Economics 0455 · IGCSE · The macroeconomic aims of government
The macroeconomic aims of government — practice question
Back in 2016, there were worries that the Singaporean economy might tip into recession because demand from China, its largest export destination, was weakening. A likely effect of a recession is a drop in consumer spending. In an earlier recession in 2008, unemployment had climbed from 1.6% to 3.4%. Singapore’s central bank therefore chose to step into the foreign exchange market to affect the currency’s value.
(a)[2]
Define the term recession.
(b)[4]
Explain why a recession is likely to lower consumer spending.
(c)[6]
Analyse the consequences of rising unemployment for a government’s spending and tax revenue.
(d)[8]
Discuss whether an exchange rate depreciation will, or will not, prevent an economy from falling into recession.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “A decrease in GDP / negative economic growth” …