants examine and debate the same economic and geo-political issues as the Summit leaders. http://www.g8online.org/

Virtual Economy – Simulation of macroeconomic management, based around No.11 Downing St. - the British Chancellor's office. http://www.bized.ac.uk/virtual/economy/

Webquest examples http://www.chass.utoronto.ca/~reak/quiz1.htm

NIE trainees' webquests at http://www.hsse.nie.edu.sg/webquest/Econ/erp_webquest.htm

Other Links of Economic Interest
1. The APEC Economies - http://www.gov.sg/apec/
2. Institute for Fiscal Studies – For economic analysis of public policy -http://www.ifs.org.uk/
3. Christian Aid – Reports on aid, debt, development & trade - http://www.christian-aid.org.uk/
4. One World - http://www.oneworld.net/article/frontpage/10/3
5. World Bank Development Education Programme - http://www.worldbank.org/

*contributed by HSSE/ NIE

Links I find useful or interesting - Added by Mrs Lily Lee:
BBC Business news - http://news.bbc.co.uk/1/hi/business/
The Economists - http://www.economist.com/index.html
Videos on why study Economics: http://www.whystudyeconomics.ac.uk/films/
Activities and games on why study Economics: http://www.whystudyeconomics.ac.uk/lecturers/games/
Notes on Economics: http://www.tutor2u.net/revision_notes_economics_gcse.asp
AmosWEB Encyclonomic webpedia
Lessons from econedlink
College Economics
Economic help
S-Cool
revision guru
Study Zone
notes on GCSE Econs

New – Half-a-minute on Basic Economics Terms
New – match-up game on Economies of Scale
Play this quiz!
Quiz on international organisations
Match the answers - economic indicators

Congratulations to Ann, Leonard and Chelsy - our team came in 2nd for the National Word Power Challenge Final at the Mediacorps Studio! Click here for the photos.

Learn about money in money land:
http://www.orangekids.com/cedric/money_intro.htm

Learn about spending pattern in spendopolis:
http://www.orangekids.com/cedric/spend_sp_001.htm

Learn about saving:
http://www.orangekids.com/cedric/save_intro.htm

Learn about investment in investment republic:
http://www.orangekids.com/cedric/invest_intro.htm

In the following activity, you'll start with $100 in Part 1 and $1000 in Part 2 and attempt to accumulate as much wealth as you can by either investing your money in the stock market or setting it aside safely in the bank. When investing in the stock market, your money will be spread among all the stocks in the market rather than placed in any single stock. This is much like investing in a diversified mutual fund. For those who aren't sure what a diversified mutual fund is, it is simply a fund that pools money from many different investors and invests in a basket of stocks. A single individual often does not have enough money to do this on his or her own. Now click below and begin your quest for guru status.

Part 1
Part 2

Professional investment managers have a variety of statistics they examine in an effort to estimate the relative value of the stock market. To help you with your decision-making process, the main ones they use will be given during your trek through time. Read the following summaries of three key statistics to give you an idea of what information they contain. Keep in mind however, if markets are truly efficient, these ratios may be of little help. Perhaps you will find the relationship that others have not.

1. Price/Earnings (P/E) ratio: This ratio describes how much one is paying for every dollar a company earns. For example, if a company's stock price is $15 per share, and it earned $1 per share over the preceding year, its P/E ratio would be 15. To give you some historical perspective, the average P/E ratio over the last 80 years has been 15.7. As of 4/15/2002 the average P/E for the largest 500 stocks was 25. All else equal, the lower the P/E ratio, the less expensive stock prices are.
2. Dividend Yield: Many stocks pay dividends. Dividends are payments to shareholders from the company's earnings. The dividend yield is the dividend divided by the share price. As an example, suppose you buy stock at $10 a share and the company pays $1 per share in dividends. In this case, the dividend yield would be $1/$10 = 10 percent. For historical perspective, consider that the average dividend yield over the last 80 years has been 4.39 percent. At the end of the year 2001, it was 1.5 percent . All else equal, the higher the dividend yield, the more attractive stocks are.
3. Interest Rate: The one-year interest rate tells you how much you can expect to earn on bonds over the next year. Bonds are fixed-income instruments that guarantee a fixed return. Think of them as savings bonds that you may have. The higher the interest rate, the more bonds pay and the less attractive stocks will be. Thus, as interest rates rise, stock prices generally fall as investors move money out of stocks and into bonds. Conversely, as interest rates decline, investors move wealth from bonds and into stocks.

For the P/E ratio and dividend yield, the preceding five-year average will be given. This will give you a historical context in which to judge these two statistics so that you can at least make an educated guess as to whether the statistics are relatively high or low.
The question you have to answer is whether the statistical value will revert back to its average or keep on trending in one particular direction. For example, if the P/E ratio is above its five-year average, common wisdom would suggest stock prices are relatively high. This may portend that stock prices will soon fall. On the other hand, if P/E ratios have moved above their average, this may suggest P/E ratios are trending upwards and thus stock prices will rise. If all this sounds somewhat contradictory and confusing, it is. Forecasting stock prices is often considered more of an art than a science.

Extracted from http://www.econedlink.org

Singapore and Brunei launch new $20 notes

extracted from Channel News Asia 27 June 2007

A new $20 polymer note has been launched to celebrate the 40th anniversary of the Currency Interchangeability Agreement between Singapore and Brunei. The commemorative notes were launched by Singapore Prime Minister Lee Hsien Loong and the Brunei Sultan Hassanal Bolkiah at a ceremony in Bandar Seri Begawan on Wednesday. Three million of the Singapore $20 commemorative notes will be introduced into circulation gradually through the banks, starting 16 July.

I hope that this article will interest you. You can find out more from the Singapore Mint website at http://www.singaporemint.com/. Please revise on the following this week as we look into the topic on money:

What is money? What are the functions of money? Why is it used as a medium of exchange? What are the forms (types) of money? Why is money introduced as a medium of exchange over barter trade( cons of barter trade)? What are the differences between the Central Bank and the commercial banks?

Write on the following topics:

1. Are Credit Cards A Form Of Money?

you can refer to this link for a comment on the above topic: http://economics.about.com/cs/money/a/credit_cards.htm

2. What are the differences in the functions of the Central Bank and the commercial Banks in Singapore?

you can refer to this link to learn more about the functions of the Central Bank in Singapore: http://www.mas.gov.sg/resource/eco_research/eco_education/explorer/explorer1.pdf

about commercial banks in Singapore:

http://www.abs.org.sg/members.htm

Try out the quiz on money here: http://www.bized.co.uk/virtual/bank/economics/money/quiz.htm

Saw this poster at the MRT station - can you recall what is inflation and the consequences?

Remember about the essay competition for budget 2007? Click on the link below to read the winning entries:
http://www.mof.gov.sg/budget_2007/essay_winners.html#cat1a

Saw this on the internet and found it quite interesting. Questions and answers on economics.
Click on the link below:
http://www.studyzones.com/ActivityZone/answers.cfm?subject=Economics

Try out this game on why do countries trade.
http://nobelprize.org/educational_games/economics/trade/

Read up on why some countries are restricting trade (protectionism) and why some economists are against protectionism.

Try out the following exercise, assumming different roles in arguments to increase or reduce tariffsfor the Car industry in Malaysia:
http://geocities.com/olevelecons/tradeorprotect.doc

The ASEAN Trade agreement call for Malaysia to reduce tariffs in its car industry.
Provide the arguments for and against the reduction of tariffs for the car industry in Malaysia.

Check out the HDI for the different countries :
http://hdr.undp.org/hdr2006/statistics/

Select a country below to see how its HDI relates to its GDP and how it compares to another country.
http://hdr.undp.org/hdr2006/statistics/flash/statistics_hdi.cfm

Listen to all these audio recordings from Bized:

The Economic Problem [2MB]
Opportunity Cost [2MB]
Public and Private Sectors: Part 1 [3MB]
Public and Private Sectors: Part 2 [2.5MB]
Economic Systems - Introduction [1.2MB]
Economic Systems - Command, or Planned, Economy [2.8MB]
Economic Systems - Market Economy [3.3MB]
Economic Systems - Mixed Economy [483KB]
Location of Industry 1 [1.2MB]
Location of Industry 2 [1.2MB]
Location of Industry 3 [1.2MB]

Podcast is getting quite popular nowadays - what do you think of this from Bized? The recordings are in MP3 format and many polytechnics and even JCs are trying this out as many students own a MP3 player nowadays. Would you like to receive the podcast on the topics that you are studying? Would you want to be involved in the production of a podcast?

Try this simple exercise on demand and supply - I like the fact that it shows you how the demand and supply curve shift on the right hand side.
http://ecedweb.unomaha.edu/Dem_Sup/econqui2.htm

Something for you to think about:

Tax all equally, but... February 07, 2007

Why it works: The extra GST revenue, amounting to $1.5 billion annually, will be used to fund areas like education, health care and transportation. It will also enable the Government to cut corporate taxes to draw more investors.
The Government has promised a 'comprehensive offset package' to help the needy.

Why it may not work: The GST is a regressive tax. While the rich may not feel the pinch of the hike, every dollar counts for the needy. The higher cost of living will hit the poor harder. GST will always be with us but the offsets might not last, argue critics.

Source: http://newpaper.asia1.com.sg/news/story/0,4136,122804,00.html?

Points to think about:

1. Reasons for the increase in GST.

2. How does it help the government to achieve its aims?

3. What is a regressive tax?

4. Why would be people worried about the increment in GST?

5. Do you think the incidence of tax will be more on the producers or the consumers?

6. What are the safety measures which the government can adapt to cushion the adverse impact of the increment in GST?

Hong Kong enjoys low rates of both personal and corporate taxation. Concerned at the territory's narrow tax base and the government's over-dependence on tax revenue from property transactions, the government is consulting the public on the proposed introduction of a Goods and Services Tax (GST). Initial popular reaction has been largely unfavourable, primarily because of concerns that it will impose an undue burden on the poorer members of society, and may also harm Hong Kong's attractiveness as a tourist destination.

source: Extract from http://en.wikipedia.org/wiki/Hong_Kong

*In a surprising about turn, the Hong Kong government announced on 5 Dec 2006 that it will abandon plans for a goods and services tax in the face of widespread public hostility to the idea.

1. Name the four types of taxes mentioned in the above source and classify them under direct or indirect tax.

2. What are the demerits of the Goods and Services tax as mentioned in the passage?

3. What other demerits do the Goods and Services tax have other than those mentioned in the extract?

4. Why do you think the Hong Kong Government wanted to introduce the goods and services tax?

Though the deadline for the essay writing competition based on the above theme is over, I would like you to comment on the following:

1. What do you think are the key challenges facing Singapore in the foreseeable future (e.g. social, economic, security)? What kinds of spending needs arise from this?

2. With no natural resources and limited revenue sources, how would you prioritise these spending needs? What can we spend less on in order to meet these increased spending needs?

3. How should Singapore find the revenue to fund our future spending needs (e.g. raising taxes – if so, what type)? Are there other alternative sources of revenue you think should be explored? What are the implications of funding our expenditure through such means?

Try out this game on budget 2007 - If you were the finance minister:
http://app.mof.gov.sg/budget_2007/choice/index.asp

In the game you are to:
1. Tell us how much you would allocate for each aspect of our public expenditure.
2. Decide how you would raise the revenue to finance these expenditure items.

All countries face tough choices in fiscal policy. Like most choices in life, fiscal choices have their own set of tradeoffs, i.e. costs and benefits. Higher taxes lower household incomes but allow the Government to provide more for the less privileged. Lower taxes increase our business competitiveness but may undermine the Government’s ability to provide adequately for its citizens. Each choice taken also impacts current and future generations differently. Are our taxes too high? Where can we look to for more revenue to meet budgetary shortfalls?
There are no perfect choices. Each country decides based on its own circumstances, beliefs and values.

I hope that you will understand the role of the government much better after playing the game.Please add to comment after you have tried the game.

Let's discuss the latest economic issues here! Participate actively in commenting the issues which I will be posting here.