Trigger activity for Overall Policy CSQ1

Marginal Benefit is the benefit that results from carrying out one additional unit of production. Provide a contextualised example.

• For example, if a factory produces one more unit of a product, the additional revenue or satisfaction gained from selling that extra unit is the marginal benefit.

• For example, if a factory reduces its production by one unit, the cost saved is the marginal benefit.

• For example, if a factory increases its workforce, the total output is the marginal benefit.

• For example, if a factory stops production, the loss incurred is the marginal benefit.

Explain the concept of marginal cost with a contextualised example.

• For example, if a company builds an additional production facility, the extra costs for gas and electricity required for that facility are the marginal costs.

• Marginal cost refers to the total revenue generated from selling one more unit of a product.

• Marginal cost is the total cost of producing all units of a product divided by the number of units produced.

• Marginal cost is the fixed cost incurred by a company regardless of the level of production.

The firms will decide to set up production facilities in Singapore if the marginal benefit of doing so outweighs the marginal cost.

• True

• False

Which of the following are reasons why the MAS opted to strengthen the Singapore dollar instead of manipulating interest rates in its monetary policy?

• To better manage imported inflation and to suit Singapore's open economy

• To increase government spending and boost domestic demand

• To reduce the unemployment rate and control wage growth

• To encourage borrowing and increase consumer debt

Which of the following best explains why Singapore adopts an exchange rate policy rather than an interest rate policy for its monetary policy?

• Singapore is heavily dependent on trade and net exports, so exchange rate policy directly impacts export and import prices.

• Singapore has abundant natural resources, making exchange rate policy more effective.

• Singapore is an interest-rate maker, allowing it to control global interest rates.

• Singapore restricts capital mobility, making interest rate policy more effective.

With the fall in income and the lowering of expectation of future income and employment, what will happen to Consumption (C) and Aggregate Demand (AD)?

• There will be a fall in Consumption (C), thus leading to a fall in AD.

• There will be a rise in Consumption (C), thus leading to a rise in AD.

• There will be no change in Consumption (C) or AD.

• Consumption (C) will rise but AD will fall.

What happens to the MEI curve and the level of investment when businessmen are pessimistic about the future?

• The MEI curve shifts leftward from MEI0 to MEI1, causing the level of investment to fall from I0 to I1 at the interest rate of r0.

• The MEI curve shifts rightward from MEI0 to MEI1, causing the level of investment to rise from I0 to I1 at the interest rate of r0.

• The MEI curve remains unchanged, but the level of investment increases from I0 to I1 at the interest rate of r0.

• The MEI curve shifts leftward from MEI0 to MEI1, but the level of investment rises from I0 to I1 at the interest rate of r0.

What is the effect of the appreciation of the Singapore dollar on exports and imports?

• Exports become more expensive in foreign currency terms, leading to a fall in demand for exports. Imports become cheaper in local currency terms, leading to a rise in quantity demanded of imports.

• Exports become cheaper in foreign currency terms, leading to a rise in demand for exports. Imports become more expensive in local currency terms, leading to a fall in quantity demanded of imports.

• Exports and imports are unaffected by the appreciation of the Singapore dollar.

• Exports become more expensive in local currency terms, leading to a rise in demand for exports. Imports become cheaper in foreign currency terms, leading to a fall in quantity demanded of imports.

Fill in the blank: The appreciation of the Singapore dollar against the Chinese Yuan will lead to exports being more expensive in _______ currency terms, resulting in a fall in demand for Singapore's exports by China.

• foreign

• domestic

• local

• international

Global factors may be more important than domestic factors in accounting for Singapore's recession because:

• Singapore's economy is highly dependent on international trade and global market conditions.

• Domestic policies have a greater impact on Singapore's economic performance.

• Singapore's recession was caused mainly by internal political instability.

• Local consumer spending is the primary driver of Singapore's economy.