2023 JC1 EOY Examinations

H2 Economics Suggested Answer

Question 1 Impact of the Fourth Industrial Revolution on Growth

Extract 1: What is the Fourth Industrial Revolution

The Fourth Industrial Revolution (4IR), also known as Industry 4.0, refers to how technologies
like artificial intelligence (AI), virtual reality, augmented reality and the Internet of things (IoT)
are merging with humans’ physical lives. It focuses on the use of technology to provide
increased automation, improved communication and monitoring, as well as smart machines
that can analyse and diagnose issues without the need for human intervention.
Source: World Economic Forum, 14 January 2016

Table 1: Selected Indicators for the Indian Economy

2014 2015 2016 2017 2018 2019

Annual real GDP growth (%) 7.4 8.0 8.2 6.8 6.5 4.0

Annual inflation (%) 6.7 4.8 4.9 3.9 3.7 3.3

Unemployment (%) 5.6 5.6 5.5 5.4 5.3 5.3

Youth unemployment (%) 21.7 22.3 22.6 22.7 22.9 23.0

Population growth (%) 1.2 1.1 1.1 1.2 1.0 1.0

Source: The World Bank, 15 June 2021

Table 2: Singapore and India literacy rate (% of people age 15 years and above)

Country Literacy Rate (%)

India 74.3

Singapore 97.3
World 86.2

Source: The World Bank, 2018

Extract 2: Fourth Industrial Revolution in India

India is one of the fastest growing economies in the world and has acquired a global reputation
for exporting services. 4IR technology has enabled India’s structural transformation from
agriculture to service-led growth without an expansion in manufacturing. It has given India the
opportunity to improve its AI capabilities and digital communication to become one of the
world’s fastest growing e-commerce market.

To further increase its economic growth through 4IR technology, the government has
committed to build the infrastructure needed to support 4IR, such as setting up of 5G network,
with the aim to increase the manufacturing sectors’ contribution to 25% of GDP by 2020.
Investments in both physical and human infrastructure matter greatly in supporting the new
drivers of growth in the various industries and job creation. Hence, the government has also
planned to set up a countrywide workplace training-based vocational education system.
1
Nanyang Junior College, Economics Department ©
2023 JC1 EOY Examinations
H2 Economics Suggested Answer

Unfortunately, these government initiatives have not produced results. Its real GDP fell below
5% this year, lower than the annual 7% real GDP growth over a decade ago.

The reality is that government spending on infrastructure like roads and other agricultural
infrastructure has remained insufficient. The existing vocational training programs are faced
with outdated curriculum, shortage of qualified teachers and trainers and unavailability of
proper infrastructure (building and equipment). Only 2% of its labor is skilled, and nearly 49%
of its workers are still in the agricultural sector, engaging in traditional small-scale low-
productivity agricultural methods due to lack of funds and capabilities to adopt the 4IR
technologies.

India has yet to take advantage of its large young working population. The adoption of 4IR
technology will lead to the creation of highly skilled and highly productive labour force. At the
same time, 4IR can also result in elimination of lower skilled jobs. Hence there is a need to
increase training to increase labour productivity, both in manufacturing and agricultural sectors.
And, with 70% of its population below 35 years old, 10 million additional jobs need to be
created per year need to ensure adequate opportunities for the young population.
Source: Various, 2019

Extract 3: Singapore’s approaches to Industry 4.0

Driven by rising operational costs and a human resources crunch, the local industry in
Singapore understands that it is imperative to adopt Industry 4.0. The Singapore government
has adopted the following approaches:

Approach 1: It has launched 6 clusters of 23 sector transformation maps covering 80% of

Singapore’s economy to provide opportunities for companies and the government. This
stimulates investments and also encourages partnerships between firms in related sectors, to
work together to promote innovation and deepen capabilities. For example, firms in hotel
services and food services can use their own unique technological capabilities to work
together to bring major events and conferences to Singapore, as well as improve experiences
for tourists.

Approach 2: Singapore’s approach to training and retraining of its workforce is multi-pronged.

All workers from the top executives to the very low-skilled workers are to be trained in various
aspects of Industry 4.0. Relevant training on Industry 4.0 technology such as data analytics
and cyber security is made available for all workers from the engineers and even the lower
skilled workers. Executive workshops are also provided for top managers to increase their
awareness and possibly shift in mindset towards learning and the use 4IR technology.

Even as the government invests time and resources to move the industry, the private business
owners need to have the mindset to embrace 4IR technology too. Managers and employees
need to think more strategically and with a future-oriented view to consider the opportunities
that Industry 4.0 can bring, and how best the business can harness these. They need to build
the business and economic case, and not simply pursue technology for technology's sake.

Source: Business Times, 25 October 2018

2
Nanyang Junior College, Economics Department ©
2023 JC1 EOY Examinations
H2 Economics Suggested Answer

Extract 4: Challenges to Singapore’s technological transformation

4IR is meant to help process data in a convenient, fast and cost-effective way. Yet, there
remains many challenges to the initiative. First, Singapore has a general lack of suitably skilled
developers for such solutions. There are various variables of the digital divide due to age, level
of IT literacy, level of income, skills, access to the Internet, etc. The lack of home-grown tech
talent is the most pressing issue for companies, especially for small-and-medium enterprises
(SMEs) in the region to sustain and grow their e-businesses. Many have shut down while
waiting for related digital initiatives to be launched. SMEs are companies with less than $100
million in annual sales, or companies with less than 200 employees.

In addition, there is a mindset problem, at both employer and employee level. Employers do
not necessarily see the need to invest in human capital development do not necessarily
perceive having well-trained employees as a competitive advantage over their competitors.

Next, costs of technology - particularly on cybersecurity - is likely to continue rising sharply in

the future. Cybercrimes have been growing concerns of the e-community, including
consumers, sellers and governments. Moreover, the public sector in Singapore has been
relatively slow in certain dealings with the private sector. The lack of resources, weak online
payment systems, weak intellectual property protection, infrastructure-related issues (e.g.
network connectivity, speed and quality of broadbands) and regulation (e.g. licensing
restrictions) issues pose problems for all.

While 4IR provides opportunities, it could also pose challenges to Singapore’s economic
growth and distribution of income. Thus, Singapore would have to manage the full extent of
impact of the 4IR.
Adapted from Various Sources, 2017 and 2023

Questions

(a) Explain a reason for the trend in India’s youth unemployment between 2014 and
2019. [3]

(b) Using 2 indicators from Table 1, explain the change in the material standard of living
in India over the period 2014 – 2019. [3]

(c) Explain one possible factor that determines the impact of a given increase in [2]
investment on the change in national income.

(d) Using an AD-AS diagram, explain how more young people joining the labour force
would affect the economic growth of India. [4]

(e) Assess the effects of the Fourth Industrial Revolution (4IR) on sustained growth and
employment in India. [8]

(f) Discuss the effectiveness of the two approaches (Extract 3) adopted by the
Singapore government to achieve inclusive economic growth. [10]

[Total: 30]

3
Nanyang Junior College, Economics Department ©
2023 JC1 EOY Examinations
H2 Economics Suggested Answer

Suggested Answers

(a) Explain a reason for the trend in India’s youth unemployment between 2014 and
2019. [3]

Table 1 shows that India’s youth unemployment has been rising between 2014 –
2019. [1m]

Possible reasons (pick 1 → 2m each):

There is a mismatch between the skills the young population has acquired from
school and the skills demanded by the firms in the job market. [1m]
The young population lacks skills required in the current labour market due to lack
of education and proper training. With the rising use of technology in production, the
firms require more workers with specific skills that are relevant to these technology.
However due to the outdated curriculum in the schools (extract 2 para 4), the young
population graduate from schools with inadequate skills to match the increasing
demand for workers with the relevant skills. [1m]

OR

Not enough jobs for the rising number of young school leavers entering the job
market. [1m] Over 70% of India’s population are below 35 years old, and given that
the country’s population growth rate is around 1%, the number of young people
entering the labour market adds to the increase in labour force every year (as seen
in Table 1).
With the increase in technology, production is now automated requiring less
manpower. Hence the number of jobs created is not enough to meet the increase in
the number of young population entering the labour market. Extract 2 para 5 states
that 10 million additional jobs are needed annually to provide sufficient job
opportunities for the young population. [1m]

(b) Using 2 indicators from Table 1, explain the change in the material standard of living
in India over the period 2014 – 2019. [3]

Material standard of living (SOL) measures the quantity and quality of goods and
services accruing to each person in the country. [1m]

Annual real GDP growth rate had fallen from 7.4% in 2014 to 4% in 2019, indicating
that the country’s real GDP has been increasing. Population growth has increased
by about 1% annually. This indicates that India’s real GDP per capita has been
rising. [1m]

The rising real GDP per capita suggests that the households’ income has been
rising, implying that the purchasing power and access to goods and services, and
thus material SOL increased between 2014 and 2019. [1m]

4
Nanyang Junior College, Economics Department ©
2023 JC1 EOY Examinations
H2 Economics Suggested Answer

(c) Explain one possible factor that determines the impact of a given increase in [2]
investment on the change in national income.

Possible factors (any one → 2m):

• Size of multiplier [1m]

o The multiplier is the magnitude of a change in RNY when there is a change in
AD. An increase in investment will directly increase AD. The increase in AD will
lead to a larger increase in RNY through the multiplier process. The larger the
value the multiplier, the larger is the effect of an increase in investment on
national income. [1m]

• Availability of unemployed resources to increase production to meet the increase

in AD [1m]
o With availability of resources in the economy, increasing production to meet the
in higher demand for goods and services will be easier than when the economy
is already at full employment. [1m]

(d) Using an AD-AS diagram, explain how more young people joining the labour force
would affect the economic growth of India. [4]

Increase in LRAS [1m]

More young people (who were previously not in the labour force) joining the labour
force will increase the quantity of labour resources, thereby increasing the
productive capacity of the economy.
Diagram [1m]

Figure 1
Impact on India’s economic growth [2m]
An increase in LRAS will lead to rightward shift in AS curve from AS0 to AS1.
Assuming that the economic is at the intermediate range of the AS, GPL decreases
from P0 to P1 and real national income increases from Y0 to Y1. This leads to India
having actual growth. [1m]
At the same time, the increase in LRAS increases India’s potential growth from Yf0
to Yf1. [1m]

5
Nanyang Junior College, Economics Department ©
2023 JC1 EOY Examinations
H2 Economics Suggested Answer

(e) Assess the effects of the Fourth Industrial Revolution (4IR) on sustained growth and
employment in India. [8]

Approach:
Command Assess – explain and evaluate whether the positive impact
outweigh the negative impact
Content The impact of 4IR on India’s economic growth and employment,
positive and negative impacts in the short-run and in the long-run
Context India
Synopsis

Students are expected to explain the positive and negative impacts of the Fourth
Industrial Revolution on India’s economy, focusing on macro goals such as
economic growth and unemployment.

Introduction:

Fourth Industrial Revolution (4IR) refers to the use of smarter technology that can
do more production functions and increase efficiency. Such that technology can be
expected to lead to overall benefit for India as it can increase India’s economic
growth and create more job opportunities. However, 4IR has some negative impact
on India.

Body 1: Positive impact of 4IR

4IR increases economic growth and job creation
— Firms embracing the 4IR technologies adds the whole country’s increase in
investment in capital goods and infrastructure (with the government committing
to build the infrastructure to set up the 5G network shown in Extract 2 para 2).
The immediate effect of the increase in investment expenditure is an increase in
AD as AD = C+I+G+(X-M). The initial rise in AD, will cause an unplanned fall in
the firm’s inventory. To maintain their inventory, firms will need to employ more
resources such as labour. As more labour are hired, they receive more in wages.
The purchasing power of the labour force rises. This leads to a multiple rise in
induced consumption. Each subsequent rise in induced consumption will be
increasingly smaller. This results in a multiple rightward shift in the AD curve,
where AD is rising at a decreasing rate. The overall rise is AD has resulted in a
multiple rise in real national income from Y0 to Y5, as shown in Figure 2 below.

Figure 2

6
Nanyang Junior College, Economics Department ©
2023 JC1 EOY Examinations
H2 Economics Suggested Answer

— This increases national income through the multiplier process, thereby

increasing actual growth in India.
— The increase in investment in 4IR technology and infrastructure also increases
productivity as production becomes more capital-intensive, thus increasing
India’s productive capacity, hence increasing its LRAS from AS0 to AS1,
increasing India’s potential growth from Yf0 to Yf1. In addition, Extract 2 para 5
states that the adoption of 4IR technology will lead to the creation of highly skilled
and highly productive labour force, hence increasing LRAS further.
— Therefore, the combined effect helps India to achieve sustained growth (Figure
3), supported by the positive real GDP growth data in Table 1.

Figure 3

— From Figure 3 above, the achievement of sustained growth has increased real
national income and output from Y0 to Y2, leading to an increase in the production
of more goods and services, increasing the demand for labour as labour is in
derived demand. Thus, this also allowed India to increase employment, as
growth has enabled India to develop its services sector (Extract 2 para 1),
creating job opportunities in this sector. 4IR technology has also led to creation
of jobs as manpower is need in manning and maintaining the 4IR machineries.

Body 2: Negative impact of 4IR

Transition:
Unfortunately, the benefits of 4IR are not spread out equally throughout the whole
economy. 4IR benefits industries that are developed in the use of 4IR technologies
and workers with the relevant skills required in the 4IR.
4IR leads to (structural) unemployment among low skilled workers
• Although 4IR leads to more job creation and has the potential to provide more
job opportunities, unfortunately it causes loss of jobs for the lower-skilled workers
as their jobs are easily taken over by automated robots. This leads to structural
unemployment as they are not able to find suitable jobs for their current skill level.
• Given India’s low literacy rate of 74.3 (Table 2), implying that India’s labour is
largely made up of low-skilled workers, the increase in structural unemployment
among the low skilled workers is likely to be greater than the increase in

7
Nanyang Junior College, Economics Department ©
2023 JC1 EOY Examinations
H2 Economics Suggested Answer

employment from the new job opportunities that arise from the 4IR. Hence 4IR
may not lead to significant fall in unemployment in India.
• The availability of 4IR technology can lead to foreign multinational firms moving
their production out of India as cheap unskilled labour are no longer required to
be cost efficient. This reduces the availability of job opportunities for the Indian
workers, especially the young workers who just entered the labour market,
leading to an atrophy of skills, and wastage of resources in the long run.

Evaluative Conclusion:
• In conclusion, India is unlikely to benefit overall from 4IR in the short run [Time
period].
• [State of economy/Constraints in the short run] This is because the reality is
that government spending on roads and other agricultural infrastructure
remained insufficient. Furthermore, there is a shortage of qualified teachers and
trainers and no proper infrastructure for vocational training, as seen in Extract 2.
Without the infrastructure and a ready workforce, the use of 4IR technologies
may not be successfully transferred to the manufacturing and agriculture sectors
in India, hindering their ability to enjoy the benefits that 4IR can bring.

OR
• 4IR may result in economic growth and increase in employment but the benefits
will likely be uneven. E-commerce markets driven by technology are likely to
experience the growth and increase in employment. But the agricultural sector
which lacks funds and capabilities to adopt the 4IR technologies are likely to lag
behind.

Level Description Mark

L2 • A clear and coherent answer that is relevant to the question 4 - 6
requirements and context of case study.
• Answer covers sufficient scope which include the following:
o Explain the positive macro impacts of the Fourth Industrial
Revolution on sustained growth and employment in India.
o Explain how negative impact of the Fourth Industrial
Revolution on employment in India.
o Max 4m if answer only covers positive impacts of the
Fourth Industrial Revolution on sustained growth and
employment in India.
• Answer is accurate and has sufficient depth:
o Detailed and accurate explanation of economic concepts.
o Economic analysis is applied to the context of the case
study and supported by accurately labelled and explained
diagrams (i.e. AD-AS framework) and contextual
evidence.
L1 • Question requirements are interpreted inaccurately. 1-3
• Explanation of economic concepts may be incomplete or
inaccurate, with limited application to the question.
• Lack of diagrams or diagrams are not accurately explained
or applied to support analysis. Limited use of contextual
evidence.

8
Nanyang Junior College, Economics Department ©
2023 JC1 EOY Examinations
H2 Economics Suggested Answer

E Two evaluative points that are explained or one evaluative point 2

that is well-developed.

One evaluative point that is explained. 1

(f) Discuss the effectiveness of the two approaches (Extract 3) adopted by the
Singapore government to achieve inclusive economic growth. [10]

Approach:
Command Discuss – 2-sided answer with evaluation
Content Approaches/Measures adopted by the government to achieve
inclusive growth
Context Singapore
Synopsis

Students are expected to explain the 2 measures adopted by the Singapore

government (outlined in the case study) to achieve inclusive economic growth
and evaluate the effectiveness of the measures.

Introduction:
Inclusive growth is sustained economic growth that takes income distribution into
consideration and does not contribute to worsening income inequality, hence
ensuring that economic growth benefits everyone in the country.
Singapore has adopted several supply-side policies involving partnerships between
firms and training of workers to take advantage of Industry 4.0. I will explain and
evaluate the effectiveness of these 2 approaches to achieve inclusive growth.

Body 1: Singapore’s first approach to achieve inclusive growth

Singapore’s approach 1: Government providing support and opportunities to
transform industries and encourage partnership between firms on related industries
(extract 3 para 2).
• Industry transformation stimulates investments → invest in capital goods →
increase I → increase AD
• Partnership will enable the firms to share resources, hence reducing their labour
crunch and operational costs → allowing them to be more competitive in the
global market → increase SRAS
• This also allows firms to increase efficiencies in production through tapping into
each other’s technology and sharing of resources in research and development
→ improve productivity → increase productive capacity → increase LRAS
• Hence such partnerships will lead to increase in investment in capital and
technology, increasing AD, and also lead lower production costs thereby
increasing SRAS and increase the economy’s productive capacity leading to
increase in LRAS. This will increase real national income from Y0 to Y1, and

9
Nanyang Junior College, Economics Department ©
2023 JC1 EOY Examinations
H2 Economics Suggested Answer

hence sustained growth, where there are both actual growth as well as potential
growth, shown in Figure 5 below.

Figure 5

• Link to inclusive growth

o Partnerships between firms can allow the lower-skilled industries to tap on
the more advanced technologies. Through partnerships, they will be able to
learn higher skills and level up, improving their skills, productivity and
eventually earning abilities. This will allow them to earn higher income and
thus this approach can help to reduce the income gap and achieve inclusive
economic growth.

Limitation
Partnerships between firms in related sectors and tapping on each others’
technological capabilities assumes that the technological transfers will be a smooth
process. However, Extract 4 para 1 states that there are various variables of digital
divide due to age, level of IT literacy, skills, access to internet, and other limitations.
For example, firms in hotel services and food services may have their own systems
and platforms (and some vendors may be less ready to embrace digital platforms),
which may bring about confusion and inconveniences to the end users, limiting the
effectiveness of the idea of sharing technology and resources.
OR
For the partnership between firms to be effective in achieving inclusive growth, there
is a need for there to be common objectives between the firms, i.e. increase profits
through the use of Industry 4.0, and a willingness to share technology with each
other. Otherwise, the partnership may lead to exploitation of the weaker firms by the
more tech-savvy firms, hence worsening the income gap between workers in the
different sectors.

10
Nanyang Junior College, Economics Department ©
2023 JC1 EOY Examinations
H2 Economics Suggested Answer

Body 2: Singapore’s second approach to achieve inclusive growth

Singapore’s approach 2: A multi-pronged training of all workers from all levels,
from top executives to the low-skilled workers, to ensure that everyone is trained in
various aspects of Industry 4.0 (extract 3 para 3).
• This will improve the productivity of workers at all levels, ensuring that every
worker has a role to play. increases productive capacity, shifting LRAS
rightwards. At the same time, the increase in productivity makes workers more
efficient, and reduces unit cost of production if the rate of increase in output
exceeds the rate of increase in wages due to higher productivity, increasing
SRAS and shifts it downwards. Overall, the AS increases from AS0 to AS1,
shown in Figure 6 below.

Figure 6

• This allows the economy to achieve economic growth as RNY increases from YF
to Y1.

• Link to inclusive growth

o Through training, it increases the workers’ employability, reducing structural
unemployment as more workers acquire the skills required in Industry 4.0.
This is all the more important for lower-skilled workers as they also tend to
be the ones with lower income. Thus, training helps them to be more
employable as their productivity increases and are able to enjoy higher
income growth, narrowing the country’s income gap, hence achieving
inclusive growth.

Limitation
However, there may be a mindset problem at both the employer and employee level,
as seen in Extract 4 paragraph 2. Employers do not necessarily see the need to
invest in upskilling their staff to have a competitive advantage, and thus may be
unwilling to send their workers for skills upgrading, rendering the multi-prong training
campaign ineffective. Even if they do send their workers to go for skills upgrading,
top executives may not see the need to upgrade their own skillset as they are already
comfortable with the way things are working as their current methods are “tried and
tested”. This implies that the growth of the companies (especially of small-and-
medium enterprises), may be limited if they are not convinced of the long-term
benefits of skills upgrading, and thus may not improve the distribution of income in
the country.

11
Nanyang Junior College, Economics Department ©
2023 JC1 EOY Examinations
H2 Economics Suggested Answer

Conclusion
In conclusion, the second approach of training will be more effective in achieving
inclusive growth for Singapore.
[Assumptions] Although sharing of technology is beneficial in the short run as firms
can tap on each other and see results quickly, it is assumed that firms are ready to
share their technology with each other. It may be difficult to get firms to trust others
to share their technology and industry secrets for fear of other firms copying and
then undercutting them.
[Constraints] Furthermore, constraints such as the costs of technology (e.g.
cybersecurity issues), weak intellectual property protection and infrastructure-
related issues mentioned in extract 4 para 3 may also limit the effectiveness of the
partnerships.
On the other hand, training is a more permanent solution as the new skills learnt will
make the workers more mobile in their skillset, allowing them to become more
marketable with a greater ability to find better paying jobs to earn higher income in
the long run, allowing Singapore to be better able to achieve inclusive economic
growth.

Level Description Mark

L2 • A clear and coherent answer that is relevant to the question 5-7
requirements and context of case study.
• Answer covers sufficient scope which include the following:
o Explain Singapore’s 1st approach in terms of government
providing support and opportunities for partnership between
firms on related industries in achieving inclusive growth, with
limitations.
o Explain Singapore’s 2nd approach of a multi-prong approach
training of all workers from all levels in achieving inclusive
growth, with limitations.
o Max 6m if answer links 1 approach to sustained growth and the
other to income distribution.
• Answer is accurate and has sufficient depth:
o Detailed and accurate explanation of economic concepts.
• Economic analysis is applied to the context of the case study and
supported by accurately labelled and explained diagrams (i.e. AD-
AS framework) and contextual evidence.
L1 • Question requirements are interpreted inaccurately. 1-4
• Explanation of economic concepts may be incomplete or
inaccurate, with limited application to the question.
• Lack of diagrams or diagrams are not accurately explained or
applied to support analysis. Limited use of contextual evidence.
E Two evaluative points that are well-explained with a clear, overall 3
relevant stand in the conclusion.

Two evaluative points that are explained or one evaluative point that is 2
well-developed.

One evaluative point that is explained. 1

12
Nanyang Junior College, Economics Department ©