2024 H2 Economics Paper 2 Essay 5: Suggested Answers
How to use these essay answers. The responses below, including the part (a) answer, are structured guides to the requirements of the question, the content, analysis and evaluation a strong answer must cover, rather than full essay prose with a written introduction and conclusion. Use them to see what to include and how to build the argument, then write it up in your own continuous prose, adding your own introduction and conclusion.
This essay explains what might cause investment to increase in an economy, then asks how far increasing investment is the best approach for Singapore to achieve its key macroeconomic objectives.
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Explain what might cause investment to increase in an economy.
Investment is influenced by several factors, with interest rates and government policy being pivotal.
Interest rates. Interest rates are a fundamental determinant of investment, shown by the Marginal Efficiency of Investment (MEI) curve, which plots the expected return over cost on new projects. As interest rates fall, the cost of borrowing falls and previously unprofitable projects become viable, so investment rises. This is an inverse relationship. During the COVID-19 pandemic, for instance, central banks such as the Federal Reserve held interest rates near zero to lower borrowing costs and encourage firms to invest.
Government policy. Government actions also shape investment. Infrastructure spending on roads, bridges and digital networks lowers transaction costs and raises business efficiency. Singapore's investment in high speed fibre broadband, for example, cut operational costs and made the economy more attractive to local and foreign investors. Political stability matters too, as a stable, predictable legal and regulatory environment reassures investors, which has helped Singapore attract foreign direct investment. Beyond these, governments can use incentives such as tax breaks, subsidies and grants to tilt the cost benefit calculation in favour of particular projects, for example tax incentives that accelerate investment in renewable energy.
Two well developed determinants, with the interest rate channel via the MEI and at least one government channel, supported by examples.
Discuss the extent to which increasing investment is the best approach for Singapore to achieve its key macroeconomic policy objectives.
- State Singapore's key macroeconomic objectives and frame investment as one possible approach.
- Build the case for investment through its effect on aggregate demand and on productive capacity, naming the objectives each serves.
- Identify an objective or shock that investment is poorly suited to address.
- Introduce an alternative policy better matched to that shock and explain its mechanism.
- Weigh investment against the alternative across the full set of objectives.
- Conclude on the extent, arguing for a policy mix rather than a single tool.
This part is gated. The full model answer with the worked ad and as analysis and the policy evaluation, with the diagrams and the full evaluation, is in the ETG TYS Answers book from SAP and is worked live in the TYS Crashcourse. ETG students also get the AI TYS coach that guides them through this exact question. Message the team to find out more.
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Where can I get the full worked answers to the 2024 H2 Economics paper 2 essay 5?
The full model answers, with the diagrams and the higher mark evaluation, are in the ETG TYS Answers book published by SAP and sold at Popular, and are worked live in the TYS Crashcourse. Every ETG student also gets the AI TYS coach on our learning management system, which guides you through how to tackle every essay and every case study question from the last ten years.
Are these the official 2024 A Level Economics answers?
No. SEAB sets and marks the A Level paper. These are suggested answers by Mr Eugene Toh, author of the H1 and H2 A Level Economics TYS answer keys, published by SAP and sold at Popular.
How should I use these suggested essay answers?
Treat them as a guide to the requirements of the question, the content, analysis and evaluation a strong answer must cover, not as full essay prose. Write the essay up in your own continuous prose, with your own introduction and conclusion.
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