Question 1 "Britain in recession for first time in 20 years...", Straits Times, 24 Jan 09.

a) Discuss the main characteristics of an economic recession? (5 marks)

b) Discuss and elaborate on the monetary policy that the British Government may pursue to bring the recession to an end.

Question 2

a) Draw a supply curve and explain the law of supply in a perfectly competitive market. (4 marks)

b) Explain with graphical illustration how the following factors will lead to a change in the supply of cigarettes assuming that this is a perfectly competitive industry. Discuss the impact of the event on the equilibrium price and quantity of cigarettes.

i) An advancement in the technology for producing cigarettes. (4 marks)

ii) Increase in the price of relevant resources for the production of cigarettes. (4 marks)

iii) Producers expect the price of cigarettes to fall by 50% next month. (4 marks)

iv) The government imposes new excise tax on cigarette production. (4 marks)