A-Level H2 Economics 3

Question 1

What is the Lorenz curve used to measure?

Accepted Answer

Income inequality within a country

Answer

The Lorenz curve plots the cumulative share of income earned against the cumulative share of population. The further the curve from the 45° line, the greater the income inequality.

Question 2

What is 'structural unemployment'?

Accepted Answer

Unemployment arising from a mismatch between workers' skills and the skills demanded by employers

Answer

Structural unemployment occurs when there is a mismatch between workers' skills and job requirements, often caused by industrial change, technological advances, or regional shifts in employment.

Question 3

What is the difference between regressive and progressive taxation?

Accepted Answer

Progressive tax takes a higher percentage from higher incomes; regressive tax takes a higher percentage from lower incomes

Answer

A progressive tax (e.g., income tax with rising rates) takes a larger percentage of income from higher earners. A regressive tax (e.g., GST) takes a larger percentage from lower income earners relative to their income.

Question 4

How does depreciation of the Singapore dollar affect its export competitiveness?

Accepted Answer

Singapore exports become cheaper in foreign currency, improving competitiveness

Answer

When SGD depreciates, Singapore's exports cost less in foreign currency, making them more price-competitive internationally. Imports become more expensive, potentially worsening the trade balance if demand is inelastic.

Question 5

What is 'moral hazard' in economics?

Accepted Answer

When one party takes more risks because another party bears the cost or consequences

Answer

Moral hazard occurs when one party takes on more risk because the costs of that risk are borne by another party — e.g., insured people taking less care because insurance covers losses.

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A-Level H2 Economics 3