The KY-asu Economist July 2021 Issue

KYUEM ECONOMICS CLUB

The KY-asu Economist

JULY 2021 ISSUE Sunday |01.08. 2021

fun trivia segment + Vintage A Levels question from the 80s !!

"Diversity in the Economics Profession"

by Hasya Atiyah

A review of an event in the past- Asian Financial Crisis 1997

Summary of July's Key Economic Events Food Prices Are Skyrocketing Food prices have been on the rise recently. In May 2021, food prices were 39.7% higher than they were in May 2020......

Malaysia E-Belia The ministry of finance Malaysia has allocated RM300 million to help 2 million Malaysians by giving them e-wallet credit of RM150 ("Program eBelia", 2021). The credit can be claimed using the following e-wallets: BigPay, Boost, ShopeePay, and Touch `n Go e-Wallet....

Moratorium In Malaysia Moratorium is a temporary hold on monthly installments such as car loans, mortgages, and debts. From the perspective of a borrower, the moratorium is supposed to aid them during ...

CONTACT: INSTA: @KYECONOMICSCLUB EMAIL:KYUEMECONSCLUB@GMAIL.COM Editor Credit : Yi Wen

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Keeping up with the Economics : A highlight of 3 key economic events of the month

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FOOD PRICES ARE SKYROCKETING

BY YAANN TAN

Food prices have been on the rise recently. In May 2021, food prices were 39.7% higher than they were in May 2020. Global food prices have risen to their highest point since September 2011 (Pflughoeft, 2021), as calculated by the FAO Food Index.

Amongst the commodities with rising price tags are vegetable oils, sugars, cereals, dairy products and meat.

One of the contributing factors to this spike is rising demand as economies recover from Covid-19 lockdown periods. Moreover, bad weather has cut back supply, which pushes up prices. Currently, Brazil is facing the worst drought in at least 90 years (Pflughoeft, 2021), which has reduced coffee and corn crops.

A third reason is slow production growth of palm oils in Southeast Asia. This unfortunately coincides with current high demand for biodiesel (Reuters, 2021). If more land is allocated towards biodiesel production, this reduces the land available for other crops needed for consumption. Reduced supply of these crops and higher prices is the outcome. Hence, we can see how efforts to fight climate change and adopt more environment-friendly resources such as biofuel are contributing to the current inflation trend.

REFERENCES Al Jazeera. (2021, June 3). Global food prices surge again, stoking inflation fears. Business and Economy News | Al Jazeera. https://www.aljazeera.com/economy/2021/6/3/global-food-prices-surgeagain-stoking-inflation-fears Bogmans, C., Pescatori, A., & Prifti, E. (2021, June 24). Four Facts about Soaring Consumer Food Prices. IMF Blog. https://blogs.imf.org/2021/06/24/four-facts-about-soaring-consumerfood-prices/ Guebert, A. C. D. T. (2021, May 17). Farm and Food File: China’s buying binge continues. . . until it doesn’t. Columbia Daily Tribune. https://eu.columbiatribune.com/story/opinion/columns/2021/05/17/farm -and-food-file-chinas-buying-binge-continues-untildoesnt/5057355001/ Pflughoeft, A. (2021, June 4). Why are food prices so high? Food prices reach highest point in a decade. Deseret News. https://www.deseret.com/2021/6/3/22516132/why-global-food-pricessurged-to-highest-point-in-a-decade Reuters. (2021, June 3). World food price index surges in May to highest level since 2011 -FAO. https://www.reuters.com/world/china/world-food-price-index-surgesmay-highest-level-since-2011-fao-2021-06-03/

Inflation: a general rise in prices in an economy, meaning each unit of currency buys fewer goods and services (decline in purchasing power) Net capital outflows: the net flow of funds being invested abroad by a country during a certain period of time. A positive NCO means that the country invests outside more than the world invests in it.

FAO food index: a measure of the monthly change in international prices of a basket of commonly-traded food commodities (vegetable oil, sugar, cereal, etc)

To make matters worse, China is buying massive quantities of food imports - China imports 25% of its total crop consumption (Guebert, 2021). Especially keen on foreign grain, China is depleting global grain stockpiles. (Al Jazeera, 2021) Again, this shortage has boosted prices.

The damage of soaring food prices is most harshly felt in import-reliant countries and developing economies.

They are more vulnerable because they spend a larger proportion of their income on food. Additionally, their foreign currencies are depreciating against the US dollar due to weak tourism and export revenues accompanied by net capital outflows. Imports of food into these countries are hence pricier seeing as most food products are traded in US dollars (Bogmans et al., 2021).

It is to be noted that the current pandemic exacerbates the risk of escalating food prices. Current problems such as unemployment and poverty make expensive food even more devastating.

The upward trend in food prices may be reversed if this summer sees good weather in Europe and North America. This could make up for crop shortages in other parts of the world. (Al Jazeera, 2021)

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KEY ECONOMIC EVENT 2

MALAYSIA EBELIA

By Angeline Tan

The eBelia programme aims to relieve the financial burden and promote cashless spending for Malaysian citizens who meet to following criteria.

1. Who have attained the age of 18 to 20 years old in 2021 (born in year 2001 to 2003); OR 2. Who are full-time students enrolled in courses equivalent to diploma or SKM4 and above in a public or private institution of higher learning in Malaysia recognised by the ministries ("Program eBelia", 2021) .

The prime minister hopes this initiative will encourage SMEs to allow cashless payments. Last year, 60% of the government’s collection was done via e-payment (Anis, 2021).

A short survey was also done among 37 Kolej Yayasan UEM students to understand further the impacts of eBelia. It was discovered that 56.8% consider themselves to be regular eWallet users.

The ministry of finance Malaysia has allocated RM300 million to help 2 million Malaysians by giving them e-wallet credit of RM150 ("Program eBelia", 2021). The credit can be claimed using the following e-wallets: BigPay, Boost, ShopeePay, and Touch `n Go e-Wallet.

However, many users have trouble redeeming the credit because of the high traffic. More than 1 in 5 of KYUEM students faced difficulties during their redemption. Hence, it is clear that the technical infrastructure of Malaysia has to be improved as we enter a more cashless society.

Of what the students mostly spend it on, 84.4% of spending was spent on online payments. The highest spending was on personal and household care using online payment which was 43.2% of total spending. This emphasizes that Malaysia is approaching a more digital economy.

Anis, M. (2021). e-wallet credit increases to RM150 under eBelia Programme. The Star. Retrieved 30 June 2021, from https://www.thestar.com.my/news/nation/2021/06/01/e-wallet-creditincreases-to-rm150-under-ebelia-programme.

Program eBelia. Belanjawan2021.treasury.gov.my. (2021). Retrieved 30 June 2021, from http://belanjawan2021.treasury.gov.my/manfaat/index.php/bm/ebelia.

Yeoh, A. (2021). eBelia: Credit redemption difficulties due to high traffic on e-wallet platforms. The Star. Retrieved 30 June 2021, from https://www.thestar.com.my/tech/tech-news/2021/06/01/ebeliacredit-redemption-difficulties-due-to-high-traffic-on-e-walletplatforms.

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[3] MORATORIUM IN MALAYSIA

BY ABIRRAMI

A moratorium is a temporary hold on monthly installments such as car loans, mortgages, and debts. From the perspective of a borrower, the moratorium is supposed to aid them during a period of financial constraints.

Considering the situation in Malaysia, the country has been hard hit by the pandemic with multiple amounts of Lockdowns such as the MCO, CMCO, and EMCO. Many businesses have lost a form of revenue due to their inability to operate. Furthermore, individuals have been retrenched, with many enduring pay cuts. According to statistics published in March of 2021, under MCO 3.0 it has been estimated that 500,000 SMEs will face closure (The Malaysian Reserve, 2021).

As part of the RM150 billion Pemulih Aid Package announced by the Prime minister on the 29th of June 2021. ‘Pemulih’ translating to ‘restore’ was presented with the aim of providing assistance to mainly individuals and businesses. Under the Package it was announced that an automatic six-month moratorium will be available for individual borrowers (B40, M40 and T20), microenterprises, and SMEs (Bank Negara Malaysia, n.d.).

However, the implementation of the moratorium has also brought dissatisfaction amongst many people in the community. One common argument against the moratorium is that it may go against its purpose of alleviating financial trouble as the interest rates continue to be maintained. Therefore, many individuals and businesses are requesting “zero interest loans repayment moratoriums” for the remaining period of the year until the projected reopening of the economy at the end of the year (Ibrahim, 2021) Previously, prior to the announcement of the Pemulih Package, Finance Minister, Datuk Seri Tengku Zafrul said that “at least 80% of borrowers in Malaysia could continue repaying their loans” (Lim, 2021). Therefore, there was no point in a moratorium as there were other alternative relief aids. Business owners, on the other hand, are still insisting that the banks do act much more generously in allowing the moratorium, especially since banks have managed to gain from the pandemic. For example, it has been reported that Public Bank’s net profit for the first quarter of 2021 had an increase of 15.1% (The Edge Malaysia, 2021).

Overall, the need for a moratorium is imperative especially for those who do not possess the availability of spare funds. On that account, the banks should consider waiving the existing interest rates.

references: Bank Negara Malaysia. (n.d.). Loan Repayment Assistance - Bank Negara Malaysia. Retrieved July 12, 2021, from https://www.bnm.gov.my/RA

Ibrahim, J. (2021, June 11). Business groups ask gov’t for blanket zero interest loan moratorium due to pandemic. The Star. https://www.thestar.com.my/news/nation/2021/0 6/11/business-groups-ask-gov039t-for-blanketzero-interest-loan-moratorium-due-to-pandemic Lim, I. (2021, June 5). ‘Just because we can, doesn’t mean we should’: Finance minister justifies banks not giving blanket moratorium during MCO 3.0.

Malaysia | Malay Mail. https://www.malaymail.com/news/malaysia/2021 /06/05/just-because-we-can-doesnt-mean-weshould-finance-minister-justifies-banks/1979774 The Edge Malaysia. (2021, June 1). Banking sector still a buy despite worsening Covid-19 situation.

The Edge Markets. https://www.theedgemarkets.com/article/bankin g-sector-still-buy-despite-worsening-covid19situation

The Malaysian Reserve. (2021, June 8). 50,000 SMEs face closure under MCO. https://themalaysianreserve.com/2021/06/08/500 00-smes-face-closure-under-mco-3-0/

EDITORIAL Featured students Diversity in the Economics Profession Lack of Representation: A Long-standing Problem in Economics The field of economics is indeed cut-throat, especially towards those who don’t fit into its dominant mould of being male and white. Relative to other disciplines, the economics profession records the lowest level of female participation[1]. Academic papers written by female economists are also disproportionately subjected to greater scrutiny and are held to a higher standard than that of males[2]. Not only do they face hostile work environments[3] and patronizing seminar culture[4], female economists also receive lower pay than their male counterparts[5] and are less likely to get their works published in academic journals[6].

HASYA ATIYAH As readers comeBY to terms with what you’ve shared, it’s always Why Is It Important great to reward them with a little extra something. Add in different sections for a variety of lighter The inclusion of diverse perspectives in economics is fundamental information, such as a music to form sound collective judgements and thus, generate and better movies section or a gadget policy outcomes for society. A 2008 study by AEA reveals section. Put in bite-sized notes on substantial differences in the the latest policy releases views of or male female do and reviews. economists pertaining to issues such as minimum wage, labour standards and health insurance[9]. Women are also found to be more cognizant of gender disparities in the labour market than men. This stands to reason that diverse perspectives are crucial in economic analysis as it helps us identify epistemic blind spots and opposing viewpoints, leading to a more accurate examination of economic policies. It also compels us to critically analyse arguments both for and against a given proposition— a process that would mitigate the overpowering influence of personal prejudices and selective biases in policymaking[10]. By designing strategies that integrate crucial insights from all members of society, governments would be able to take more nuanced approaches to economic challenges.

Make sure to have photos that match your stories well too.

These disparities manifest profoundly along racial and ethnic lines too. Results from a survey conducted by the American Economics Association (AEA) in winter 2018-2019 revealed that 28% of minority respondents reported having personally been discriminated against or treated unfairly on the basis of race or ethnicity during their experience in the field[7]. Minority representation in economics was also lower than that of STEM subjects across all degree levels (17.3% overall compared to 19.5% in STEM)[8]. Clearly, more needs to be done to address diversity shortfalls in this arena.

It is important to recognize how the field of economics is closely intertwined with societal frameworks. Whether it be in relation to governments, banks, corporates, NGOs, or even individuals, the broad and interdisciplinary nature of the field means that the spillover effects from having diverse perspectives within it would be far-reaching. With that being said, it is ever more crucial that we ensure underrepresented voices within the field are acknowledged and amplified— not just to improve group dynamics within the discipline, but to benefit society as a whole, too.

“An economist will choose a topic that interests them individually. If you have a lack of women and other minorities, it leads to a discipline that doesn’t cover the range of topics it might cover, had there been a greater diversity of people in the field. That’s a clear loss for science and the profession.”

- Hélène Rey, Professor of Economics at London Business School[11]

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Secondly, diversity in economics increases the opportunity for novel research endeavours. Having people from all walks of life within the profession helps us to shed light on complex societal challenges more accurately, including more obscure ones commonly experienced by minorities.

This has the potential of stirring discussions on critical subject areas that would otherwise go unnoticed. Moreover, a review of 2.5 million research papers across the sciences also found that those written by ethnically diverse research teams received more citations and had a greater impact than papers by authors of the same ethnicity[12]. Evidently, diversity brings important issues to the forefront, and prevents minorities from falling through the cracks by allowing economists to identify systemic loopholes and research gaps.

Last but not least, diverse perspectives in economics enriches the discipline. Research has found that ethnically diverse groups prevent homogeneity of thought and thus, are more innovative[13]. These environments also give rise to creative ideas and fresh problem-solving techniques[14].

Furthermore, as economic issues become increasingly complex, monolithic approaches are simply insufficient to address socioeconomic intricacies. Having representatives from different backgrounds is essential to create policies that are sufficiently sensitive to the diverse lived experiences of affected communities.

References : 1. Bayer, Amanda, and Cecilia Elena Rouse. 2016.

"Diversity in the Economics Profession: A New Attack on an Old Problem." Journal of Economic Perspectives, 30 (4): 221-42.

As readers come to terms with 2. Hengel, E. (2016).

“Publishing while female: Gender what you’ve shared, it’s always differences in peer review scrutiny.” great to reward them with a little http://www.erinhengel.com/research/publishing_fema extra something. Add in different le.pdf sections for a variety of lighter 3. Wu, Alice. 12/2020. “Gender Bias in Rumors information, such as a music and Among Professionals: Identity-based movies sectionAn or a gadget Interpretation.” Review Economics and notes Statistics, section.of Put in bite-sized on 102, 5, Pp. 867-880. the latest releases or do reviews.

4. Dupas, Pascaline; Sasser Modestino, Alicia; Niederle, Muriel; Wolfers, Justin. "Gender and the Dynamics of Economics Seminars 5. The LSE Equity, Diversity and Inclusion Taskforce.

September 2016. “The Gender and Ethnicity Earnings Gap at LSE.” 6. David Card, Stefano DellaVigna, Patricia Funk, Nagore Iriberri, Are Referees and Editors in Economics Gender Neutral?, The Quarterly Journal of Economics, Volume 135, Issue 1, February 2020, Pages 269–327 7. American Economic Association. "Committee on Equity, Diversity and Professional Conduct (Sam Allgood, Lee Badgett, Amanda Bayer, Marianne Bertrand, Sandra E. Black, Nick Bloom and Lisa D. Cook)." AEA Professional Climate Survey: Final Report 15.

8. Hoover, Gary A., and Ebonya Washington. "Report: Committee on the Status of Minority Groups in the Economics Profession (CSMGEP)." AEA Papers and Proceedings. Vol. 111. 2021.

9. May, Ann Mari, Mary G. McGarvey, and Robert Whaples. 2014. “Are Disagreements among Male and Female Economists Marginal at Best?: A Survey of AEA Members and Their Views on Economics and Economic Policy.” Contemporary Economic Policy 32(1) 10. Mercier, H., & Sperber, D. (2011). Why do humans reason? Arguments for an argumentative theory.

Behavioral and brain sciences, 34(2), 57-74.

Little, Jenny. 2020. Diversity in economics: quality, not just equality.

London Business School. https://www.london.edu/think/diversity-ineconomics-quality-not-just-equality.

12. Richard B. Freeman and Wei Huang, "Collaborating with People Like Me: Ethnic Coauthorship within the United States." Journal of Labor Economics, 33(S1), pp 289-318 13. How Diversity Can Drive Innovation. Harvard Business Review.

(2014, August 1). https://hbr.org/2013/12/how-diversity-can-driveinnovation.

14. Friedman, Hershey H., Linda W. Friedman, and Chaya Leverton. "Increase diversity to boost creativity and enhance problem solving."

Psychosociological Issues in Human Resource Management 4.2 (2016): 7.

Featured students

Make sure to have photos that match your stories well too.

Make sure to have photos that match your stories well too.

Make sure to have photos that

Economics as a field has the potential of attracting a remarkable array of skills and talent. However, if diversity is pursued as a token gesture rather than a genuine welcome of new perspectives, initiatives would prove futile in generating the changes that we seek. Diverse talents should be tapped into, not ignored and underutilized. We need to further cultivate inclusive group dynamics that allow economists to feel more included, valued, and heard. It is undeniable that economists play a crucial role in correcting economic disparities and building inclusive systems for society. But in order to effectively carry this responsibility, we must first look within.

match your stories well too.

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Blast from the Past :

Recounting a significant event that occurred in the past in this same month

24 years ago, on the 2nd of July in 1997 The Asian Financial Crisis began in Thailand. In the years prior, the East Asian economies also known as the ‘tiger economies’ were on a trajectory of growth. The rapid growth left the East Asian economies in a highly vulnerable state. Indonesia, Thailand, and South Korea had the greatest impact while other countries such as Singapore, Malaysia, and the Philippines were less severely affected. The following article will outline the causes and effects and the recovery process.

ASIAN FINANCIAL CRISIS 1997

BY ABIRRAMI

Causes

Effects

To this day, the origin of the crisis is still highly argued amongst economists. The most common consensus analyses the events leading up to the crisis. East Asian economies were achieving mass economic development and growth stemming from an increase in exports and foreign direct investments (FDI). To continue the inflow of money, higher interest rates were set to attract hot money and a fixed exchange rate pegged to the USD was imposed.

The USD symbolized security and stability for many ASEAN countries.

The effects did not only have a devastating impact on Asian countries but also created a shock in Eastern Europe and Latin America. Within Asia, the event exposed the result of weak macroeconomic policies. The problems can be branched into economic, political, and social issues.

What had first started as a result of exchange rates soon led to vulnerability in the financial system. According to ASEAN, Indonesia was forced to close 16 banks while Thailand closed 54. GDP’S were also severely dropping by double digits with the worst impact on the Indonesian Rupiah by 80% (Setboonsarng, 1998)

At this period, the United States was recovering from the 1990 recession. Following the monetary policy approach, the Federal Reserve Board of the US increased interest rates which in return attracted an inflow of money into the economy. The increase in interest rates generated an appreciation in the USD, which consequently influenced the currencies pegged to the USD. This hurt the competitiveness of export trade. Prices were higher and consumers were searching for other alternatives.

This event was a huge shock to investors and businesses who started to withdraw assets and capital invested into the East Asian economies. The sudden shock of outflow had immense pressure on the exchange rates. With the currencies still pegged to the standard of the USD, foreign reserves were slowly drying up to maintain the fixed exchange rate. Bound to happen to the others, the Thai Baht was the first currency to fall by a reported 38% (Investopedia, 2021). As a result, the government imposed a floating exchange rate. This left the nation in an extremely fragile situation causing a downward spiral of events.

The event also unfolded major political turmoil especially in South Korea, Thailand, and Malaysia. The crisis caused the resignation of reigning Prime ministers in both South Korea and Thailand and the introduction of a new government. While in Malaysia, political turbulence was caused by a divide in opinions within the ruling dominant party.

Socially, unemployment increased in every east Asian economy with South Korea having the largest chunk of 4.5% (Chul, n.d.). Standard of living decreased, especially harshly affecting people on the poorer part of the spectrum.

Many countries approached a reduction in fiscal spending to improve their current account deficits at the cost of pivotal imports such as medical supplies which were far more expensive and scarce. The first signs of recovery in many of these affected economies only started showing by 1999.

Recovery The International Monetary Fund (IMF) had a huge part in aiding the recovery process. A US 35 billion loan from the IMF was given for bailout purposes including 85 billion USD loans from multilateral and bilateral sources (IMF Staff, 2000). Although, it's important to note that some countries refused the assistance to protect their economic sovereignty. In addition, countries had to alter their macroeconomic policies. A contractionary fiscal policy by increasing taxes and reducing fiscal spending, a tighter monetary policy by increasing interest rates, and also undergoing the privatization of industries.

That being said, there are plenty of lessons that we can gain from this anfair. ASEAN economies are very much interconnected, a crisis in one country will sooner or later have a spillover effect in the other. The Asian Financial Crisis also clearly highlights the vulnerability of economic growth. Although it brings about benefits to the economy, growth at an uncontrolled rate can backfire. The Asian Financial Crisis goes down in the books as a lesson for financial crisis prevention and policy coordination.

references: Ping, L., & Yean, T. (2007). Malaysia Ten Years After the Asian Financial Crisis. Asian Survey, 47(6), 915-929. doi:10.1525/as.2007.47.6.915 Chul, J. K. (n.d.). Labor markets in East Asia during crisis: Developments and policy implications?

(Analytical Reports No. 67879; p. 2). World Bank. https://documents1.worldbank.org/curated/en/51571 1468245426038/pdf/678790BRI00PUB067903B0EYE0on0E A0no2.pdf Corporate Finance Institute. (2020, April 13). Asian Financial Crisis. https://corporatefinanceinstitute.com/resources/kn owledge/finance/asian-financial-crisis/

IMF Staff. (2000, June). Recovery from the Asian Crisis and the Role of the IMF -- An IMF Issues Brief.

International Monetary Fund. https://www.imf.org/external/np/exr/ib/2000/0623 00.htm#IV Setboonsarng, S. (1998). Asean Economic Co‑operation: Adjusting to the Crisis. Southeast Asian Affairs 1998, 1998(1), 18–36. https://doi.org/10.1355/seaa98b THE INVESTOPEDIA TEAM. (2021, April 29). Asian Financial Crisis Definition.

Investopedia. https://www.investopedia.com/terms/a/asianfinancial-crisis.asp UNCTAD, & Y.A. (2000, February). CAUSES AND SOURCES OF THE ASIAN FINANCIAL CRISIS. UNCTAD. https://unctad.org/system/files/officialdocument/ux_hi_akyuz.en.pdf

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KY-asu Economist Approved : THIS MONTH’S THEME: THE BASIC GUIDE TO BEGIN THIS NEW ACADEMIC YEAR

by Angeline Tan

THE FINAN C IAL TIMES [NEWSPAPER ]

What It Is? The Financial Times (FT) is one of the world’s leading news organisations, recognised internationally for its authority, integrity and accuracy.

(Taken from: https://aboutus.ft.com) Why I recommend?

Tthere is something for everyone, whether you are interested in technology, economy or climate. Furthermore, there is a section where you can read about expert’s opinions on current issues.

What It Is? The Undercover Economist is a fresh explanation of the fundamental principles of the modern economy, illuminated by examples from the booming skyscrapers of Shanghai to the sleepy canals of Bruges.

(Taken from: https://timharford.com/books/undercovereconomist/) Why I recommend?

Reading this book gave me a more holistic view of what is economics all about. It touches on things that will be learned in A-level Economics (ie free trade, price discrimination, imperfect information, etc).

THE E C ONOMIST RADIO [POD C AST ]

THE UNDER C OVER E C ONOMIST [BOOK ]

What It Is? A podcast by the economist which provides sound reasoning on current affairs, business and finance, science and technology, and global issues.

(Taken from: https://www.economist.com/podcasts) Why I recommend?

Podcasts are a great way to staying updated on key economics. The narrator is clear and easy to understand. Moreover, they regularly post new episodes!

What It Is? Oxplore is an engaging digital resource from the University of Oxford. As the ‘Home of Big Questions’, it aims to challenge those from 11 to 18 years with debates and ideas that go beyond what is covered in the classroom. ( Taken from: https://oxplore.org/about ) Why I recommend?

The bright colour and pretty graphics make it very fun and accessible to use. Oxplore is suited for any subject and is a great tool to use if you are unsure what you want to study in the future.

OXPLORE [WEBSITE ] 91

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by Yaann Tan

EconLingo : An economic jargon explained ASYMMETRIC INFORMATION,

ADVERSE

SELECTION MORAL

&

HAZARD

Asymmetric information is when one party has more information about a good or service than another in an economic exchange.

Example: A doctor knows a lot more about a patient’s medical condition than the patient themselves.

BY YAANN TAN F FU UN N QFUAI C ZT ES

&

MCQ QSUEECSTTI IOONN! !

A VINTAGE 80S A-LEVELS QUESTION 1. The demand for illegal addictive drugs remains constant for some time in a country. Which of the following would an economist regard as the best indicator of the success of a campaign to restrict rhe supply of addictive driugs?

Asymmetric information allows for greater productivity through specialisation.

Example: A doctor has asymmetric information in the example above because of years of medical training. It would not be sensible for the patient to also specialise in medicine, as the patient could be specialising in another field of knowledge (e.g. engineering).

A) an increase in the quantity of drugs seized by the customs and excise service B) an increase in medical expenditure on rehabilitating addicts C) an increase in expenditure on the enforcement campaign D) a sharp rise in the street price of addictive drugs

Adverse selection is when the better-informed party uses asymmetric information to take advantage of another party before the exchange/agreement has taken place.

Example: In the second-hand car market, a seller may know about a vehicle’s defect but does not disclose the issue, thus charging the buyer more than they should.

2. The country with the largest income per person (as measured by GDP per capita) is: A) Singapore B) Luxembourg C) Norway D) United States

Moral hazard occurs when a change in behaviour of one party is exposed after a deal has been made between two parties with asymmetric information. This party has failed to act in good faith because it knows the other party bears the economic consequences of their behavior.

Example: James claims auto (car) insurance after stating that he parks his car in a secure garage at night. After claiming insurance, he changes behaviour and parks his car on the road. It is the insurance company, not James, that will bear the economic consequence of the greater risk of car theft or vandalism.

REFERENCES: INOMICS. (2020, APRIL 1). ASYMMETRIC INFORMATION, ADVERSE SELECTION & MORAL HAZARD | ECONOMICS DEFINITIONS [VIDEO]. YOUTUBE. HTTPS://WWW.YOUTUBE.COM/WATCH?V=39QHA4QCOEC HAYES, A. (2021, JANUARY 19). ADVERSE SELECTION. INVESTOPEDIA. HTTPS://WWW.INVESTOPEDIA.COM/TERMS/A/ADVERSESELECTION.ASP

TRIVIA

3. What is the International Poverty Line? (i.e. the threshold below which a person is considered in poverty) A) $0.50 a day B) $1.90 a day C) $3.00 a day D) $5.00 a day 4. What is Malaysia’s current minimum wage per month, as of July 2021?

A) $800 B) $1000 C) $1200 D) $2000

C B B D

.4 .3 .2 .1