Cambridge International Examinations

Cambridge International Advanced Subsidiary and Advanced Level

ECONOMICS 9708/22
Paper 2 Data Response and Essay May/June 2018
1 hour 30 minutes
No Additional Materials are required.
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An answer booklet is provided inside this question paper. You should follow the instructions on the front cover
of the answer booklet. If you need additional answer paper ask the invigilator for a continuation booklet.

Section A
Answer Question 1.
Brief answers only are required.

Section B
Answer one question.

You may answer with reference to your own economy or other economies that you have studied where relevant
to the question.

The number of marks is given in brackets [ ] at the end of each question or part question.

This document consists of 3 printed pages, 1 blank page and 1 Insert.

DC (CE) 142957/2
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Section A

Answer this question.

1 Thai Economy’s Prospects Improve

Table 1.1: Total expenditure in Thailand, by category, 2014

Category of Spending US dollars % National

(billions) Expenditure
Household consumption 243 55.6
Capital goods 98 22.4
Government consumption 69 15.8
Exports 280 64.1
Imports 253 57.9

Source: United Nations data

Extract 1: Thailand’s economy shows improved health

The latest figures show that Thailand’s economy grew by 3.5% in the second quarter, putting
it on track for 3–3.5% growth for the whole of 2016. Thailand has managed to boost its growth
after several quarters of disappointing performance by increasing public sector investment in
several large infrastructure projects, including roads, railways and airports. These projects
will run over the next 3 to 5 years and are worth several hundred billion baht, Thailand’s
currency. It is hoped that this public sector investment will encourage the private sector to
increase their investment spending.

In addition to increased investment, the Thai economy’s growth is being boosted by recovering
private consumption due to increases in farm prices, which are crucial to household
purchasing power, as well as a strong tourism sector.

Regarding the export sector, which remains the biggest engine of growth, the outlook is
still uncertain but the negative impact from China’s economic slowdown appears to have
stabilised with a Chinese growth rate of around 6.6% per annum.

Source: The Nation, 18 August 2016

Extract 2: Thailand’s tourism industry continues to grow

The Thai tourism industry is projected to record international visitor arrivals of 16.67 million
between January and June 2016, which will be up by 13% over the same period of 2015.
Projected earnings are estimated at 824 billion baht, up 17%. The top three markets in terms
of tourism receipts are projected to be China (146 billion baht, +32%), Malaysia (22.5 billion
baht, +15%) and Australia (17.8 billion baht, +4%). China is now by far the largest source of
visitors, but there has been a resumption of growth from Russia and Thailand’s neighbouring
countries of Cambodia, Laos and Myanmar.

Source: Thailand Business News, June 2016

© UCLES 2018 9708/22/M/J/18

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(a) (i) Calculate the level of aggregate demand in Thailand in 2014. [1]

(ii) In which category of expenditure would the various infrastructure projects be placed? [1]

(b) Explain how a fall in the rate of interest would be likely to affect expenditure on

(i) consumption, [3]

(ii) exports. [3]

(c) Explain how changes in any three demand factors might account for the greater rate of
growth in numbers of visitors into Thailand from China than from other countries. [6]

(d) Discuss whether Thailand’s government should be concerned that export and import spending
represents the highest proportion of total spending in Thailand. [6]

Section B

Answer one question.

2 (a) Explain the different ways in which resources are allocated in a market economy and in a
mixed economy. [8]

(b) Discuss the effectiveness of supply-side policies in increasing the supply of enterprise to the
economy. [12]

3 (a) With the use of diagrams, explain how the price elasticity of demand for a product influences
the incidence of an indirect tax on that product. [8]

(b) ‘Indirect taxes reduce consumer surplus and should therefore never be imposed in a mixed
economy.’ Discuss this view. [12]

4 (a) Explain how a high rate of inflation and a rise in an economy’s exchange rate can each cause
a deficit in an economy’s current account of the balance of payments. [8]

(b) Discuss whether a high rate of inflation or a deficit on the current account of the balance of
payments is the more serious problem for an economy. [12]

© UCLES 2018 9708/22/M/J/18

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