SECTION A

1.Explain the factors which can cause a change in demand for a product.

Demand is the quantity of goods or services that a consumer is willing and able to purchase at a given price over a period of time. The change in demand for a product can be affected by several factors, and different factors can have an increasing or decreasing effect on it.

Changes in population can significantly impact demand. An increase in population often means a broadening of the consumer base, which may lead to a growth in the demand for a wide range of goods and services. For example, an increase in the population in an area commonly drives more demand for housing, food, and other essential goods. ( figure-1: illustrates Changes in demand under the influence of population)

Another key determinant factor is the price of substitutes. It will directly affect demand. When the price of a substitute product decreases, consumers may switch from the original product to the cheaper substitute, leading to a decrease in demand for the original product. Conversely, if the price of a substitute increases, it might lead to an increase in demand for the original product. Like tea and coffee. If the price of coffee increases, consumers might switch to tea, leading to an increase in demand for tea. ( figure-2：illustrates two different substitute cases, perfect substitutes and imperfect substitutes)

Moreover, the income levels are also related to the demand scale. When consumers' incomes increase, their purchasing power grows. They are willing to buy more of certain goods or services. For common goods, an increase in income leads to an increase in demand. In contrast, for inferior goods, consumers buy less as their incomes increase. For example, an income growing might tend to buy more advanced appliances while abandoning the use of cheaper cleaning supplies.（figure-3 : Shows the relationship between income level and inferior good A and common good B.)

These three factors are my explanation of the main influences on demand for a product.

2.Explain the factors which can determine the level of investment in an economy.

Investment refers to the spending on newly acquired fixed capital goods, ongoing projects, and increased stock levels within a period of time. Investments are further classified as autonomous and induced investments. Autonomous investments are less affected by external economic conditions, while induced investments are more affected by changes in the external environment and vary with short-term changes in economic conditions. Therefore, I will discuss more about the factors that determine induced investments.

For induced investment, GDP holds significant sway.A strong GDP means growing economic activity, increasing incomes and economic development. With the economy thrives, consumption usually surges,that prompting companies to invest more to cater the escalating demand. Imagine a country whose GDP continues to grow as productivity increases and businesses grow. People's incomes gradually increase and their expenditures rise naturally. The increase in spending drives demand for products, prompting companies to increase investments to expanding production capacity or introducing new products.

Additionally, the price level (inflation/deflation) is also an important factor affecting induced investment. Inflation and deflation affect the purchase of capital goods as they change the expected profitability of any given project. High inflation may reduce the expected return on investment, thus discouraging firms from investing. Conversely, in times of deflation, the expectation of increased profitability may encourage more investment.（figure-4 : inflation and deflation)

Last but not least, a discussion of Autonomous Investment remains necessary. Technological innovation is one of the most important factors affecting Autonomous Investment, and technological development cannot be achieved overnight but requires constant investment by firms. Therefore Autonomous investment is particularly important in this regard. For example, a company may invest autonomously in technological innovation to ensure that it remains competitive in the marketplace and is not subject to short-term interest rates or revenue fluctuations.

SECTION B

3.To what extent is a sharp depreciation of its exchange rate always beneficial for an economy?

Currency devaluation has both positive and negative effects on countries’ economies. Currency devaluation refers to a decline in the value of a country's currency relative to other currencies. A devaluation can enhance the competition ability of a country's exports, but it can also make the price of imported goods increasing. This change has far-reaching effects on the country's economy, not only affecting the domestic market but also involving international trade.

The positive aspect of currency devaluation is that it can enhance a country's export competitiveness. As a country's currency depreciates, the country's exports become relatively less expensive in the international market, thereby stimulating foreign demand for its products and services, which in turn boosts the country's export business. Thus, an increase in foreign demand can enhance the country's economic activity and have a positive impact on the trade surplus. For instance, China has a huge manufacturing base with tens of thousands of factories producing countless products. China's domestic market demand has plummeted in the post-epidemic era and the domestic economy is facing difficulties. At this time, the depreciation of the RMB has boosted the export of Chinese-made products, giving impetus to China's economic recovery. （figure-5 : Shows the relationship between export and currency depreciatation.)

However, currency depreciation may also have a number of negative effects. Firstly, the imported goods price increase may cause domestic inflation. With the devaluation of the currency, the prices of the country's imported goods will rise again, especially for essential items that are not domestically self-sufficient. This will significantly affect the costs for consumers and businesses, limiting their spending power and productive capacity, and affecting the overall economic environment. For example, Japan is highly dependent on imports of daily necessities such as clothing, home appliances, and smartphones, the depreciation of the yen in recent years has increased the cost of daily living for Japanese households, putting pressure on their livelihoods.（figure-6 : Shows the relationship between the price of import products and currency depreciatation.)

In addition, currency devaluation also has a negative impact on countrys' financial stability and debt. If a country has a large amount of debt denominated in foreign currencies, currency depreciation will increase both the cost of servicing the debt and the country's fiscal burden. It will put the country in a debt trap, increasing the instability of national financial systems.

In conclusion, although currency devaluation can promote exports and international competitiveness in some cases, it also hurts the domestic economy. Therefore, I believe that the disadvantages of devaluation outweigh the advantages to most non-export-oriented countries.

4. Evaluate the reasons for and against a government using protectionist policies to correct a balance of payments deficit.

Trade protectionism is a policy stance, it aims to reducing the impact of foreign product imports on domestic industries by restricting or raising the cost of imports to protect domestic industries. There are several forms of these policies, such as tariffs, quota restrictions, subsidies to domestic industries. Those policies have been heated debating on the international platform. Someone argue that this police are very helpful to correct balance-of-payments deficits, while others insist that it’s upsides is more than downsides.

Protectionist policies are seen as a means of dealing with balance-of-payments deficits. By raising the prices of imported goods, governments can reduce their import expenditures, which may help to reduce the trade deficit. In addition, the support for domestic industries can bring more opportunities to their production and employment, increasing GDP and contributing to economic growth. These policies also play a key role in the protection of the country's core industries and ensure that domestic productivity capacity is maintained in crisis times. In the case of the United States, the Government has taken a series of measures to protect and support the development of the country's automobile manufacturing industry. In the 1980s, the United States published a law, that aimed to impose more tariffs on automobiles imported from Japan. At the same time, the government provided subsidies and trade support to its own automobile manufacturers and adopted policies to encourage United States automobile manufacturers to return to their home countries to build factories. To a certain extent, these policies have helped the United States to preserve the automotive industry and reduce import dependence in this sector, enhancing the resilience of the United States industry to cope with external crises.  （figure-7: Demonstrate the extent to which U.S. tariff policy affects the bilateral trade balance. Reveals the ripple effects of inter-country trade policy adjustments on cross-country economic relations and global supply chains.)

However, protectionist policies are also accompanied with several negative effects. First, the imposition of tariffs or restrictions on imports may lead to higher prices for imported goods, and it will infringement of consumer interests. High import taxes may reduce consumers' purchasing power and limit their consumption choices. Second, protectionist policies are easily trigger trade wars, making global trade instability. In addition, protectionist policies also violate international trade rules and agreements, undermining a country's standing and credibility in the international arena. Again using the US as an example, while the US imposed tariffs on Japanese cars, Japan retaliated by imposing tariffs on goods imported from the US as a response to the US behavior, resulting in trade friction intensifying. On the other hand, the restriction on Japanese cars has caused American consumers to lose the right to choose economical Japanese cars and have to pay more money to buy other cars.

All in all, in the short term, these policies may bring benefits to domestic industries and employment, but in the long term, they may not only lead to instability in global trade and tensions in international relations, damaging the country's trade credibility, but also damaging the rights of domestic consumers. Therefore, I believe that the policy of trade protectionism is a policy that does more harm rather than good. This position of restricting and distorting free trade by hindering imports through tariffs, quota restrictions, and other means is contrary to the concept of free trade.