H2 Economics Flashcards

What is the Gini coefficient?

Answer: A numerical measure of income inequality ranging from 0 (perfect equality) to 1 (perfect inequality)

The Gini coefficient is derived from the Lorenz curve and quantifies income inequality: 0 represents perfect equality; 1 (or 100) represents maximum inequality. Singapore's Gini is around 0.4 before transfers.

What is 'oligopolistic interdependence'?

Answer: The situation where each firm in an oligopoly must consider the likely reactions of rivals when making decisions

Oligopolistic interdependence means each firm's decisions about price, output, or advertising are influenced by how rivals might react — leading to strategic behaviour and models like the kinked demand curve.

What is the current account of the Balance of Payments?

Answer: Records trade in goods and services, income flows, and current transfers

The current account records: trade in goods (visible trade), trade in services (invisible trade), primary income (investment income, wages), and secondary income (current transfers like foreign aid).

What is meant by 'economies of scale'?

Answer: The cost advantages that a firm obtains due to expansion, where long-run average cost falls as output increases

Economies of scale are the cost advantages achieved as a firm increases its scale of production, leading to a fall in long-run average cost. Sources include specialisation, indivisibilities, and bulk buying.

What is the difference between monetary and fiscal policy?

Answer: Monetary policy manages money supply/interest rates/exchange rates; fiscal policy manages government spending and taxation

Monetary policy (managed by MAS in Singapore) involves controlling money supply, interest rates, and exchange rates. Fiscal policy involves government decisions on spending and taxation to influence economic activity.

How does Singapore's export-oriented growth strategy link to economic vulnerability?

Answer: Heavy reliance on exports makes Singapore vulnerable to global demand shocks and external economic downturns

Singapore's openness and export dependence mean global recessions (like 2008 or 2020) significantly impact Singapore's GDP. This vulnerability requires strong reserves, fiscal flexibility, and economic diversification.