Economics 9708/21 — October/November 2023
Cambridge AS Level · AS Level Data Response and Essays · worked solutions for every part, with the mark scheme
Topics International Trade and Comparative Advantage · Price Stability · Economic Growth · Exchange Rates · Demand and Supply · Price Elasticity of Supply · +6 more
Economic growth in Taiwan
In 2021, Taiwan’s economy is forecast to grow at its fastest rate in seven years, encouraged by increasing global demand for its technology products. Gross domestic product (GDP) is expected to rise by 4.6% in 2021.
Exports from Taiwan’s electronics industry include gaming devices, laptops, devices that aid cloud computing and semiconductors for car production. Taiwan is able to take advantage of a global shortage of semiconductors and it is estimated that exports will grow by 9.6% in 2021, the strongest export growth since 2017. A Taiwanese company is the world’s largest producer of semiconductors, and it plans to increase its capital investment by as much as US$28 billion in 2021 to help meet the shortage of semiconductors.
Consumption expenditure in Taiwan is also expected to grow by 3.7% in 2021 which would be the fastest rate of growth in 17 years.
It is significant that the expected growth in GDP in 2021 is higher than the expected rate of increase in the consumer price index (CPI), as is shown in Table 1.1.
Table 1.1 Selected economic data for Taiwan, 2021
| Previous forecast (November 2020) | Latest forecast (February 2021) | |
|---|---|---|
| Nominal GDP growth (% per year) | 3.8 | 4.6 |
| CPI increase (% per year) | 1.2 | 1.3 |
| Export sales growth (% per year) | 4.6 | 9.6 |
| Trade balance (US$ billion) | 57.8 | 63.9 |
The growth in the demand for Taiwan’s exports has contributed to an appreciation of more than 7% in the Taiwan dollar against the US dollar during 2020. Taiwan had a trade surplus of US$58.8 billion in 2020 and this is expected to rise to US$63.9 billion in 2021. This increase is likely to appreciate the value of the Taiwan dollar further.
Sources: Adapted from: Forbes magazine, 22 February 2021 and: Bloomberg, 20 February 2021
Using the data in Table 1.1, calculate the expected growth in Taiwan’s real GDP in 2021, based on the latest forecast.
State two internal causes of economic growth for Taiwan in 2021 and consider which of these is more likely to generate long-term economic growth.
Explain why the Taiwan dollar appreciated in 2020.
Assess whether the effects of the appreciation of the Taiwan dollar on the terms of trade will benefit all industries in Taiwan.
Assess the possible consequences of a higher rate of economic growth for an economy such as Taiwan.
The rest of this paper
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- Q5Protectionism · International Trade and Comparative Advantage20M