HKCEE Economics Multiple Choices CONTENTS SECTION 1 THE BASIC ECONOMIC PROBLEMS 1.1 Scarcity P.1.2 1.2 Choice and opportunity cost P.3-7 1.3 Goods P.8-13 1.4 The three basic economic problems P.14-17 SECTION 2 DEMAND SUPPLY AND PRICE ELASTICITY 2.1 Demand and supply P.18-35 2.2 Price elasticity of demand and supply P.36-40 SECTION 3 MARKET INTERVENTION 3.1 Price ceiling P.41 3.2 Price floor P.42-43 3.3 Quota P.44-45 3.4 Unit tax P.46-50 3.5 Unit subsidy P.51-53 SECTION 4 PRODUCTION 4.1 Types of production P.54-56 4.2 Division of labour P.57-58 4.3 Factors of production P.59-72 4.4 Short run and long run P.73-78 SECTION 5 FIRMS AND BUSINESS OWNERSHIP 5.1 Definition of a firm P.79 5.2 Types of private enterprise P.80-84 5.3 Comparing different types of private enterprise P.85-90 5.4 Methods of raising capital and different types of shareholders P.91-94 5.5 Public enterprise P.95 SECTION 6 GOWTH OF FIRMS 6.1 Types of integration P.96-97 6.2 Motives of integration P.98-100 SECTION 7 MARKET STRUCTURE 7.1 Market and competition P.101-102 7.2 Types of market structure P.103-106
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HKCEE Economics Multiple Choices
CONTENTS
SECTION 1 THE BASIC ECONOMIC PROBLEMS
1.1 Scarcity P.1.2
1.2 Choice and opportunity cost P.3-7
1.3 Goods P.8-13
1.4 The three basic economic problems P.14-17
SECTION 2 DEMAND SUPPLY AND PRICE ELASTICITY
2.1 Demand and supply P.18-35
2.2 Price elasticity of demand and supply P.36-40
SECTION 3 MARKET INTERVENTION
3.1 Price ceiling P.41
3.2 Price floor P.42-43
3.3 Quota P.44-45
3.4 Unit tax P.46-50
3.5 Unit subsidy P.51-53
SECTION 4 PRODUCTION
4.1 Types of production P.54-56
4.2 Division of labour P.57-58
4.3 Factors of production P.59-72
4.4 Short run and long run P.73-78
SECTION 5 FIRMS AND BUSINESS OWNERSHIP
5.1 Definition of a firm P.79
5.2 Types of private enterprise P.80-84
5.3 Comparing different types of private
enterprise P.85-90
5.4 Methods of raising capital and different
types of shareholders P.91-94
5.5 Public enterprise P.95
SECTION 6 GOWTH OF FIRMS
6.1 Types of integration P.96-97
6.2 Motives of integration P.98-100
SECTION 7 MARKET STRUCTURE
7.1 Market and competition P.101-102
7.2 Types of market structure P.103-106
SECTION 8 NATIONAL INCOME
8.1 Circular flow of income P.107-109
8.2 GDP - Production (Value-added) approach P.110-112
8.3 GDP – Expenditure approach P.113-115
8.4 Income approach P.116
8.5 Whether an item is included in GDP P.117-120
8.6 GNP P.121-123
8.7 GDP at factor cost P.124-126
8.8 GDP at current and constant market prices P.127-129
8.9 Factors affecting GDP P.130-131
8.10 Limitations of GDP statistics P.132
SECTION 9 BUSINESS CYCLE, UNEMPLOYMENT AND
CHANGES IN THE GENERAL PRICE LEVEL
9.1 Business cycle P.133-136
9.2 Unemployment P.137-141
9.3 Changes in the general price level P.142-150
SECTION 10 MONEY AND BANKING
10.1 Nature and functions of money P.151-156
10.2 Three-tier banking system P.157-158
10.3 Functions of central bank P.159-160
10.4 Money supply P.161-166
10.5 Deposit creation P.167-174
10.6 Classification of financial market P.175
SECTION 11 PUBLIC FINANCE
11.1 Type and nature of tax P.176-177
11.2 Principles of taxation P.178-179
11.3 Classification of tax system P.180-189
11.4 Economic effect on taxation P.190-197
11.5 Public expenditure P.198
11.6 Public expenditure as a proportion of GDP P.199
11.7 Fiscal policy P.200-202
SECTION 12 INTERNATIONAL TRADE
12.1 Absolute and comparative advantage P.203-211
12.2 Terms of trade P.212-213
12.3 Balance of Payments P.214-226
12.4 Protectionism P.227-230
12.5 Exchange rate P.231-234
12.6 Hong Kong’s international trade and
its financial centre P.235
Multiple-Choices Answers (By Topics) P.236-242
Multiple-Choices Answers (By Years) P.243
1
1. 1991/II/1
Owing to the problem of scarcity in a society, we have to
(1) impose price controls.
(2) make choices.
(3) adopt a planned economic system.
(4) compete against one another.
A. (1) and (3) only B. (1) and (4) only C. (2) and (3) only D. (2) and (4) only
2. 1991/II/55
Scarcity of commodity X will NOT occur when
A. there is a great supply of it. B. nobody wants it.
C. it is free of charge. D. only one person wants it.
3. 1992/II/1
A scarce resource has the following characteristic
A. its supply is fixed B. it is difficult to find
C. it is in great demand D. it has a price on the market
4. 1994/II/1
Even though Japan is one of the richest economies in the world, it still has to face the problem of scarcity.
This statement is
A. false, because scarcity only exists in developing countries.
B. false, because Japan has a high gross national product (GNP).
C. true, because what the Japanese have cannot satisfy all their wants.
D. true, because Japan’s income is unevenly distributed.
5. 1995/II/1
It was reported that many people queued for two days in order to get the monthly parking ticket for certain
car park. This phenomenon implies
(1) scarcity in parking spaces.
(2) the existence of competition.
(3) shortage of parking spaces.
A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. (1), (2) and (3)
HKCEE ECONOMICS | 1.1 Scarcity | P.1
2
6. 1995/II/2
Scarcity exists
A. because there is more than one person in the world.
B. if at least one person’s wants are not fully satisfied.
C. because resources are not evenly distributed.
D. if the market price is kept below the equilibrium level
7. 1997/II/1
Which of the following statements about scarcity is true?
A. Once a choice is made, the problem of scarcity is solved
B. A good is scarce if not everyone has it
C. Scarcity means unlimited human wants
D. Both rich and poor people face the problem of scarcity
8. 1999/II/1
The existence of scarcity implies that
A. the economy is planned economy.
B. there is competition for the good.
C. effective price control is imposed on that good.
D. wealth is not evenly distributed.
9. 2004/II/1
The existence of scarcity implies that
A. resources will be allocated by the price mechanism.
B. all markets are perfectly competitive.
C. the quantity supplied of all goods is fixed.
D. people need to pay for what they want.
10. 2005/II/1
The existence of scarcity implies that
A. there is no such thing as free goods
B. human wants are unlimited
C. each and every economic good has a positive money price
D. there is a cost in obtaining some goods
HKCEE ECONOMICS | 1.1 Scarcity | P.2
3
1. 1990/II/1
Tommy was asked to choose one birthday present from the following three things: a model spaceship, a
walkman and a jacket. He liked the model spaceship the most and the walkman second. What would be his
opportunity cost if he chose the model spaceship?
A. A walkman B. A walkman and a jacket
C. The price of a model spaceship D. No opportunity cost since it was a present
2. 1991/II/2
Susan is choosing between two jobs: being a teacher and being a singer. If she chooses to be a singer, her
opportunity cost will include
A. the income from being a teacher B. the income from being a singer
C. the tuition fee she paid for her training as a teacher D. the tuition fee she paid for her training as a singer
3. 1992/II/3
Which of the following are opportunity costs of attending school?
(1) school fee
(2) income forgone
(3) poor examination results
(4) expenditure on dinners
A. (1) and (2) B. (1) and (3) C. (2) and (4) D. (3) and (4)
4. 1993/II/2
Mr. Wong could spend two hours at a concert or tutoring a student at $60 per hour. He could use the time on
painting instead and earn a total of $150. If the price of the concert ticket is $300, what is his opportunity
cost of his choice of going to the concert?
A. $150 B. $300 C. $420 D. $450
5. 1994/II/2
In a lottery, Peter wins a transferable air ticket to Japan. Which of the following statements is correct?
A. The ticket is a free good
B. Peter will not lose anything if he loses his ticket
C. The opportunity cost to Peter of using the ticket is zero
D. The opportunity cost to Peter of using the ticket increase if the price of the ticket increases
6. 1994/II/3
Mr. Lee own a photographic studio. Previously he received $30000 per month by letting it out. He now
does not let it, but instead he uses the premises for his own business. He also employs a model at $10000
per month. What is Mr. Lee’s opportunity cost of using the studio by itself?
A. $10000 per month B. $20000 per month C. $30000 per month D. $40000 per month
HKCEE ECONOMICS | 1.2 Choice and opportunity cost | P.1
4
7. 1995/II/5
Fanny can choose among three different jobs. Her choice of preference is as follows:
First priority : being a teacher at School X
Second priority : being a secretary in Company Y
Third priority : being a sales representative in Firm Z
Assuming her choice of preference remains unchanged, which of the following will increase her opportunity
cost of being a teacher in School X?
A. The students in School X are becoming more naughty
B. Company Y requires its secretaries to work longer hours
C. Company Y decides to increase the salaries of its secretaries
D. Firm Z decides to increase the bonuses for its sale representative
8. 1996/II/1
John live in his own apartment which is worth $1million. He can sell the apartment and put the money in a
bank at an interest rate of 5% per year. He can also rent out the apartment at $5000 per month. What is the
opportunity cost to John if he decides to live in the apartment?
A. $1 million
B. $5000 a year
C. $5000 a month
D. There is no opportunity cost because he lives in his own apartment
Answer Question 9 and 10 by referring to the following information:
Max Department Store has launched a promotion campaign. For every purchase of $1000, customers are
given a coupon to exchange for the following gifts:
9. 1997/II/2
John has accumulated 30 coupons. What is the opportunity cost to John if he uses them to exchange for one
air ticket?
A. a TV set B. $30000 C. a camera and a TV set D. a camera, a TV set and $30000
10. 1997/II/3
Later, John finds that he has to queue up to exchange his coupons for gifts. The queue show that
A. these gifts are truly free of charge
B. there is a shortage of gifts for all customers
C. the promotion campaign is successfully and there is an increase in the demand for the company’s products
D. customers has an extra cost to obtain the gifts
Number of coupon Gifts
10 20 30
1 camera 1 TV set 1 air ticket
HKCEE ECONOMICS | 1.2 Choice and opportunity cost | P.2
5
11. 1997/II/49
Before the sale of a big residential estate, many elderly people queued up outside the site office for potential
buyers. This implies that
A. the value of the flats to these elderly people was higher than to younger people
B. the price of the flats was above the equilibrium level because there was a shortage
C. the opportunity cost of the queuing time of theses elderly people was lower than that of the potential buyers
D. the opportunity cost of the queuing time of theses elderly people was zero because they did not have a job
12. 1998/II/50
May is considering accepting one of the following job offers:
(1) a clerk in an import-export firm
(2) a salesgirl in a department store
Which of the following changes will NOT affect her opportunity cost of choosing to work as a clerk?
A. The import-export firm increases its staff’s welfare
B. The department store offers a higher salary
C. There is a third offer paying a higher salary than the original two offers
D. The department store announces that their business will terminate one year later
13. 1998/II/54
Which of the following about choice is INCORRECT?
A. People have to choose in order to avoid competition B. People have to choose if there is scarcity
C. People choose to option with the least cost D. People choose the most preferred option
14. 1999/II/50
Peter invites Jason to play tennis in afternoon. Jason will NOT have opportunity cost if
A. Peter pays the fee for him B. He has nothing more worthwhile to do in the afternoon
C. He likes to play tennis with Peter D. None of the above is a correct answer
15. 2000/II/2
Chan and Wong take a journey to City X separately. They can go there either by plane or by train. The plane
takes 2 hours while the train takes 10 hours. The air ticket costs $1000 while the train fare is $200. During the
journey to City X, the foregone earning of Chan is $200 per hour and that of Wong is $80 per hour.
For the journey to City X, Chan would take the ___________and Wong would take the ______________
A. train ... train B. train ... plane C. plane ... train D. plane ... plane
16. 2000/II/53
Which of the following is NOT an opportunity cost of constructing Disneyland in Hong Kong ?
A. the alternative use of the site B. the amount of capital invested
C. the pollution created by the construction work D. the entrance fee of Disneyland
HKCEE ECONOMICS | 1.2 Choice and opportunity cost | P.3
6
17. 2001/II/1
Which of the following will change the cost to an individual of attending a concert?
A. He is an hour late for the concert due to traffic congestion.
B. His view is blocked by the audience in front of him.
C. The singer performs badly.
D. The concert overruns by an hour.
18. 2002/II/3
Mr Lee lives in his own house. He bears an opportunity cost from living in that house because
(1) he could earn rental income from letting the house to others.
(2) he has to pay property tax to the government.
(3) he has paid a sum of money to buy the house.
A. (1) only B. (1) and (2) only C. (1) and (3) only D. (2) and (3) only
19. 2002/II/4
Which of the following would affect the cost of constructing the West Rail ?
A. an increase in the damage to the natural environment along the railway caused by the construction
B. an increase in the wages of the maintenance staff for the operation of the train service
C. a decrease in the profit from providing the train service
D. a decrease in the revenue of the bus company operating a bus service along the railway
20. 2003/II/2
Peter is an F.5 graduate who could not get a study place in F.6. Which of the following may lower the cost of
repeating F.5 for Peter?
A. The tuition fee for studying F.5 increases B. The tuition fee for studying F.6 decreases
C. The wage rate for F.5 graduates decreases D. Peter’s new F.5 English teacher teaches badly
21. 2003/II/3
Medical doctors seldom change their occupation. Which of the following can explain this phenomenon?
A. They have spent much time and effort in getting their professional license
B. They have incurred high costs in accumulating the skills and knowledge required for the profession
C. For medical doctors, changing occupation has a high cost.
D. Being medical doctors has a high cost.
HKCEE ECONOMICS | 1.2 Choice and opportunity cost | P.4
7
22. 2004/II/2
Which of the following statements about the concept of opportunity cost is correct?
A. Opportunity cost still exists even when there are no choices.
B. Opportunity cost does not exist in a planned economy.
C. When the value of an option decreases, the opportunity cost of choosing that option does not change.
D. When the value of the highest-valued option increases, the opportunity cost of choosing that option will
decrease.
23. 2004/II/13
When the Real Madrid football team visited Hong Kong, many people queued up for days for the tickets to
watch the game. Some people complained that they were unable to buy a ticket even they were willing to
pay the official ticket price. This implies that
(1) there was only price competition for the ticket.
(2) the official ticket price was set below the market clearing level.
(3) the opportunity cost of obtaining a ticket was higher that its official selling price.
A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. (1), (2) and (3)
24. 2005/II/3
David is choosing between two ways of spending his summer vacation : to take a summer job or join an
exchange programme of the United Kingdom. Which of the following will increase his opportunity cost of
taking the summer job?
A. The fee for the exchange programme increases B. The summer job pays a higher salary
C. A valuable course is added to the exchange programme D. Less training for the summer job is provided
25. 2007/II/2
A resident of Mainland China is choosing between a tour to HK and a tour to Macau organized by a travel agent.
His opportunity cost of choosing to visit HK will increase if
A. the food provided during his trip in HK is poorer than expected
B. he is abandoned on the streets in HK by the tour guide
C. newly developed tourist attractions in Macau make it more enjoyable to visit Macau
D. the rental of the hotel accommodation in Macau increases
26. 2008/II/2
Which of the following would raise the cost of drug abuse?
A. The price of drugs increases
B. The government imposes heavier punishment on drug abuse
C. Drug abuse causes greater damage to one’s health
D. All of the above are correct
HKCEE ECONOMICS | 1.2 Choice and opportunity cost | P.5
8
1. 1990/II/2
A free good is a good which
A. nobody wants. B. is provided by the government free of charge.
C. is not scarce. D. is plentiful in supply.
2. 1990/II/25
Which of the following statements is correct?
A. Scarcity exists only in poor countries.
B. If there were plenty of rainwater in Hong Kong, the cost of the domestic water supply would be zero.
C. The 9 years free education provided by the Hong Kong government is a scarce good.
D. Economics is concerned with how free goods are distributed.
3. 1991/II/3
Which of the following are economic goods?
(1) social welfare provided by the government
(2) gifts from parents
(3) flowers in a garden
A. (1) and (2) only B. (1) and (2) only C. (2) and (3) only D. (1),(2) and (3)
4. 1992/II/2
To society, used aluminium Coca-Cola cans are __________ because __________
A. free goods; nobody wants them B. free goods; there are plenty of them
C. economic goods; they have alternative uses D. economic goods; they were produced from scarce resource
5. 1992/II/6
Air-conditioners used in restaurants can be classified as
(1) capital goods
(2) consumer goods
(3) scarce goods
A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. (1), (2) and (3)
6. 1993/II/1
A broken machine
A. has no use value B. is not an economic good
C. can be allocated by means of price D. cannot be used for further production
HKCEE ECONOMICS | 1.3 Goods | P.1
9
7. 1993/II/16
In Nathan Road one day, samples of new brand of shampoo were given away free to passers-by. Within an
hour, all available samples were gone. These free samples are _________ because _________.
A. free goods; they are free of charge
B. free goods; they are used for advertising proposes
C. economic goods; the passers-by want them
D. economic goods; they are limited in supply relative to people’s wants
8. 1993/II/56
Which of the following statements about wealth is FALSE?
A. A person’s wealth is his total earnings over a period of time
B. Retired people’s experience is part of society’s wealth
C. A person’s wealth will increase if he spends less than his income
D. Saving deposits yield interest
9. 1995/II/3
To society, used paper for recycling is _________ because ________.
A. a free good, it is free of charge B. a free good, it has no alternative uses
C. an economic good, more than one people want it D. an economic good, people prefer to have more of it
10. 1995/II/14
Electric fans installed in classrooms are classified as
(1) consumer goods.
(2) capital goods.
(3) economic goods.
A. (1) only B. (2) only C. (1) and (3) only D. (2) and (3) only
11. 1996/II/2
A department store reduced the price of its television sets but there was still unsold stock. These television
sets are
A. free goods because the quantity supplied is greater than the quantity demanded.
B. consumer goods because they are sold at a department store.
C. capital goods because they are man-made.
D. economic goods because people have to pay a price for them.
12. 1996/II/55
Which of the following is NOT true about a free good?
A. Nobody wants to have more of it. B. Its price is zero.
C. It is unlimited in supply. D. It has use value.
HKCEE ECONOMICS | 1.3 Goods | P.2
10
Hotel ABC
Free buffet Dinner Buy two buffet dinners and get one free!
(From Monday to Thursday) $200 for one person $400 for two person plus a friend
13. 1997/II/12
The free buffet dinner is
A. a free good because the quantity supplied is greater than the quantity demanded
B. a free good because it is free of charge
C. an economic good because more of the food is preferred to less of it
D. an economic good because non-price competition is involved
14. 1998/II/1
If a good is scarce,
A. only a small quantity is available. B. its price will increase.
C. its quantity supplied is smaller than its quantity demanded at all prices. D. more of it is preferred.
15. 1998/II/2
Which of the following statements about goods are correct?
(1) Free goods are free of charge. (2) Natural resources are free goods.
(3) Inputs are economic goods. (4) Outputs are economic goods.
A. (1) and (2) B. (1) and (4) C. (2) and (3) D. (3) and (4)
16. 1999/II/2
Jenny won a cooking competition and was awarded a famous brand microwave oven. This microwave oven is
A. a free good because Jenny does not need to pay for it.
B. a consumer good because it is a prize in the competition.
C. an economic good because other competitors want to have it.
D. a capital good because it has a market value.
17. 1999/II/5
In which of the following pairs does the demand for the first good create a derived demand for the second?
A. digital versatile disc (DVD) and laser disc (LD) player B. wool and mutton
C. hardback book and printing paper D. electricity and light bulb
18. 1999/II/10
Which of the following are capital goods of a school?
(1) teacher’s knowledge of economics (2) notes taken by the students (3) watch-dogs
A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. (1), (2) and (3)
HKCEE ECONOMICS | 1.3 Goods | P.3
11
19. 2000/II/1
Good X is a ‘free good’ when
A. there is no opportunity cost involved in using it.
B. its quantity supplied is greater than what consumers are willing to purchase in the market.
C. nobody wants more of it.
D. its supply is so abundant that consumers place no value on it.
20. 2001/II/47
Which of the following is NOT classified as “economic good”?
A. a company’s stock whose price has been falling for two months
B. the votes for the candidates in a Legislative Council election
C. stray and homeless dogs in the streets
D. used paper collected for recycling
21. 2002/II/1
In which of the following situations would ice in the North Pole be regarded as a free good?
A. The ice is a gift of nature.
B. More of the ice is not preferred.
C. The price of the ice is zero.
D. The quantity demanded of ice is smaller than the quantity supplied at a price greater than zero.
22. 2002/II/2
Nowadays, many people download their favourite songs and pictures through the Internet without paying any fee.
To society, these songs and pictures are
A. free goods because there are plenty of songs and pictures on the Internet.
B. free goods because their original owners have not received any payments.
C. economic goods because the cost involved in using the Internet is negligible.
D. economic goods because there are cost involved in producing these songs and pictures.
23. 2003/II/1
In some poor countries in Africa, people do not have enough food and have to eat rats. They have to dig into the
ground in order to find these rats. The rats in the above case are
A. not an economic good because rats are harmful to people
B. an economic good because more of them is preferred
C. a free good because there is no cost of producing rats
D. an economic good because rats can satisfy human wants.
HKCEE ECONOMICS | 1.3 Goods | P.4
12
24. 2004/II/3
Good X is an economic good if
A. more than one person needs it. B. more of it is preferred.
C. it can satisfy human wants. D. it is limited in supply.
25. 2005/II/2
Upon successful application for a credit card from a bank, Miss Chan obtains a digital versatile disc (DVD)
players as a free gift. Theses free gifts are
A. free goods, because successful applicants like Miss Chan have no cost to pay.
B. free goods, because the quantity supplied is larger than the quantity demanded
C. economic goods, because more of these gifts are preferred to less
D. economic goods, because the quantity available is limited
26. 2006/II/2
Answer questions 26 and 27 by referring to the following observation :
Every July of the Lunar calendar, many charity organizations distribute packs of rice to people free of charge.
Those who spend a lot of time queuing up for this rice are mostly elderly people.
In the above case, the elderly rather than the young people would spend time queuing up for these packs of
charity rice because
A. it is a tradition to queue for this rice.
B. the elderly prefer rice to other kinds of food.
C. the elderly are poorer than the young people.
D. the elderly value their best choice of other activities less than that of the young people.
27. 2006/II/3
The charity rice are economic goods because
A. the quantity of this rice is limited B. rice can satisfy people’s wants
C. the wants for this rice are unlimited D. people want more of this rice
28. 2007/II/1
A good is a free good if
A. it is not rare or it can be found easily
B. there is enough of its available free of charge for everyone who wants it
C. there is enough of its available for everybody who pays the market price for it
D. no one owns it
HKCEE ECONOMICS | 1.3 Goods | P.5
13
29. 2007/II/12
Flour is a _______ when __________
A. capital good … it is used by Mrs Chan to make a cake for her daughter’s birthday
B. consumer good … it is for sale in the market
C. capital good … it is used in cooking program shown on the television
D. consumer good … it is packed for delivery to customers
30. 2008/II/1
From the viewpoint of society,
A. people will not compete for free goods.
B. money price is the only criterion of competition for scarce goods
C. resources with alternative uses are scarce
D. there is no scarcity in barter economy
HKCEE ECONOMICS | 1.3 Goods | P.6
14
1. 1990/II/3
Basic economic problems in a market economy are mainly solved by
A. the government B. the price mechanism C. the entrepreneurs D. the consumers
2. 1992/II/5
In a market economy, the allocation of goods and services among consumers is basically determined by
A. the preference of the government B. the preference of sellers
C. the controlled prices D. the price mechanism
3. 1993/II/50
When a centrally-planned economy has changed and become a market economy,
A. its government will make most economic decisions
B. its income distribution will be more even
C. private ownership of resources should have already been established
D. more shortages of goods and services will occur
4. 1994/II/4
In the New Territories, an indigenous female resident cannot inherit her father’s property if her father dies
without leaving a will. This is an example of
resource allocation by
A. government rationing B. market mechanism C. violence D. social custom
5. 1994/II/5
Hong Kong is considered to be market economy because
(1) it has a high per capita real gross domestic product (GDP)
(2) price is used as a means to allocate resources in Hong Kong
(3) it has a system of low taxes
(4) most of its resources are privately owned
A. (1) and (2) only B. (1) and (3) only C. (2) and (4) only D. (3) and (4) only
6. 1995/II/20
The Housing Authority is considering whether it should raise the income limits of families for the application
of public housing. What basic economic problem(s) is/are involved in this consideration?
A. What to produce?
B. How to produce?
C. For whom to produce?
D. What and for whom to produce?
HKCEE ECONOMICS | 1.4 Three basic economic problems | P.1
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7. 1996/II/3
Hong Kong can be described as a capitalist economy because
A. all problems of resource allocation are solved by the prize mechanism.
B. income is unevenly distributed.
C. not all the public utilities are owned by the government.
D. most resources are privately-owned.
8. 1997/II/4
Which of the following statements about market economy is correct?
A. There is no non-price competition
B. Competition is perfect throughout the economy
C. The pattern of production reflects the preference of consumers
D. All resources are privately owned and controlled
9. 1998/II/3
As compared to a market economy, a planned economy
A. has a less even income distribution. B. must have a lower inflation rate.
C. must have a lower unemployment rate. D. has a smaller proportion of privately-owned resources.
10. 1999/II/3
In a market-oriented economy,
A. the living standard is higher than in a command economy.
B. the unemployment rate is lower than in a command economy.
C. resources are mostly allocated according to price signals.
D. all infrastructure is privately owned.
.
11. 2000/II/4
Which of the following markets in Hong Kong rely heavily on price mechanism to solve the three basic economic
problems?
(1) medical service (2) education
(3) bank loans (4) electrical appliances
A. (1) and (2) only B. (1) and (4) only C. (2) and (3) only D. (3) and (4) only
12. 2001/II/2
Which of the following statements about a market economy is correct?
A. All markets in the economy are perfectly competitive.
B. Most resources in the economy are owned and controlled by individuals and private firms.
C. Income is less evenly distributed in a market economy than in a command economy.
D. The unemployment rate is higher in a market economy than in a command economy.
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13. 2002/II/5
Which of the following are major determinants of the allocation of goods and services in a market economy?
(1) the planning of government
(2) the costs of production
(3) the demand of consumers
(4) the controlled prices
A. (1) and (3) only B. (1) and (4) only C. (2) and (3) only D. (2) and (4) only
14. 2003/II/4
An economy is considered as a market economy when
A. the profit tax rate is low
B. prices are used to allocate resources
C. there is competition in all industries
D. there are no restrictions on the entry and exit of firms to all markets
15. 2004/II/4
Compared to a command economy, a market-oriented economy has
A. a less even income distribution. B. keener competition for goods and services.
C. more production guided by price signals. D. no problem of scarcity
16. 2005/II/8
Which of the following statements is a correct description of a market-oriented economy?
A. Most resources are privately owned
B. All economic problems are solved by the price mechanism
C. Income is less evenly distributed than in a command economy
D. There is no non-price competition
17. 2006/II/1
Since the opening of Hong Kong Disneyland, some people have suggested a reduction of the ticket price. This
suggestion is related to the ____________ question(s) in Economics.
A. ‘what to produce’ B. ‘how to produce’
C. ‘for whom to produce’ D. ‘what, how and for whom to produce’
18. 2006/II/4
In a market economy, which of the following are guided by price signals?
(1) resources allocation
(2) production decisions
(3) consumption decisions
A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. (1), (2) and (3)
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19. 2007/II/3
Compared to a planned economy, a market economy must
A. have a larger income gap between the rich and the poor
B. have higher inflationary pressure
C. have a higher unemployment rate
D. have a higher proportion of resources directed by the price mechanism
20. 2008/II/3
An economy is considered as market-oriented when
A. most of the markets are perfectly competitive
B. most of the resources are allocated by the price mechanism
C. most of the goods are economic goods
D. most of the public utilities are privately owned
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1. 1990/II/5
Suppose there is a good harvest of apples this year. Under which of the following conditions will apple growers
earn more income?
A. They sell more apples. B. The demand for apples is elastic.
C. The supply of apples is inelastic. D. The government fixes a minimum price on apples.
2. 1990/II/15
Which of the following will cause the demand curve if ice cream to shift from D1 to D2?
A. The cost of production of ice cream decreases. B. More and more children enjoy drinking soft drinks.
C. The price of ice cream decreases. D. Children are given more pocket money.
3. 1990/II/17
Which of the following will cause a fall in the equilibrium price of petroleum in a country?
A. The country imposes a quota on the imported oil.
B. The cost of exploration for oil increases substantially.
C. The country undergoes rapid industrialization.
D. A cheap substitute for oil has been discovered.
4. 1990/II/26
After the launching of an advertising campaign, both the price and the quantity sold of a product increase.
Which of the following statements can explain this?
A. The demand for the product is inelastic. B. The supply of the product is elastic.
C. The demand for the product increases. D. The supply of the product decreases.
5. 1990/II/43
Suppose that the Japanese yen appreciates against the Hong Kong dollar and the Italian lira depreciates against
the Hong Kong dollar. The demand for Italian cars in Hong Kong will
A. increase.
B. decrease.
C. remain unchanged because there is only a change in the quantity demanded.
D. either increase depending on the extent of price changes.
D1 D2
Unit price
Quantity 0
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6. 1991/II/12
The above diagram shows the market for apples. E0 is the original equilibrium point.
If there is an increase in the population and a good harvest of apples, the new equilibrium point will be
A. E1 B. E2 C. E3 D. E4.
7. 1991/II/23
When demand increases, which of the following would cause a greater rise in price?
A. There is a large unsold stock of the good. B. It is easy to enter the industry.
C. The factors of production have a low mobility. D. There is excess capacity in production.
8. 1991/II/24
Which of the following may cause the market demand for housing in Hong Kong to increase?
A. There is an influx of immigrants. B. The interest rate has increased.
C. More housing estates are built by the government. D. The selling price of flats has decreased.
9. 1991/II/25
Recently a ban has been imposed stopping Hong Kong from exporting ivory products. Which of the following
graphs illustrates the immediate effects on the quantity of ivory products locally sold?
10. 1991/II/57
Which of the following would NOT lead to an increase in the total revenue from the sale of a product?
A. an increase in its demand B. an increase in its selling price
C. a decrease in its demand D. a decrease in its selling price
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11. 1991/II/58
Suppose the government raises the first registration tax on newly-imported cars by $10 000. Which of the
following is FALSE?
A. The market price of all newly-imported cars will increase by $10 000.
B. The market price of second-hand cars will increase.
C. The tax burden can be shifted to the consumers.
D. The number of cars newly imported will decrease.
12. 1992/II/21
The increase in the demand for container transportations will lead to an increase in demand for container trunk
drivers. This is an example of
A. competitive demand B. joint demand C. derived demand D. excess demand
13. 1992/II/22
Which of the following factors will cause a decrease in the demand for imported private cars?
(1) The Organization of Petroleum Exporting Countries restricts the producing of oil
(2) An extension of the MTR to Kennedy Town is built
(3) The price of imported private cars increase
A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. (1),(2) and (3)
14. 1992/II/23
A large stock of corn is piling up because of a good harvest. Which of the following diagrams can explain this
phenomenon?
15. 1992/II/42
The Housing Authority has offered to sell rental flats in public housing to the present tenants. However, not many
tenants have expressed a desire to but the flats they are living in. Which of the following would make the tenants
more willing to buy the flats?
A. increasing the supply of flats in the private sector
B. increasing the rents of public housing units
C. increasing the interest rates on home mortgage loan
D. increasing the quantity of Home Ownership Scheme flats allocated to tenants
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16. 1993/II/18
In 1992, the lending ceiling on home mortgage in Hong Kong was reduced from 90% to 70% of the value of the
property. This resulted in _________ residential property.
A. a decrease in the demand for B. a decrease in the quantity demanded of
C. an increase in the supply of D. an increase in the quantity supplied of
17. 1993/II/20
From 1990 to 1991, even though the price of private flats increased rapidly, more flats were sold than in the
previous year. Which of the following reasons can explain this?
A. The demand for private flats did not obey the law of demand
B. The demand for private flats was inelastic
C. There was an increase in the supply of public housing
D. There was a change in the demand for private flats
18. 1993/II/57
The price of textbooks in Hong Kong has greatly increased in recent years.
Which of the following is NOT a possible reason for this?
A. more frequent revisions of textbooks B. more publishers publishing textbooks
C. increasing wages and rents D. the photocopying of textbooks becoming more costly
19. 1994/II/6
In Hong Kong, the number of taxi licenses is controlled by the government. In a certain year, it was found that
the price of taxi licenses increase after the government issued more taxi licenses. Which of the following diagram
illustrates the above situation?
A. B. C. D.
20. 1994/II/7
If the price of movie tickets increase and the rental of laser discs falls, then the equilibrium price of laser disc
players
A. will remain unchanged B. will increase C. will decrease D. may increase or decrease
HKCEE ECONOMICS | 2.1 Demand and Supply | P.4
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21. 1994/II/58
Which of the following situations will NOT lead to an increase in demand for private cars?
A. The price of private cars decrease sharply. B. More people live in the remote areas in the New Territories.
C. The fares for public transport increase. D. The government abolishes the gasoline tax.
22. 1995/II/6
This method of sales promotion can be explained by
A. the law of supply. B. economies of scale.
C. the law of demand. D. the principle of comparative advantage.
23. 1995/II/8
If the market price of a good is equal to its equilibrium price,
(1) the sellers can sell all the quantity that they are willing to supply at that price.
(2) there is no pressure for the price to change.
(3) the sales revenue is maximized.
(4) consumers’ want of the good is fully satisfied.
A. (1) and (2) only B. (1) and (4) only C. (2) and (3) only D. (3) and (4) only
24. 1995/II/9
The flats under the Home-Ownership Scheme are allocated by a draw. This implies that
A. the Housing Authority has under-estimated the demand for this type of housing.
B. a draw is the fairest method in allocating resources.
C. the price of this type of housing is below its cost.
D. the price of this type of housing is below the equilibrium prices.
25. 1995/II/12
In the above figure, the market price of good X is fixed by the government at P’. If the demand increases from D
to D’,
(1) the excess demand will be greater.
(2) the quantity transacted will not change.
(3) the sales revenue will increase when the demand is elastic.
A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. (1), (2) and (3)
Lane Crawford
50% discount on all items !
HKCEE ECONOMICS | 2.1 Demand and Supply | P.5
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26. 1996/II/4
The supply of secondary school teachers will increase if
A. the government provides a subsidy for schools to employ more language teaches.
B. the government increases the salary of teachers.
C. the number of children eligible for secondary education increase.
D. the number of job vacancies in the business field decreases.
27. 1996/II/6
Suppose the price of compact discs decreases. The prices of compact disc players will __________and the
demand for cassette tapes will ___________.
A. rise … increase B. rise … decrease C. fall … increase D. fall … decrease
28. 1996/II/56
An increase in the supply of leather which is used in the production of shoes will have the following effects
EXCEPT
A. an increase in the demand for shoes. B. an increase in the supply of shoes.
C. an increase in the quantity demanded of leather. D. an increase in the quantity demanded of shoes.
29. 1997/II/5
When the mad cow disease broke out in 1996, many cows were destroyed. Which of the following diagrams
best describes the effects on the beef market?
30. 1997/II/6
The MTRC encourages the adoption of a flexi-time-office-hours scheme to reduce the overcrowding of
passengers during the rush hours. Hence, passengers using the Nathan Road Route before 8:00 am and between
9:00 am and 9:30 am will have a discount on their MTR fares. Which of the following diagrams could be a
result of such a measure of the MTRC?
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31. 1997/II/7
Suppose the government raised the water charge in January 1997.What would be the result?
A. a decrease in the demand for water
B. a decrease in average household water consumption
C. a decrease in the government revenue from water charge
D. a decrease in the cost of producing of restaurants because they would use less water
32. 1997/II/8
If there is a poor harvest of rice in Thailand, the total expenditure on Thai rice in Hong Kong
A. would increase because of a price rise
B. would decrease because of the availability of substitutes
C. would be more or less the same because of the availability of substitutes
D. may increase or decrease, depending on the price elasticity of demand of Thai rice
33. 1998/II/7
When the supply of a commodity increases, its price may rise if
A. the demand for it is inelastic . B. the demand for it is perfectly elastic.
C. the price of its complement decreases. D. the price of its substitute decreases.
34. 1998/II/8
The diagram above shows the supply and demand curves of tobacco. The original equilibrium point is at E.
Suppose the government increases the income tax of households and the excise duty on tobacco, the new
equilibrium point will be
A. point A B. point B C. point C D. point D
35. 1998/II/9
Suppose the price of oranges increases and the quantity of oranges transacted decreases in H.K., this is likely
caused by
(1) a rise in transportation cost.
(2) a fall in the price of apples
(3) the fact that oranges have proved useful in reducing the chance of catching a cold
(4) a serious bad harvest of oranges in the U.S.A.
A. (1) and (2) only B. (1) and (4) only C. (2) and (3) only D. (3) and (4) only
HKCEE ECONOMICS | 2.1 Demand and Supply | P.7
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36. 1998/II/10
Suppose the rice production in Thailand suffers a serious fall in output and hence less rice is exported to Hong
Kong. Which of the following is a result of this event?
37. 1999/II/12
In the above diagram, E0 is the initial equilibrium point of the market for Hong Kong’s garment products in the
U.S. Suppose there is an increase in import duties in the U.S. and many U.S. retailers order from other Asian
countries instead of Hong Kong, the new equilibrium point in the diagram would be
A. Ea B. Eb C. Ec D. Ed
38. 2000/II/3
In the above diagram, when the price P1 increases to P2,
A. the excess demand will disappear. B. the quantity transacted will decrease.
C. the total revenue will necessarily increase. D. the total revenue will increase only if the demand is inelastic.
39. 2000/II/5
It became more difficult to find a metered car parking space by the roadside after the fee for a parking space
was reduced from $4 to $2 for every 15 minutes. It was also reported that the fee in a car park remained at
$15 per hour. Which of the following about the effect on metered car parking by the roadside is correct?
A. It can be explained by the law of demand. B. It is an increase in demand.
C. The equilibrium quantity decreases. D. The demand is elastic.
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40. 2000/II/7
The diagram above shows the market of tours for Hong Kong people to Japan. The initial equilibrium is at E0.
Because of economic recession, fewer Hong Kong people spend their holiday in Japan. Moreover, the Japanese
Yen appreciates against the Hong Kong dollar.
The new equilibrium point in the market will be at
A. Ea B. Eb C. Ec D. Ed
41. 2000/II/8
Refer to the following demand and supply schedules of a good.
Price per unit $25 $30 $35 $40 $45
Quantity demanded (units) 120 100 80 75 60
Quantity supplied (units) 60 75 80 100 120
According to the above information, we can conclude that
A. the total sales revenue would be $3 000 when the price is $30 per unit.
B. a unit subsidy of $10 on production would cause the equilibrium price to drop by $5.
C. a higher salaries tax would raise the market price to a price greater than $35.
D. the seller could set the price at $40 to gain the highest profit.
42. 2000/II/9
Which of the following is an example of joint demand?
A. the courier service (送遞文件服務) of a local firm and the postal service of the government
B. the Airport Express train service and the Tung Chung Line train service
C. magazines and printing paper
D. floppy diskettes and floppy diskette drives
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43. 2000/II/12
Which of the following diagrams shows the result of an improvement in the technology used in producing digital
versatile disc (DVD) players ?
44. 2001/II/3
‘Compared to last year, more watermelons were sold this summer and the price was lower.’ This is because
there was a (an) __________ in the __________ watermelons.
A. increase … demand for B. decrease … demand for
C. increase … supply of D. decrease … supply of
45. 2001/II/4
‘A rise in the price of a good will cause a decrease in demand for it and an increase in its supply.’
The above statement is
A. correct because a change in price will change both demand and supply.
B. incorrect because a rise in price will only increase the supply.
C. incorrect because a rise in price will only decrease the demand
D. incorrect because both demand and supply will not change as a result of a change in price.
46. 2001/II/5
Which of the following diagrams shows the result of a significant increase in the annual license fee for private
cars.
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47. 2001/II/10
The diagram below shows the supply and demand curves of imported Japanese automobiles in Hong Kong. The
original equilibrium point is at E.
If there is an increase in the transportation cost from Japan to Hong Kong and more similar models of Korean
automobiles with cheaper price are imported, the new equilibrium points will be at
A. E1 B. E2 C. E3 D. E4
48. 2002/II/6
The following table shows the supply of and demand for Good X
Unit price ($) Quantity demanded (units) Quantity supplied (units)
2 4 6 8
10
20 16 12 8 4
4 8
12 16 20
If the government raises the price ceiling from $4 per unit to $8 per unit, the quantity transacted will
A. increase by 4 units. B. increase by 8 units. C. decrease by 8 units. D. decrease by 4 units.
49. 2002/II/7
Refer to the following diagram :
Which of the following would lead to the above change in demand from D1 to D2?
A. an increase in the toll fee for taxis using the cross harbour tunnels
B. an increase in the frequency of cross harbour bus services
C. a fall in the wage rate of bus drivers
D. a fall in the ticket price for Mass Transit Railway services
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50. 2002/II/8
After a good harvest, the price of choi-sum has changed by 50% and the quantity transacted has changed by 40%.
Which of the following statements is/are correct?
(1) The quantity demanded of choi-sum has increased.
(2) The demand for choi-sum has increased.
(3) The total revenue from selling choi-sum has increased.
A. (1) only B. (1) and (2) only C. (2) and (3) only D. (1), (2) and (3)
51. 2002/II/9
The diagram below shows the supply and demand schedules of the market for airline tickets in Hong Kong.
The original equilibrium point is at E.
If, as a result of a terrorist attack, fewer people travel overseas and the insurance premium of airlines rises to a
high level, the new equilibrium point will be at
A. E1 B. E2 C. E3 D. E4
52. 2002/II/10
Suppose there is a technological advance in the production of a normal good. In which of the following situations
may the market price of the good remain unchanged?
A. The income of consumers decreases. B. The government raises the unit sales tax on the good.
C. The demand for the good is perfectly inelastic. D. The supply of the good is perfectly inelastic.
53. 2002/II/50
At the outbreak of war in the Middle East, civil aircraft which used to fly through the nearby air space had to fly
longer routes in order to stay away from the war areas. Moreover, the risk of travelling by civil aircraft was also
higher.
Which of the following diagrams about the effects of these changes is INCORRECT?
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54. 2003/II/8
According to research evidence, one of the substances in bear has proved to be good for the healthy development
of bones. This will lead to an increase in
(1) the supply of beer
(2) the quantity transacted of beer
(3) the demand for beer
A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. (1),(2) and (3)
55. 2003/II/9
The government has imposed a fee for using the emergency services provided by public hospitals. As a result,
patients’ total expenditure on private medicals services
A. will decrease B. will increase C. will remain unchanged D. may increase or decrease
56. 2003/II/14
Which of the following diagrams shows the result of a significant reduction in the cost of storing and
transportation chilled chicken from the mainland of China to Hong Kong?
57. 2004/II/5
Suppose a bill is passed that punishes the buyers of pirate compact discs (CDs). The price of pirated CDs would
and the quantity transacted would _______.
A. increase … increase B. increase … decrease
C. decrease … increase D. decrease … decrease
58. 2004/II/6
Suppose the Hong Kong government imposes a toll on highway users.
The above graph shows the effect of the above toll on the market of
A. Mass Transit Railway (MTR) services. B. private motor cars.
C. gasoline. D. school bus services.
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59. 2004/II/7
The following diagram shows the market supply and demand curves of face masks in Hong Kong. The original
equilibrium point is E.
Suppose more people decide to wear face masks to prevent the spread of respiratory diseases and there is an
increase in the number of face mask producers. As a result, the new equilibrium point would be
A. W B. X C. Y D. Z
60. 2004/II/8
Suppose an airline reduces the price of its air tickets. As a result,
A. the demand for its air tickets will increase. B. the number of its passengers will increase.
C. the supply of its aircraft service will increase. D. its sales revenue will increase.
61. 2005/II/4
Suppose consumers of traditional eye-classes gradually change to using contact lenses. As a result, the
equilibrium price of traditional eye-classes will ___ and the sales revenue of traditional eye-glass sellers will ___.
A. rise ... increase B. rise ... decrease C. fall ... increase D. fall ... decrease
62. 2005/II/5
In the following graph, E0 was the original equilibrium point of the seafood market in Hong Kong.
Last year a number of people was poisoned by seafood. At the same time, fishermen's harvest decreased. As a
result, what would be the new equilibrium point in the graph?
A. Ea B. Eb C. Ec D. Ed
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63. 2005/II/7
While many construction workers are unemployed in Hong Kong, there is a shortage of construction workers in
Macau. Suppose a law is passed in Macau which allows the importation of construction workers from Hong
Kong to Macau. Which of the following diagrams would best describe the effects of such a law on the labour
market of construction workers in Macau?
64. 2005/II/9
Under the Closer Economic Partnership Arrangement, some of Hong Kong made goods exported to the Chinese
mainland will enjoy zero tariffs. As a result, in the mainland,
A. the price of these goods will rise B. the price of these goods will fall
C. the total expenditure on these goods will rise D. the total expenditure on these goods will fall
65. 2005/II/13
As shown in the following graph, the government of a certain country has fixed the price of agriculture products
P’.
If the price of fertilizers falls, what will happen to the agriculture products?
There will be :
A. a larger excess demand B. an increase in the quantity transacted
C. an increase in the sales revenue D. a larger excess supply
66. 2006/II/5
The following diagram shows the private housing market. Point E is the original equilibrium point.
Suppose there is an increase in both the home mortgage interest rate and the labour cost of private house
construction. The new equilibrium point in the diagram would be
A. W B. X C. Y D. Z
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67. 2006/II/6
An increase in the price of petroleum will lead to a decrease in
A. the demand for petroleum B. the demand for mini-bus services
C. the supply of mini-bus services D. the supply of mini-bus drivers
68. 2006/II/7
Nowadays, more schools in Hong Kong have implemented reading programs to develop students’ reading habits.
This would lead to an increase in
A. both the demand for and the supply of books
B. both the demand for and the quantity supplied of books
C. both the supply and the quantity demanded of books
D. both the supply and the quantity supplied of books
69. 2006/II/8
Which of the following would lead to a fall in price and an increase in quantity sold of imported Japanese
television sets in Hong Kong?
A. The transportation cost of goods from Japan to Hong Kong increases
B. An increasing number of lower-priced similar models of television sets are imported from Korea
C. The Japanese technology in producing television sets improves
D. The salaries tax rate in Hong Kong decreases
70. 2006/II/49
In order to reduce the amount of household garbage disposed of, the government is planning to impose a
household garbage disposal charge according to the amount of garbage disposed by each household.
Which of the following concepts can be used to explain the above policy?
A. law of demand B. principle of comparative advantage
C. diseconomies of scale D. law of diminishing marginal returns
71. 2007/II/4
The diagram below shows the supply and demand curves of hotel accommodation in Macau. The original
equilibrium point is at E.
More and more hotels start operating in Macau and it is becoming more popular to visit the place. The new
equilibrium point will be ____.
A. W B. X C. Y D. Z
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72. 2007/II/5
Suppose the technology required to produce LCD TV sets advances. The price of LCD TV sets will ____ and
the price of traditional CRT TV sets will ____.
A. rise ... rise B. rise ... fall C. fall ... rise D. fall ... fall
73. 2007/II/10
A possible cause of an increase in both the world market price and the quantity transacted of gasoline could
be ___________.
A. a warmer than usual weather during winter around the world
B. a rapid industrial development of newly developing countries
C. oil production cuts by the Organization of Petroleum Exporting Countries (OPEC)
D. a decrease in the price of crude oil which is used to produce gasoline
74. 2008/II/4
The following diagram shows the market of exhibition spaces in Hong Kong
An increase in the _________ would lead to a shift of the demand curve from D1 to D2 in the diagram.
A. rental of exhibition spaces in Hong Kong
B. rental of exhibition spaces in Macau
C. number of trade fairs held in Hong Kong
D. exhibition spaces in Macau
75. 2008/II/5
The diagram below show the supply and demand curves of residential property in Hong Kong. The original
equilibrium point is at E.
If the population of Hong Kong increases and the wage rate of local construction workers rises, the new
equilibrium point will be at _________ .
A. E1 B. E2 C. E3 D. E4
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76. 2008/II/6
Recently the stock market in Shanghai has become overheated. Compared with last year, the selling price of a
financial magazine has increased from RMB¥ 5 To RMB¥ 8 while its sales volume has increased by 10%.
In the above case,
A. the law of demand is violated
B. the demand curve of the magazine can still be downward sloping
C. the demand for the magazine is inelastic
D. the supply of the magazine is elastic
77. 2008/II/11
The following table shows the demand and supply schedules of rice:
Unit price ($) Quantity demanded (units) Quantity supplied (units)
5
4
3
2
1
10
12
15
20
27
25
20
15
10
5
If the controlled price is raised from $2 to $4 per unit, sellers' total revenue will increase from______ to ______.
A. $20 … $45 B. $20 … $48 C. $40 … $48 D. $45 … $48
HKCEE ECONOMICS | 2.1 Demand and Supply | P.18
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1. 1991/II/19
Price Quantity demanded (unit) Total revenue
$2
$4
$6
$8
$10
10
6
4
3
1
$20
$24
$24
$24
$10
The elasticity of demand is unitary over the price range from
A. $2 to $6 B. $2 to $8 C. $4 to $8 D. $4 to $10
2. 1991/II/26
When the tax on commodity X is doubled, its tax revenue is also doubled. This indicates that
A. the demand for X is perfectly elastic. B. the demand for X is unitarily elastic.
C. the supply of X is perfectly elastic. D. the supply of X is perfectly inelastic.
3. 1992/II/26
A tax on using the Cross-Harbor Tunnel will have the least effect on solving the Tunnel’s congestion problem if
A. the demand for the Tunnel services is elastic
B. the demand for the Tunnel services is inelastic
C. the supply of the Tunnel services is elastic
D. the demand for other transportation means of crossing the harbor is inelastic
4. 1992/II/28
Suppose the demand for wheat is elastic. Which of the following will decrease if there is a poor harvest of
wheat?
(1) the price of wheat
(2) the total expenditure on wheat
(3) the demand for wheat
(4) the quantity of wheat transacted
A. (1) and (2) only B. (1) and (3) only C. (2) and (4) only D. (3) and (4) only
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5. 1993/II/25
If the demand is unitarily elastic along the above curve DD, then area 1 ______ area 2.
A. is equal to B. is greater than C. is smaller than D. may be greater or smaller than
6. 1993/II/28
In a period of rainy whether, the price of umbrella increased by 10% while the quantity transacted increased by
15%. What is the price elasticity of demand/supply of umbrellas in the above situation?
A. The demand is elastic B. The demand is inelastic
C. The supply is elastic D. The supply is inelastic
7. 1993/II/29
A tax is imposed on a commodity. The tax burden on the consumers is relatively smaller if the commodity has an
___ demand and an ___ supply.
A. elastic; elastic B. elastic; inelastic C. inelastic; elastic D. inelastic; inelastic
8. 1995/II/7
The demand for good X is
A. elastic B. unitary elastic C. perfectly elastic D. inelastic
9. 1996/II/10
Research shows that changes in bus fares will not affect the number of passengers who travel before 9 am. Which
changes by a greater percentage than the percentage change in bus fares? In order to obtain the largest revenue,
the bus company should
A. increase the fares before and after 9 am.
B. not change the fares before 9 am but reduce the fares after 9 am.
C. increase the fates before 9 am. But reduce the fares after 9 am.
D. not change the fares before 9am. But increase the fares after 9am.
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10. 1997/II/9
The price elasticity of demand for the Hung Hom Cross-Harbor Tunnel service would decrease if
A. the tunnel fee is raised from $10 to $30
B. the Western Harbor Crossing is open
C. the Eastern Harbor Crossing is closed for maintenance work
D. a new hydrofoil services is produced between Tsuen Wan and Wan Chai
11. 1997/II/10
Suppose the MTR fares on short-distance journeys (X) and cross-harbor journeys (Y) are raised by 6.9% and
13.6% respectively. If the quantity demanded for X and Y falls by 8% and 3.5% respectively, which of the
following is correct?
A. Both the demand for X and Y are elastic
B. Both the demand for X and Y are inelastic
C. The demand for X is less elastic than the demand for Y
D. The demand for X is more elastic than the demand for Y
12. 1998/II/5
In the above diagram, if the demand is unitary elastic, Q2 will be
A. 60 B. 75 C. 80 D. 100
13. 1998/II/6
Suppose the unit price of good X increases from $2 to $2.8 and its quantity demanded changes by 20%. Which of
the following statements is correct?
A. The increase in price leads to a more than proportionate decrease in the quantity demanded of good X.
B. The increase in price leads to an increase in the total revenue of good X.
C. The elasticity of demand for good X is 0.4.
D. The change in the quantity demanded is less than the change in the price of good X.
14. 2000/II/10
The demand elasticity of good X is 1.2. After a decrease in supply, the equilibrium quantity drops by 30%.
The equilibrium price would ________by __________. .
A. increase ... 25% B. decrease ... 25% C. increase ... 36% D. decrease ... 36%
HKCEE ECONOMICS | 2.2 Price elasticity of demand and supply | P.3
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15. 2001/II/6
‘I love to take photos very much. Even though the price of film has increased by 30%, my spending on it will
still be the same.’ Mary said. Mary’s demand for film is
A. perfectly inelastic. B. inelastic. C. elastic. D. unitarily elastic.
16. 2003/II/5
Which of the following would increase the elasticity of demand of the transport service of the MTR?
A. the cutting of bus lines running routes similar to those of the MTR
B. a decrease in MTR passenger fares
C. the opening of new lines of KCR running routes similar to those of the MTR
D. a decrease in the operating costs of the MTR
17. 2003/II/7
Refer to the following straight line demand curve DD.
Point A is the mid point of the demand curve DD. If the unit price increases from $8 to P, the total revenue
A. will be greater than $80 B. will be equal to $80
C. will be smaller than $80 D. may be greater or smaller than $80
18. 2003/II/13
A marker researcher reports to the manager of a company, “Even if we cut prices to boost sale, the sales revenue
will remain unchanged because of the elasticity of demand of our product?”
According to the market researcher, their product’s elasticity of demand is
A. perfectly inelastic B. inelastic C. elastic D. unitarily elastic
19. 2004/II/9
In the above diagram, DD is a demand curve. In the price range P1 to P2, the elasticity of demand
A. is less than 1. B. is equal to 1. C. is greater than 1.
D. may be less than or greater than 1, depending on the exact values of P1, P1, Q1 and Q2.
HKCEE ECONOMICS | 2.2 Price elasticity of demand and supply | P.4
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20. 2005/II/12
The table below shows the relationship between the price of Good X and its total sales revenue.
Price ($) 1 2 3
Total sales revenue ($) 100 200 300
Within the above price range, the elasticity of demand of Good X is
A. equal to zero B. greater than zero and smaller than one
C. equal to one D. greater than one
21. 2006/II/9
Fearing an outbreak of bird flu, people tend to consume less live poultry but more canned food. As a result, the
price of the canned food of a particular brand changed by 50% and its quantity transacted rose from 1000 cans
to 1350 cans per month.
We can conclude that within the above price range this canned food had
A. an elastic demand B. an inelastic demand
C. an elastic supply D. an inelastic supply
22. 2007/II/9
The table below shows the relationship between the price of Good X and its sales revenue.
Price ($) 10 20 30
Total sales revenue ($) 1 000 1 500 2 000
Within the above price range, the elasticity of demand for Good X is
A. equal to zero
B. greater than zero and smaller than one
C. equal to one
D. greater than one
23. 2008/II/10
With the introduction of HD TV breasting in Hong Kong, more people have chosen to buy an HD TV set. Under
what condition will the market price of HD TV sets remain unchanged?
A. The income of consumers increase
B. The government grants a cash subsidy to lower income group to buy HD TV sets
C. The demand for HD TV sets is perfectly inelastic
D. The supply of HD TV sets is perfectly elastic
HKCEE ECONOMICS | 2.2 Price elasticity of demand and supply | P.5
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1. 1992/II/27
The above diagram shows the price and quantity of Good X. The price increases from Pc to Pe after the price
ceiling is cancelled. As a result, the total expenditure on Good X will
A. increase B. decrease
C. remain unchanged D. either increase or decrease, depending on its price elasticity of demand
2. 1994/II/10
The above diagram shows the supply of and the demand for the tickets of a concert.
If the tickets are sold at P2 in stead of P1,
(1) a black market may occur.
(2) the sales revenue will be smaller.
(3) the quantity transacted will be greater.
(4) the sales revenue may increase or decrease, depending on the price elasticity of demand.
A. (1) and (2) only B. (2) and (4) only C. (2) and (3) only D. (3) and (4) only
3. 1996/II/8
Shortage occurs when
A. a price floor below the equilibrium price is imposed. B. an effective price ceiling is imposed.
C. the supply is reduced. D. the demand increase sharply.
4. 1996/II/9
Suppose initially the price of a certain good is fixed below the market equilibrium. Relaxing the price control
will lead to
(1) an increase in revenue.
(2) a decrease in demand.
(3) an increase in revenue only if the demand for this good is inelastic.
(4) an increase in the quantity supplied.
A. (1) and (2) only B. (1) and (4) only C. (2) and (3) only D. (3) and (4) only
HKCEE ECONOMICS | 3.1 Price ceiling | P.1
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1. 1992/II/24
If the government imposes a price floor below the equilibrium price, there will be
A. a decrease in the sales revenue
B. a decrease in the quantity transacted
C. an excess supply
D. no excess demand
2. 1993/II/27
Filipino maids working as domestic helpers in Hong Kong receive a minimum wage. They usually have to
wait for a long time before obtaining employment in Hong Kong. They would have a shorter waiting time and
more employment opportunities in Hong Kong if
A. their minimum wage was raised
B. the minimum wage legislation was removed
C. the Philippine was more political unstable
D. a surcharge was imposed on the Hong Kong employers
3. 1998/II/4
If a price floor is set below the equilibrium price of good X,
A. a shortage of good X will occur.
B. the quantity transacted will decrease.
C. the total revenue may increase or decrease, depending on the elasticity of demand for good X.
D. the total revenue will remain unchanged.
4. 1999/II/6
Refer to the above supply and demand schedule for good X. The government sets its minimum price at $4 per
unit. What would happen if the government raised the minimum price to $6 per unit?
A. The shortage of good X would disappear.
B. The quantity transacted would increase.
C. Consumer expenditure on good X would decrease.
D. The surplus of good X would decrease.
Unit price ($) Quantity Demanded (units) Quantity Supplied (units)
7 6 5 4 3
8 12 16 20 24
20 18 16 14 12
HKCEE ECONOMICS | 3.2 Price floor | P.1
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5. 2000/II/6
Hong Kong’s recent economic recession has caused a decline in people ’s income. In view of this, the government
decided to lower the effective minimum wage level of Filipino maids. As a result of these TWO changes,
(1) the demand for Filipino maids should decrease.
(2) the quantity supplied of Filipino maids should decrease.
(3) the excess supply of Filipino maids should decrease.
(4) the total expenditure on the employment of Filipino maids should drop.
A. (1) and (2) only B. (2) and (3) only C. (1), (2) and (3) only D. (1), (3) and (4) only
6. 2004/II/12
Refer to the above diagram. Which of the following statements is correct?
A. If a price ceiling is set at P1, the quantity transacted is Q3.
B. If a price floor is set at P1, the quantity transacted is Q2.
C. If a price floor is set at P3, the quantity transacted is Q2.
D. If a price ceiling is set at P3, non-price competition will occur.
7. 2007/II/7
An imposition of a minimum wage legislation would increase
A. the employment opportunities of unskilled workers
B. the total wage payment to unskilled workers
C. the unemployment of unskilled workers
D. the inflow of foreign investment
8. 2008/II/12
The government raises the effective minimum wage of imported workers,
A. the employment of imported workers will increase
B. the problem of shortage of imported workers will become more serious
C. the unemployment rate of local workers will increase
D. the total wage earnings of local workers will increase
HKCEE ECONOMICS | 3.2 Price floor | P.2
44
1. 1994/II/12
If the government imposes an effective quota on good Y, the market price of Y will _____ and its quantity
transacted will _______.
A. increase…increase B. increase…decrease C. decrease…increase D. decrease…decrease
2. 1994/II/13
Refer to Question 1. The consumers’ total expenditure on good Y will
A. decrease.
B. increase.
C. remain unchanged.
D. increase or decrease, depending on the price elasticity of demand for good Y.
3. 1999/II/7
The abolition of an effective quota on an imported good will result in
(1) a fall in its price.
(2) an increase in its import volume.
(3) an increase in its total sales revenue.
(4) an improvement in its quality.
A. (1) and (2) only B. (1) and (3) only C. (1), (3) and (4) only D. (2), (3) and (4) only
4. 2006/II/10
In country A, there is a quota restriction on an imported good. When the import quota quantity is Q1, the
market price of the good is P1.
Now suppose Country A increases the quota quantity from Q1 to Q3 as shown in the diagram below. As a
result, the new total sales revenue would be
A. P1 × Q1 B. P2 × Q2 C. P1 × Q3 D. P3 × Q3
5. 2007/II/8
China abolished the car import quota system in 2005. As a result , ___________ in China will increase
A. the price of cars B. the sales volume of cars
C. the income of workers in the car manufacturing industry D. the revenue from car sales
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6. 2008/II/9
Country A reduces the quantity of an effective quota on clothing imported from Country B. At the same time,
imported clothing from other countries to Country A has become cheaper.
Which of the following graphs can illustrate the changes in Country A’s market of clothing imported from
Country B? 1E is the original equilibrium point and 2E is the new equilibrium point.
HKCEE ECONOMICS | 3.3 Quota | P.2
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1. 1990/II/51
Suppose the government increases the tax on cigarettes by $2. Consequently, the price of each packet of
cigarettes increases by $1.5. Which of the following statements is true?
A. The producers bear 1/4 of the tax. B. The demand for cigarettes is elastic.
C. The supply of cigarettes is elastic. D. The tax is progressive in nature.
2. 1994/II/8
For Question No. 2 and 3, consider the following supply and demand schedule of wine in a certain country:
Mr. Wong is a second-hand car dealer. He bought a used car for $20 000 which he immediately resold for
$25 000. By how much would the gross national product be increased after he sold the car?
A. $5 000 B. $20 000 C. $25 000 D. $45 000
2. 1992/II/13
Which of the following can lead to the conclusion that the manufacturing sector in Hong Kong is declining
in the contribution to Hong Kong's GDP?
A. The number of workers in this sector is decreasing
B. The number of firms in this sector is decreasing
C. The wage rates in this sector are decreasing
D. The value added of this sector is decreasing
3. 1992/II/46
Which of the following ways of measuring output involves double counting?
A. summing up the expenditure on all final goods and services
B. summing up the incomes earned by all factors of production
C. summing up the values added in all production stages
D. summing up the values of all market transactions
4. 1995/II/59
Which of the following statements is NOT a conclusion drawn from the above table?
A. The manufacturing sector had a higher labour productivity in 1992 than in 1982
B. The services sector had a higher labour productivity in 1992 than in 1982
C. The services sector had a higher labour productivity than the manufacturing sector in 1992
D. The services sector had a higher labour productivity growth rate than the manufacturing sector
5. 1998/II/25
The following transactions were recorded in an economy in a certain year:
I. Firm A sold its products to Firm B for $100 and Firm C for $200.
II. Firm B then resold part of the products to households for $200 and the rest to other firms for $300.
III. Firm C then exported the products for $500.
In the above transactions what was the total contribution of Firm B and Firm C to the GDP of this economy?
A. $700 B. $900 C. $1100 D. $1300
Real GDP value-added per employee
1982 1992
Manufacturing sector $41 000 $165 000
Services sector $103 000 $280 000
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6. 2000/II/35
The following diagram shows a production chain involving the import of $100 worth of gasoline into Hong
Kong:
What is the contribution of the production chain to Hong Kong ‘s GDP at factor cost?
A. $400 B. $500 C. $900 D. $1000
7. 2003/II/27
The following diagram shows the production of a garment factory in Economy A. The factory imports $20000
worth of raw materials.
What is the contribution of the garment factory to Economy A's GDP at factor cost?
A. $10000 B. $50000 C. $55000 D. $75000
8. 2004/II/27
The following diagram shows a production process of an economy.
What is the contribution of Amy’s garment factory to the national income of the economy?
A. $1 600 B. $3 700 C. $5 300 D. $5 900
9. 2005/II/28
A production chain is shown below.
The contribution of the above chain to Hong Kong's GDP is
A. $1400 B. $1700 C. $2400 D. $2600
Garment Factory
Overseas
Consumers $20 000
$45 000
$30 000 ($5 000 sales tax inclusive)
Local
Consumers
Local importers
Gasoline stations Consumers
$100 $300 $1 000
($500 tax inclusive)
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10. 2007/II/28
Answer Questions 10 and 11 by referring to the following production chain of watches in an economy. The local
watch manufacturers import $10000 worth of raw materials.
What is the contribution of the above producing chain to the economy's GDP at market prices?
A. $105000 B. $110000 C. $115000 D. $120000
11. 2007/II/29
What is the contribution of the local watch retailers to the economy's GDP at factor cost?
A. $25000 B. $30000 C. $75000 D. $80000
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113
1. 1990/II/33
A Hong Kong citizen switches his fight from a local airline to Japan Airlines. What is the effect on
Hong Kong‘s Gross Domestic Product (GDP)?
A. an increase in imports B. a decrease in exports
C. a decrease in consumption D. an increase in investment
2. 1992/II/47
A building which collapsed in a landslide at the beginning of the year was re-built at the end of the year.
The GDP in that year
A. increased B. decreased C. remained unchanged D. decreased at first and later increased
3. 1993/II/39
Answer Question 3 referring to the following data of an economy in a certain year:
$ million Private consumption expenditure 40 Government consumption expenditure 10 Gross domestic fixed capital formation 10 Change in stocks 1 Total exports of goods 80 Domestic exports 70 Re-exports 10 Imports of goods 60 Exports of services 20 Imports of services 30 Inflow of capital 30 Outflow of capital 15
The GDP of the economy in that year is
A. $61 million B. $70 million C. $71 million D. $81 million
4. 1996/II/54
The tourism industry
(1) involves tertiary production only.
(2) increase the GDP of a country.
(3) has its earnings counted as net income from abroad.
(4) has its earnings recorded in the current account of a country.
A. (1) and (3) only B. (1) and (4) only C. (2) and (3) only D. (2) and (4) only
5. 2000/II/34
More Hong Kong people shop in Shenzhen and the real interest rate in Hong Kong is increasing and being
sustained at a high level. Which of the following GDP components of Hong Kong would be least likely
affected by the above situation ?
A. domestic consumption (C) B. private investment (I)
C. government expenditure (G) D. net export (XM)
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6. 2001/II/28
The following table shows the gross domestic product (GDP) data of a country.
Components $ Million Private consumption expenditure 500
Government consumption expenditure 100
Net domestic fixed capital formation 250
Changes in inventories 30
Total exports of goods 800
Re-exports of goods 200
Imports of goods 900
Exports of services 300
Imports of services 150
Depreciation 60
The GDP at market price is
A. $900 million B. $930 million C. $990 million D. $1190 million
7. 2003/II/26
The following table shows the GDP data of a country in a certain year:
Components $ Million Private consumption expenditure 400
Government consumption expenditure 100
Gross domestic fixed capital formation 200
Reduction in inventories 20
Domestic exports of goods 330
Re-exports of goods 170
Imports of goods 550
Exports of services 400
Imports of services 350
Depreciation 60
The GDP at market price is
A. $620 million B. $660 million C. $680 million D. $720 million
8. 2004/II/28
Which of the following items must be positive in value?
A. net external factor income flow B. net exports C. depreciation D. gross profit of firms
9. 2004/II/30
Refer to the above GDP data of a country in a certain year. Its net domestic product (in $ million) is:
A. 440 B. 590 C. 630 D. 650
Components $ Million GDP 640
Net exports of goods 200
Depreciation 50
Indirect Business Taxes 10
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115
10. 2004/II/49
The introduction of the ‘individual visit’ scheme for Mainland visitors to Hong Kong would increase the GDP
of Hong Kong. The spending of these visitors on jewellery in Hong Kong is a/an _______ of Hong Kong.
A. consumption expenditure B. investment expenditure
C. export D. import
11. 2005/II/27
The following table shows the statistical of an economy in a certain year.
Million Dollars Private consumption expenditure 50 000
Government consumption expenditure 8 000
Gross domestic fixed capital formation 7 000
Decrease in inventory 3 000
Total export 30 000
Total import 45 000
Indirect taxes 50
Depreciation allowance 4 200
The GDP at market price (in million dollars) is
A. 42850 B. 47000 C. 50000 D. 51150
12. 2006/II/25
Which of the following $5 million amounts is an investment expenditure in the national income accounting
of Hong Kong ?
A. taking-over a company in Hong Kong by buying up $5 million worth of shares
B. purchasing $5 million worth of ‘Hong Kong Link’ bonds
C. depositing $5 million into a licensed bank of Hong Kong
D. spending $5 million to turn a shopping mall car park in Hong Kong into shops
13. 2008/II/26
The following table shows the national income statistics o an economy:
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116
1. 1995/II/31
Study the following information about a country and answer Question 1:
$ million National income 400 Depreciation 50 Rent 88 Interest 46 Wages 220 Indirect taxes 12
Profit is
A. $46 million B. $58 million C. $96 million D. $108 million
2. 2001/II/34
Study the following information about a country and answer Question 2:
$ million National income 500 Depreciation 60 Rent 120 Interest 70 Profit 180 Subsidies 80 Indirect taxes 100
The amount of wages of the economy is (in $ million):
A. 130 B. 190 C. 210 D. 290
3. 2002/II/26
Nancy runs a boutique in Hong Kong. The following table shows the boutique’s financial statement for a given
period of time.
$ 000 $ 000 Sales revenue of fashions 16 000 Less : Imported fashions 2 000 Electricity & water charges 3 000 Wage payment 2 500 Profits tax 1 500 9 000 Net profit 7 000
What is the contribution of Nancy’s boutique to Hong Kong’s GDP in thousand dollars?
A. 7 000 B. 11 000 C. 14 000 D. 16 000
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1. 1990/II/49
The following were received by Mr. A last year:
(1) wages of $10000
(2) public assistance of $1000
(3) $100 interest from his saving account
(4) a Mark Six prize of $8000
His contribution to the GDP last year was
A. $10000 B. $10100 C. $11100 D. $19100
2. 1991/II/44
Which of the following is included when calculating Hong Kong’s gross domestic product (GDP) by the
expenditure approach?
A. the compensation paid to Kowloon Walled City residents
B. the expenditure incurred on buying a second-hand car
C. the revenue earned from toys sold to Americans
D. the revenue received by the government from taxation
3. 1992/II/45
Which of the following amounts should be included in the measurement of GDP?
A. Mr Chan sells his house, built two yeas ago, for $2000000
B. Mr Chan buys shares worth $150000
C. Mr Chan wins a Mark Six prize of $100000
D. Mr Chan receives a monthly salary of $35000
4. 1992/II/58
The expenditure by the Hong Kong government on Vietnamese boat people ________ included in Hong Kong's
GDP because _________.
A. should be; goods and services are produced in Hong Kong
B. should be; part of the expenditure will be paid back by the United Nations
C. should not be; goods and services are spent on foreign
D. should not be; Vietnamese boat people do not produce goods and services
5. 1993/II/35
Which of the following is included in the measurement of Hong Kong's GDP?
A. medical benefits of civil servants
B. student travel subsidy
C. dividends gained from overseas investments
D. money won from betting in a horse race
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6. 1994/II/32
Which of the following items should be included in Hong Kong’s GDP for the current year?
A. An investor buys shares on the local stock exchange
B. A British citizen receives a salary for teaching English in a school in Hong Kong
C. A students sells some used textbooks to his friend
D. A manufacturer sells last year’s unsold stocks
7. 1995/II/60
Which of the following will NOT be included in Hong Kong’s GDP?
A. profits earned by individual investors from buying and selling shares in the Hong Kong stock market
B. bonuses paid by the Stock Exchange of Hong Kong Limited to its staff
C. stamp duty levied on the shares bought and sold in the Hong Kong stock market
D. commissions paid to the brokers for transactions in the Hong Kong stock market
8. 1996/II/27
Which of the following items is included in the calculation of Hong Kong’s GDP?
A. The government grant received by a university student
B. The salary received by a civil servant who is a foreigner working in Hong Kong
C. Interest to a loan paid by a firm in Hong Kong to a bank in Japan
D. Loans repayment made by the Hong Kong government to the Hong Kong Bank
9. 1997/II/24
The following shows some assets of a farm.
Which should be included in the calculation of investment expenditure of the GDP of this year?
A. the expenditure on the ploughing of 10 acres of new farmland in spring this year
B. the value of 10 tones of wheat stocked up since last year
C. the settlements of a $10000 debt incurred as a result of repairing machines last year
D. recent expenditure on acquiring 10000 units of government bonds in order to earn an annual interest
of $55000
10. 1997/II/60
Which of the following items is NOT included in the calculation of GDP?
A. government spending of $300 million on the employee retraining programme
B. unemployment benefits of $20 million paid by the government
C. commission paid by a successful job searcher to an employment agency for job referral services
D. salaries paid to the two extra posts created in the Labour Department to help job searchers
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11. 1998/II/26
Which of the following would be considered as part of the national income?
A. commissions received by salesmen selling second-hand cars
B. a gift cheque to a bride for an invitation to her wedding banquet
C. insurance compensation to injured workers
D. scholarships to students with good results in schools
12. 1998/II/51
Transfer payments are NOT included in national income because
A. they are included in the gross national income but not the net national income.
B. they are already included in the incomes of households.
C. they are not returns for the production of goods and services.
D. they are not taxed by the government.
13. 1999/II/31
Which of the following $1 million amounts is included in the calculation of Hong Kong’s GDP?
A. A famous singer holds a charity performance in Hong Kong and donates all the proceeds of $1 million to
the floods victims in Mainland China.
B. A father transfers $1 million worth of company shares to his daughter.
C. A victim in a traffic accident receives a sum of $1 million from the government as compensation for injury.
D. An investor earns a capital gain of $1 million from the sale of his flat.
14. 2000/II/33
Which of the following is included in the calculation of the gross domestic product (GDP) of Hong Kong?
A. the estimated rental value of an owner-occupied property in Hong Kong
B. the low-interest government loans to university students in Hong Kong
C. the interest paid to foreign investors holding Exchange Fund bills
D. the increase in the price of the shares issued by a bank in Hong Kong
15. 2001/II/50
Which of the following should NOT be included in the calculation of Hong Kong’s GDP?
A. the loans made by a local bank to its customers
B. the tips received by a bellboy in a local hotel
C. the 10% service surcharge collected by a local restaurant
D. the income earned by a local hawker.
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16. 2002/II/49
Which of the following items should NOT be included in the calculation of Hong Kong’s GDP ?
A. Profit gained by a car agent from reselling second-hand cars
B. Compensation paid to a car owner for his loss in a traffic accident
C. Insurance premium for a car paid to a local insurance company
D. Income earned by a person from repairing cars
17. 2004/II/26
Which of the following should be included in the calculation of the GDP of Hong Kong?
A. the money received from the ‘We Care Education Fund’ by children who lost their parents to SARS
B. the money received by a local property agent for his service in the resale of flats.
C. the money received by a local student from selling his used reference books to his schoolmates.
D. the money received by a local limited company from issuing new bonds in the market
18. 2005/II/26
Which of the following items is included in the calculations of the gross domestic product of Hong Kong?
A. the salary received by an American who works for a local television station as a reporter
B. the money received by a local student from selling his mobile phone to his classmate
C. the cash award won by a local citizen in a game show organized by a local television station
D. the insurance compensation received by a local construction worker for his injury
19. 2007/II/27
Which of the following would be included in the GDP for 2005?
A. money deposited in a savings account during 2005
B. the purchase price of an antique in 2005
C. public assistance paid to individuals during 2005
D. the value of wheat produced but unsold in 2005
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1. 1991/II/43
Which of the following is included in a country’s gross national product?
A. the expenditure on newly-issued shares B. the salary paid to a foreign employee
C. the expenditure on public assistance D. the income of citizens earned abroad
2. 1992/II/48
The income of a Hong Kong citizen working in Canada is included in
(1) Hong Kong’s Gross National Product
(2) Hong Kong’s Gross Domestic Product
(3) Canada’s Gross National Product
(4) Canada’s Gross Domestic Product
A. (1) and (3) only B. (1) and (4) only C. (2) and (3) only D. (2) and (4) only
3. 1993/II/44
If GNP is greater than GDP,
A. depreciation is greater than zero B. net income from aboard is greater than zero
C. transfer payments are greater than zero D. exports are greater than imports
4. 1994/II/33
Consider the following data of an economy producing only bread and shirts:
The GNP at constant (1992) market prices for 1993 is
A. $900 B. $1100 C. $1200 D. $1490
5. 1995/II/32
GDP will be greater than GNP when
A. the net export is negative B. the net export is positive
C. the net income from abroad is negative D. the net income from abroad is positive
Price in 1992 ($) Price in 1993 ($) Output in 1993
Bread Shirts
10 20
12 25
50 20
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6. 1996/II/28
In using the expenditure approach to calculate the Goss national product (GNP) of an economy, imports
should be deducted because:
A. Some imports are substitutes of domestic products
B. Some imports are intermediate goods
C. Imports will lead to payments to foreign countries
D. Imports are the expenditure on goods and services produced by foreign countries
7. 1997/II/21
To calculate Hong Kong's GNP from GDP, which of the following items should be taken into consideration in
the calculation of external factor income flows?
(1) rental from overseas properties received by Hong Kong residents
(2) earnings from US stock and shares held by Hong Kong residents
(3) interest yields from Hong Kong Exchange Fund Notes received by residents in Japan
(4) fee paid by the MTR Corporation to UK experts for finding out the causes of a recent breakdown of MTR
service
A. (1) and (2) only B. (3) and (4) only C. (1),(2) and (4) only D. all of the above
8. 1999/II/24
Which of the following should be included in the calculation of gross national product (GNP)?
A. the value of newly issued shares sold B. the value of shares transacted in the stock market
C. stamp duty paid for buying shares D. capital gain from selling shares
9. 1999/II/26
Which of the following sources of income earned by local residents should be included in the calculation of
net income from abroad’?
(1) export of goods
(2) export of services
(3) property investment in foreign countries
(4) stocks and shares investment in foreign countries
A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. (3) and (4) only
10. 1999/II/29
Which of the following statements about GDP is correct?
A. GDP will be larger than GNP if the net export is positive
B. GDP does not include the income derived by local citizens from abroad
C. GDP does not consider the value of depreciation
D. Net income from abroad cannot be negative
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11. 2002/II/25
In order to calculate the gross national product of Hong Kong, which of the following items should be deducted
from Hong Kong’s gross domestic product (GDP) figure?
A. the dividend received from shares in Hang Seng Bank by a Japanese person who lives in the U.S.
B. the rental income earned by a Hong Kong resident from his property in the U.S.
C. the salary earned by a native English teacher employed on a two- year contract in a secondary school in
Hong Kong
D. the donations of a Hong Kong resident to mainland China
12. 2006/II/26
Gross domestic product will be greater than gross national product when the amount of
A. net income from abroad is negative B. net income from abroad is positive
C. indirect taxes less subsides is positive D. net exports is negative
13. 2006/II/29
Which of the following items should be included in the calculation of Hong Kong’s net external factor income
flow (i.e., net income from abroad)?
(1) the spending of a Japanese tourist in Hong Kong
(2) the revenue earned by a Hong Kong watch manufacturer from selling watches to Europe
(3) the rental income of a Hong Kong resident from property investment in the U.K.
(4) the interest received by a Hong Kong resident from his savings deposit in a bank in Switzerland
A. (1) and (2) only B. (1) and (3) only C. (2) and (4) only D. (3) and (4) only
14. 2007/II/26
Which of the following statements about GDP is correct?
A. GDP includes the value of imports
B. GDP is the total income of all the residents producing units
C. GDP is higher than gross national product if the net income from abroad is negative
D. GDP is the value of all goods and services transacted in the market
15. 2008/II/27
Which of the following amounts should be added to the GDP of Hong Kong in order to calculate the GNP
of Hong Kong?
A. the income earned by a Japanese singer who held two concerts in Hong Kong
B. the salary of a Hong Kong resident who works for the Hong Kong Office of an American bank
C. the rental income received by a Hong Kong resident from his residential apartment in Canada
D. an investment made by a Hong Kong resident in a garment factory in Thailand
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1. 1995/II/30
Study the following information about a country
$ million
National income 400
Depreciation 50
Rent 88
Interest 46
Wages 220
Indirect taxes 12
The gross national product (GNP) at factor cost is
A. $412 million B. $450 million C. $462 million D. $816 million
2. 1996/II/30
Questions 2 and 3 refer to the following information about an economy:
GNP at market price $100
Exports of goods and services 20
Imports of goods and services 30
Net income from abroad -5
Indirect taxes 25
Subsidies 35
Depreciation 5
The GDP at factor cost is:
A. $95 B. $105 C. $115 D. $125
3. 1996/II/31
The net national product at factor cost is:
A. $100 B. $105 C. $110 D. $115
4. 1998/II/30
Answer Questions 4 and 5 by referring to the following data of an economy:
$Mn Gross national product at market price 46
Change in stock 3
Net income from abroad 1
Subsidies 4
Depreciation 5
Indirect business tax 6
Net exports 2
The gross national product at factor cost (in $Mn) is
A. 39 B. 43 C. 44 D. 47
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5. 1998/II/31
The net domestic product at market price (in $Mn) is
A. 38 B. 40 C. 41 D. 43
6. 2001/II/33
Study the following information about a country and answer Question 18 and 19.
$ Million
National Income 500
Depreciation 60
Rent 120
Interest 70
Profit 180
Subsidies 80
Indirect Taxes 100
The gross national product (GNP) at factor cost is (in $ million):
A. 520 B. 540 C. 560 D. 580
7. 2006/II/28
The following table shows the statistical data of an economy.
Components $Million Private consumption expenditure Government consumption expenditure Net domestic fixed capital formation Decrease in stock Subsidies Depreciation Net exports Net income from abroad Direct tax
200 150 300 70
120 50
300 80
100
The GDP at factor cost (in $mn) is
A. 950 B. 970 C. 1050 D. 1190
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8. 2008/II/13
Hong Kong GDP at factor cost was higher in 2005 than in 2001. The charts below show the contribution to
GDP at factor cost by sectors in 2001 and 2005 respectively.
Based on the above information, we can conclude that in the year 2005
A. workers in the tertiary sector on average earned more than those in the secondary sector
B. the labour productivity of the secondary sector decreased
C. the output value of the primary sector increased
D. the number of workers in the tertiary sector increased
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1. 1991/II/59
Growth rate of GDP in 1990
At current market prices 15.2%
At constant (1980) market prices 11.9%
The above data do NOT show an increase in the ______ in 1990.
A. general price level B. nominal GDP C. real GDP D. labour productivity
2. 1995/II/34
If a country’s real GNP and price level both increase by 5%, this implies that
A. the standard of living will remain unchanged
B. the nominal GNP will rise by 5%
C. the nominal GNP has a greater percentage increase than the real GNP
D. the nominal GNP will remain constant
3. 1997/II/23
The following are data of Country X.
Year 1992 1997
GDP $500 billion $700 billion
Price Index (1990=100) 120 135
The growth rate of real GDP from 1992 to 1997 is:
A. 24.4% B. 28.6% C. 40.0% D. 57.5%
4. 1998/II/23
Suppose a closed economy produces food and clothing only. The outputs of Years 1 and 2 are as follows:
From Year 1 to Year 2, the real gross national product (real GNP) of this country has
A. worsened because the price level increases B. worsened because the output of both goods decreases
C. improved because the nominal GNP increases D. improved because the technology advances
5. 1998/II/29
Suppose a country experiences a 2% increase in the production volume of goods and services as well as a 3%
rise in the general price level in a year. We can conclude that
(1) the real GNP will increase by 2%
(2) the nominal GNP will increase by 2%
(3) the nominal GNP will increase by 3%
(4) the nominal GNP will increase more than the real GNP by 1%
A. (1) only B. (2) only C. (1) and (2) only D. (1), (3) and (4) only
Year Quantity of food (unit) Unit price of food ($) Quantity of clothing (unit)
Unit price of clothing ($)
1 2
20 15
4 10
40 35
12 30
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6. 1999/II/25
Suppose the nominal GNP and the price level increase by 10% and 5% respectively, but the population decreases
by 10%. Then the per capita nominal GNP will _______ and the per capita real GNP will ________ .
A. increase … increase B. decrease … decrease
C. increase … remain unchanged D. remain unchanged … increase
7. 2000/II/36
Year GNP at current market price ($ billion) GNP deflator
1997 1998
2100 2800
105 125
Based on the above information, the growth rate of real gross national product (real GNP) between 1997
and 1998 is
A. 12% B. 16.3% C. 33.3% D. There is insufficient information to find the answer.
8. 2002/II/30
From 1991 to 1998, GDP at current market prices is always greater than GDP at constant (1990) market prices
because
A. the inflation rate is increasing in this period.
B. the real output level is rising in this period.
C. the current price level is always higher than the price level of 1990.
D. the inflation rate is higher than the real output growth rate.
9. 2003/II/29
If both of the nominal and real GDP of an economy are rising, the general price level of the economy
A. is rising B. is falling C. remain unchanged D. may be rising, falling or remain unchanged
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10. 2004/II/34
According to the above data on an economy,
A. the real GDP has increased. B. the unemployment rate has increased.
C. the inflation rate has increased. D. the general living standard has decreased.
11. 2005/II/29
Study the following information about a country:
Year Nominal GDP (in million dollars) Price index
2003 2004
75 000 100 000
90 100
As a compared to 2003, the _________ of this country was higher in 2004.
A. general living standard B. real GDP C. consumption expenditure D. average income
12. 2007/II/32
Year Nominal GDP($ billion) Population (million) Consumer Price Index
1 3 000 2 100
2 3 500 2.5 110
According to the above information, from Year 1 to Year 2, the economy’s real GDP has ________ and
the per capita nominal GDP has ________.
A. increased ... decreased B. increased ... increased
C. decreased ... decreased D. decreased ... increased
13. 2008/II/32
The following table shows the change in GDP from Year 1 to Year 2.
We can conclude from the above data that the real output _____ and the general price level _____ in that period
A. increased ... decreased
B. increased ... increased
C. decreased ... increased
D. decreased ... decreased
Composite Consumer Price Index -3.0%
GDP deflator -2.7%
Nominal GDP -0.6%
Change
GDP at current market prices GDP at constant market prices
+5.1% +8.1%
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1. 1990/II/37
The national income of a country will tend to increase if
A. the government increases its budget surplus. B. The government raises the interest rates.
C. The government reduces the profits tax rates. D. The demand for exports decreases.
2. 1993/II/51
An increase in exports and a decrease in imports will cause the national income to
A. increase B. decrease C. remain unchanged D. either increase or decrease
3. 1997/II/22
It is expected that there will be a record-high number of tourists visiting Hong Kong in the year 1997. This will
increase Hong Kong's
A. GDP B. visible trade C. net external factor income flows D. consumer price index
4. 1997/II/29
Which of the following events that occurred in 1996 would lead to a rise in the GDP of 1996?
A. The government issued more Exchange Fund bills
B. The government increased the salaries tax allowance
C. The market value of accommodation units which were completed and sold in previous years
rose continuously.
D. An international corporation collected $1 billion from the subscribes of its newly-issued shares
5. 2004/II/29
The introduction of the ‘individual visit’ scheme for Mainland visitors to Hong Kong would increase the
GDP of Hong Kong. The spending of these visitors on jewellery in Hong Kong is a/an ______of Hong Kong.
A. consumption expenditure B. investment expenditure C. export D. import
6. 2004/II/31
Which of the following is both a demand-side factor and a supply-side factor affecting national income?
A. the government’s productivity-enhancement projects
B. the government’s promotion of tourism
C. a ‘buying local products’ campaign
D. a firework show sponsored by private firms
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7. 2005/II/30
Which of the following will result in an increase in Hong Kong’s GDP?
A. The government increases the profit tax rate
B. There is a fall in the total export value of Hong Kong made toys
C. The government develops the Western Kowloon cultural district
D. There are more Hong Kong people traveling in foreign countries
8. 2006/II/32
Which of the following would most likely raise the potential GDP (i.e. production capacity) of an economy?
A. an increase in the social welfare benefit
B. an increase in the reserve ratio of the banking system
C. an increase in the government expenditure on tertiary production
D. an increase in the demand for the economy’s exports
9. 2008/II/28
If the government constructs the Tuen Mun-Chek Lap Kok Link to links up Shenzhen and the Hong Kong
International Airport, the _________ of Hong Kong will increase
(1) employment
(2) actual GDP
(3) potential GDP
A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. (1),(2) and (3)
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1. 1990/II/56
When both the price level and the money income level of a society rise,
A. the living standard will drop because the value of money decreases.
B. the living standard will rise because the citizens have more money to spend.
C. the living standard will not change because the rise in income is offset by the rise in price.
D. the effect on the living standard is not certain because the extent of both changes is unknown.
2. 1993/II/41
The Gross National Product of a country may overstate the living standard of its people because the figure
(1) doses not reflect the improvement in the quality of the goods and services produced in the country
(2) doses not reflect the effect of a rise in the price level
(3) excludes the undesirable effects of production
(4) excludes the goods not transacted in the market
A. (1) and (2) only B. (1) and (4) only C. (2) and (3) only D. (3) and (4) only
3. 1999/II/30
Under which of the following circumstances will the per capita real GNP understate the living standard?
A. when the construction industry causes noise pollution
B. when there is an increase in population due to immigration
C. when Mrs. Lam does the housework by herself instead of employing a servant
D. when there is inflation
4. 2002/II/27
Country X has a higher GDP but a lower general living standard than Country Y. Which of the following is a
possible reason for this?
A. The net factor income from abroad of Country Y is smaller
B. The working hours of people in Country Y are longer
C. Capital goods make up a higher proportion of the output of Country Y
D. The population size in Country Y is smaller
5. 2006/II/50
GDP at constant market price would NOT be a good indicator to compare the living standard of two countries
When the __________ of the two countries is different.
(1) population size
(2) income distribution
(3) inflation rate
A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. (1), (2) and (3)
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1. 1994/II/35
According to the data below, what do we call the phase of the business cycle that the economy was in 1991?
Year 1989 1990 1991 1992 1993
Real GDP growth rate (%) 1.5 0.0 2.1 2.8 3.5
A. recovery B. peak C. recession D. trough
2. 1994/II/36
During recession,
(1) The growth rate of national income is steady.
(2) The general price level begins rise.
(3) The unemployment rate increase.
(4) The production level declines.
A. (1) and (2) only B. (1) and (4) only C. (2) and (3) only D. (3) and (4) only
3. 1995/II/35
Which of the following will happen in times of recession?
(1) The total demand for goods and services will decrease.
(2) The budget deficit will decrease.
(3) The unemployment rate will increase.
(4) The balance of payments deficit will increase.
A. (1) and (3) only B. (1) and (4) only C. (2) and (3) only D. (2) and (4) only
4. 1996/II/59
Which of the following is NOT a characteristic of the phases of recession in a business cycle?
A. The consumption expenditure decreases.
B. The investment expenditure decreases.
C. The unemployment rate increases.
D. The government suffers from fiscal deficit as her tax revenue decreases and expenditure increase.
5. 1997/II/30
An economy is experiencing the following : the unemployment rate is declining, prices have stopped falling and
started rising, and investment expenditure is expanding. It is the ___________ phase of a business cycle.
A. recovery B. peak C. recession D. trough
6. 1998/II/27
Which of the following indicates that the economy is beginning to recover from depression?
A. decreasing price level
B. increasing government fiscal deficit
C. decreasing balance of payments deficit
D. increasing employment rate
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7. 1999/II/27
Average growth rate
X Year
In the diagram below, X is situated in a certain phase of the business cycle. Which of the following is a
characteristic of this phase?
A. The real GNP has a zero growth rate. B. The nominal GNP is higher than the real GNP.
C. The investment expenditure of the economy is zero. D. The unemployment rate is high.
8. 1999/II/28
According to the government, Hong Kong experienced a recession in 1998 because for three consecutive
quarters, there was
A. an increase in the unemployment rate B. a fall in the average wage rate
C. a fall in the general price level D. a negative growth rate of real gross domestic product (GDP)
9. 2000/II/37
The following phenomena are observed in an economy :
(1) industrial output on an upward trend
(2) increasing imports and exports
(3) growth of retail receipts
(4) forecast of economic growth being revised upwards
Which phase of the business cycle is the economy in ?
A. peak B. recession C. trough D. recovery
10. 2001/II/38
If Hong Kong is in the stage of recovery in the business cycle,
A. government expenditure will increase.
B. the proportion of tax revenue in total government revenue will decrease.
C. government revenue from direct taxes will increase.
D. there will be a budgetary surplus for the government.
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11. 2002/II/28
The information above shows that the economy is in a stage of _______ in Year 3.
A. recession B. depression C. recovery D. prosperity
12. 2004/II/32
When an economy is in the recovery stage,
(1) retail receipts will increase.
(2) the government will have a budget surplus.
(3) the unemployment rate will fall.
(4) the balance of payments deficit will decrease.
A. (1) and (3) only B. (1) and (4) only C. (2) and (3) only D. (2) and (4) only
13. 2005/II/31
The following is observed in an economy: the unemployment rate is decreasing, the price level is no longer falling
but rising instead, and the investment expenditure increasing. In which phase of the business cycle is the economy
situated?
A. recovery B. peak C. recession D. trough
14. 2006/II/27
According to the above information, the economy is in a stage of ____________ in 2004.
A. recovery B. prosperity C. recession D. depression
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15. 2007/II/31
In the diagram below, X is situated in a certain phase of the business cycle. Which of the following
is a characteristic of this phase?
A. The general price level is falling.
B. The consumption expenditure is falling.
C. The balance of payments surplus is increasing.
D. The level of investment is increasing.
16. 2008/II/29
In the stage of economic ______________ , the percentage change in real GDP _________.
A. recession … could be negative B. recovery … is equal to the inflation rate
C. prosperity … will be constant D. depression … will be zero
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1. 1993/II/49
In an economy with unemployment, a deficit budget will lead to
A. a lower rate of unemployment B. a lower level of national income
C. a lower rate of household consumption D. a decrease in government debt
2. 1994/II/37
Which of the following people would be classified as ‘unemployed’ in Hong Kong?
A. Jack, aged 30, who has retired after winning the mark six.
B. Peter, aged 14, who cannot find a job after completing form three.
C. John, who has quit his job and has gone on a trip to Europe.
D. Mary, who lost her job five weeks ago and has been looking for a new job for one month.
3. 1995/II/15
From the above table, we can conclude that
A. the manufacturing sector had a big fall in employment in 1992 as compared to 1982.
B. the services sector had a great increase in employment in 1992 as compared to 1982.
C. the services sector employed the largest number of working people in 1992.
D. the services sector accounted for a greater proportion of gross domestic product (GDP) than the
manufacturing sector in 1992.
4. 1995/II/37
Which of the following are the possible losses to society caused by unemployment?
(1) loss of output
(2) a higher crime rate
(3) a greater expenditure in public assistance
(4) a reduction in the government’s tax revenue
A. (1) and (2) only B. (1) and (3) only C. (2) and (4) only D. (3) and (4) only
5. 1996/II/33
David has quit his job for two months because he has been ill and is restring in bed. According to the
Hong Kong government, he is
A. unemployed B. underemployed. C. employed. D. not in the labor force.
% share in total employment
1982 1992
Manufacturing sector 45% 19%
Services sector 50% 78%
Others 5% 3%
Total 100% 100%
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6. 1997/II/26
Study the following data about Hong Kong in a certain year:
Numbers of persons
Employed Population 2 931 000
Underemployed Population 33 000
Unemployed Population 69 000
The unemployment rate is
A. 2.27% B. 2.30% C. 3.36% D. 3.40%
7. 1997/II/55
An increase in the number of Form 7 graduates studying in the universities will result in
(1) a decrease in the present labour supply.
(2) a decrease in the present unemployment rate.
(3) an increase in future average labour productivity.
A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. (1), (2) and (3)
8. 1998/II/24
Which of the following are included in the calculation of the labour force of Hong Kong?
(1) an employee with a foreign nationality working in a law firm in Hong Kong
(2) Mr. Chan, who is unemployed and searching for a job
(3) Mr. Wong, who works as a volunteer in a community center after his retirement
A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. (1), (2) and (3)
9. 1998/II/28
If some Hong Kong residents who emigrated return to Hong Kong to fill up some posts which have been
vacant for a long time, then Hong Kong’s labour force would ________ and her unemployment rate would
_________ .
A. increase … fall B. decrease … fall C. increase … rise D. decrease … rise
10. 1999/II/32
Many imported workers who had stayed in Hong Kong several years working on the new airport project,
have gone back to their home countries. What will be the effect of their departure on the unemployment rate in
Hong Kong?
A. The unemployment rate will increase. B. The unemployment rate will decrease.
C. The unemployment rate will remain constant. D. The effect cannot be determined.
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11. 2000/II/38
Which of the following would most likely increase employment during an economic downturn?
A. restructuring of private firms to improve their efficiency
B. increasing computerization and automation of production process
C. government’s injection of a large amount of funds to help small enterprises
D. increasing real interest rates
12. 2001/II/30
Which of the following changes would reduce unemployment?
A. The government introduces a minimum wage law.
B. The profits tax rate is raised.
C. Many domestic firms try to use more labour-saving machines.
D. The demand for the country’s exports increases.
13. 2002/II/29
Number of Persons
Population aged 15 or above 10 000 000
Employed population 6 800 000
Unemployed population 1 200 000
Underemployed population 800 000
According to the above table, which of the following statements is/are correct?
(1) The labour force amounts to 8 000 000.
(2) The underemployment rate is 10%.
(3) The unemployment rate is 12%.
A. (3) only B. (1) and (2) only C. (1) and (3) only D. (2) and (3) only
14. 2002/II/31
Which of the following are possible losses to a society cause by unemployment?
(1) more government spending on public security due to a higher crime rate
(2) more unemployment assistance given by the government
(3) lower output level
(4) lower cost of living
A. (1) and (3) only B. (2) and (4) only C. (1), (2) and (3) only D. (2), (3) and (4) only
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15. 2003/II/30
Study the following data about Hong Kong in the period of July 2002 to September 2002.
Numbers of persons
Employed Population 3 243 000
Underemployed Population 101 000
Unemployed Population 267 000
The unemployment rate is
A. 7.4% B. 7.6% C. 8.2% D. 10.2%
16. 2004/II/33
Number of Persons
Employed population 18 400
Unemployed population 1 600
Now there are 1 000 additional job seekers in the economy. If 90% of them succeed in finding a job, the
unemployment rate
A. will increase B. will decrease C. will remain unchanged D. may increase or decrease
17. 2005/II/6
It was reported that in the late 2004, there were millions of unemployed people in the countryside Chinese
Mainland. On the other hand, the firms in the Pearl Ricer Delta faced a labour shortage problem.
Which of the following would reduce the unemployment in the countryside?
(1) The social wealth benefit of workers in the Pearl River Delta improves
(2) Labour wages in the Pearl River Delta fall
(3) Firms in the Pearl River Delta move to countryside
A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. (1), (2) and (3)
18. 2005/II/32
Population
Aged 15 or above 10 000 000
Employed 6 800 000
Unemployed 1 200 000
Underemployed 1 600 000
According to the above data,
A. the total labour force is 9 600 000 B. the underemployment rate is 20%
C. the unemployment rate is 12.5% D. the unemployment rate is 16%
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19. 2006/II/30
Suppose the unemployed population of an economy is 500 000 while the unemployment rate is 5%.
The employed population is
A. 500 000 B. 1 000 000 C. 9 500 000 D. 10 000 000
20. 2007/II/30
Unemployment is costly to society because
A. the employed will pay more tax B. the potential GDP will fall
C. the real output of the economy will fall D. unemployment benefit is a burden to society
21. 2008/II/30
Study the following figure of an economy
Numbers of persons
Unemployed 20 000
Underemployed 60 000
Employed 480 000
Persons aged 15 or above 1 000 000
The unemployment rate of the economy is ___________ .
A. 2.0% B. 3.7% C. 4.0% D. 4.17%
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1. 1990/II/34
During inflation, the __________ of the people increase(s) and more people are put into the tax net or into higher
tax brackets. Given the same tax allowances, their __________ actually increase(s).
A. nominal incomes, tax burden B. real incomes, nominal incomes
C. nominal incomes, real incomes D. tax burden, nominal incomes
2. 1990/II/38
Which of the following would make depositors in Hong Kong transfer their local currency deposits to foreign
currency deposits?
A. The interest rate in Hong Kong has increased relative to other countries.
B. There is a widespread belief that the Hong Kong dollar is overvalued.
C. The local political development is favourable.
D. The value of Hong Kong’s exports has increased.
3. 1990/II/44
Which of the following is a fiscal policy used to reduce inflation?
A. a direct control on the rise in wages of workers
B. an increase in unemployment benefits
C. an increase in the required reserve ratio of banks
D. a decrease in the spending on an environmental protection scheme
4. 1990/II/53
Refer to the table below:
Year Real GDP ($Mn) Nominal GDP ($Mn)
1985 1982
150 120
180 120
What is the GDP deflator in 1985?
A. 100 B. 120 C. 150 D. 180
5. 1990/II/56
When both the price level and the money income level of a society rise,
A. the living standard will drop because the value of money decreases.
B. the living standard will rise because the citizens have more money to spend.
C. the living standard will not change because the rise in income is offset by the rise in price.
D. the effect on the living standard is not certain because the extent of both changes is unknown.
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6. 1991/II/30
Which of the following would affect the value of money?
A. The consumer price index increases.
B. The money income and the real income increase by the same percentage.
C. The cost of printing bank notes increases.
D. New bank notes are issued to replace the old ones.
7. 1991/II/45
Which of the following is most likely to lead to a fall in the inflation rate?
A. an increase in the money supply B. an increase in the interest rate
C. an increase in government expenditure D. an increase in indirect tax
8. 1991/II/46
What will happen when there is inflation?
A. The cost of living will fall. B. The budget deficit will decrease.
C. The living standard will improve. D. The value of money will decrease.
9. 1991/II/48
Unexpected inflation will
(1) increase government revenue.
(2) Encourage exports.
(3) Redistribute income.
(4) Cause an inflow of short-term capital.
A. (1) and (2) only B. (1) and (3) only C. (2) and (4) only D. (3) and (4) only
10. 1992/II/43
In the financial year 1990-1991, the government increased the tax allowance by about 5 %. The
inflation rate at the same period was about 10 %. Which one of the following was a consequence
of the above situation?
A. The government had to introduce a sales tax.
B. More people fell into the tax net.
C. The real income of Hong Kong people increased.
D. The government collected more indirect tax revenue.
11. 1992/II/50
According to the table above, which of the following statements is true?
A. The cost of living was lower in 1990 B. The standard of living was lower in 1990
C. The purchasing power of money was higher in 1991 D. The consumption expenditure was higher in 1991
Year 1990 1991
Consumer price index 100 125
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12. 1993/II/42
The above table compares the indexes for November 1991 and November 1992. It shows that in November 1992,
The _________ of the higher income group increased at a _________ rate than that of the lower income group
A. standard of living … faster B. standard of living … slower
C. cost of living … faster D. cost of living … slower
13. 1993/II/43
In Hong Kong, inflation at the consumer level has remained at around 10% for the past few years. Which of the
following are two possible reasons for this phenomenon?
(1) a recession affecting western countries
(2) the surplus budgetary policy of the government
(3) low interest rates for bank deposits and loans
(4) an inflow of capital from China
A. (1) and (2) only B. (1) and (4) only C. (2) and (3) only D. (3) and (4) only
14. 1993/II/60
Which of the following methods is NOT inflationary in financing government expenditure in Hong Kong?
A. printing more money
B. increasing tax revenue
C. using fiscal reserves
D. borrowing money from other countries
15. 1994/II/34
The rate of inflation from 1992 to 1993 calculated by using the GNP deflator is:
A. 18.2% B. 22.2% C. 33.3% D. 122.2%
16. 1994/II/38
Who will lose during an unanticipated inflation?
A. Mrs. Lee, who has hired a Filipino maid
B. Mr. Chan, who has bought ten coupons which can be exchanged for cakes at a bakery
C. Mr. Fu, who runs a restaurant
D. Mr. Wong, who has put all his money in his time deposit account
November 1991 November 1992
Consumer price index Hang Seng Consumer price index
117.7 118.7
128.5 129.9
Price in 1992 ($) Price in 1993 ($) Output in 1993
Bread Shirts
10 20
12 25
50 20
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17. 1995/II/33
Based on the above data, we may conclude that from 1994 to 1995, the economy’s
A. nominal GDP increased by 12%. B. real GDP increased by 10%.
C. rate of deflation was 12%. D. general price level increased by 10%.
18. 1995/II/36
Which of the following people will gain in times of unexpected inflation?
(1) holders of long-term government bonds
(2) holders of certificates of deposits
(3) those who have used credit cards to buy goods
(4) shareholders of companies which have issued long-term fixed-interest debentures.
A. (1) and (2) only B. (1) and (4) only C. (2) and (3) only D. (3) and (4) only
19. 1996/II/32
Study the following information about Country X:
Year Nominal national income ($mn) Price index
1988 1989
8000 10000
100 120
Comparing the year 1988 with 1989, we can conclude that
A. the cost of living increase by 20% in 1989.
B. The living standard in 1989 is generally higher.
C. The real GNP growth rate in 1989 is 25 %.
D. The price of all goods and services increase by 20% in 1989.
Year 1994 1995
GDP deflator 120 132
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20. 1997/II/25
The above graph shows that in the first half of 1996,
A. the high price of housing had lead to a low consumption of the citizens
B. the living standard of Hong Kong people had improved
C. Hong Kong’ property market was on the upswing
D. there was a lot of speculative in the property market of Hong Kong
21. 1997/II/27
The above data reflects that during this period,
A. the consumption power of the people became weaker
B. the economy was on a downswing
C. the people consumed less but saved more
D. the increase in the cost of living had slowed down
22. 1997/II/31
An increase in the GDP deflector from 100 to 110 in a certain year means that
A. every household's cost of living has increased by 10%
B. the general price level has increased by 10%
C. the prices of all goods produced in the current year have increased by 10%
D. people's nominal incomes have increased by 10%
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23. 1999/II/33
Study the figure below concerning the changes in the Consumer Price Index. Study the figure below
concerning the changes in the Consumer Price Index.
From the figure, we can conclude that
A. inflation has stopped as prices go down.
B. wages have decreased.
C. the cost of living has been rising at a slower rate.
D. some debts who purchased mortgages on flats recently have suffered a loss.
24. 2000/II/39
Mr. A borrows money from a bank for a housing mortgage at a fixed interest rate of 7% p.a. After that the
general price level falls continuously. In this event, Mr. A loses and the bank gains. This is because
A. the value of the mortgaged house has been falling.
B. Mr. A’s wage income has been falling.
C. the bank can sell the house if Mr. A fails to repay the loan.
D. when the general price level keeps on falling, the purchasing power of a fixed amount of interest will
increase.
25. 2001/II/31
Based on the data in Chart 1, under what situation would Mr. Chan have gained from July 1999 to July 2000?
A. Before that period of time he had already borrowed a sum of money from a bank at a fixed interest rate.
B. His salary remained unchanged during that period of time.
C. He adjusted the rental charge to his tenant in a rental property according to the change in price level.
D. He had a collection of antique vases.
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26. 2001/II/32
Refer to the following data about an economy.
Year 1 Year 2
GDP deflator 150 180
We can conclude that from Year 1 to Year 2,
A. the purchasing power of money has decreased. B. the real national income has decreased.
C. the average standard of living has gone down. D. the income distribution has become more uneven.
27. 2002/II/42
Suppose the government of an economy cuts the salaries tax allowance by 10% while both the wage rates
and the general price level in the year fall by 5%. It follows that
A. the tax revenue would increase.
B. more people would fall into the tax net.
C. the real income of people before tax would generally increase.
D. the ratio of people’s tax payment to their nominal income would generally decrease.
28. 2003/II/28
Suppose the GDP deflator of an economy decreases from 100 to 90. This implies that
A. its GDP decreases by 10 %. B. the general price level decreases by 10 %.
C. people’s real income increases by 10 %. D. people’s living standard decreases by 10 %.
29. 2005/II/33
Which of the following would gain when unexpected inflation occurs?
A. holders of fixed deposits with banks
B. employees whose salaries are adjusted according to inflation
C. people who received a fixed amount of unemployment benefits
D. a government which has issued bonds at fixed interest rates
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30. 2005/II/34
Based on the above diagram, we can conclude that during this period,
A. the nominal GDP was decreasing B. the real GDP was decreasing
C. the cost of living was increasing D. the purchasing power of money was increasing
31. 2006/II/31
The Consumer Price Index(A) of Hong Kong in the third quarter of 2005 has increased. This means
that ________________ in Hong Kong has increased
A. the price of all goods B. the price of imported goods
C. the nominal national income D. the cost of living
32. 2007/II/33
Which of the following statements about inflation is correct?
A. A continuous increase in the price of a good is not inflation
B. During inflation, everyone suffers to the same extent
C. During inflation, incomes and prices increase at the same rate
D. Inflation may benefit some people, particularly those people whose incomes are fixed
33. 2007/II/34
Refer to the following information about the composite consumer price index of Hong Kong.
Based on the above information, we can conclude that during this period in 2006,
A. the nominal GDP was falling B. the nominal GDP was increasing
C. the purchasing power of money was falling D. the purchasing power of money was increasing
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34. 2008/II/31
Which of the following would lose during an unexpected inflation?
A. a tenant who has signed a fixed rental contract before the unexpected inflation occurs
B. an employer who has fixed the wage payment to his employees before the unexpected inflation occurs
C. a creditor who has loaned out a sum of money at a fixed interest rate before the unexpected inflation occurs
D. an insurer who is paying compensation, the amount of which was fixed before the unexpected inflation
occurs
35. 2008/II/33
The following table shows the Consumer Price Index (A) of Hong Kong from 2004 to 2006.
Year Consumer Price Index (A)
2004 99.3
2005 100.3
2006 102.1
Based on the above table, we can conclude that during this period of time,
A. the per capital nominal GDP has increased B. the living standard has worsened
C. the cost of living has increased D. the frequency of making payments
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1. 1990/II/29
To serve as a unit of account, money has to be
A. homogeneous B. portable C. scarce D. durable
2. 1990/II/30
The Canadian Maple Leaf gold coins can be an example of __________ in Hong Kong.
A. legal tender B. credit money C. bank assets D. token coins
3. 1990/II/40
Which of the following is the most acceptable means to settle a debt in Hong Kong?
A. credit cards B. personal cheques C. Japanese yen D. Bank drafts
4. 1990/II/41
The value of money is reflected by its
A. face value. B. intrinsic value C. purchasing power. D. owner’s subjective value.
5. 1990/II/58
Which of the following statements is INCORRECT?
A. A credit card is money because it is a means of payment.
B. The use of money eliminates the need for the double coincidence of wants in transactions.
C. Money performs less satisfactorily as a store of value when inflation is serious.
D. In a barter economy, when a person buys a good, he must be also selling another good.
6. 1991/II/29
Which of the following can best serve as money in a desert?
A. shells B. sand C. water D. potatoes
7. 1992/II/33
A time deposit fulfils the function of money as a
A. medium of exchange B. store of value
C. unit of account D. standard of deferred payments
8. 1992/II/57
The potato is NOT a good form of money mainly because it is
A. indivisible B. portable C. homogeneous D. perishable
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9. 1992/II/59
Which of the following descriptions about barter is FALSE?
A. Barter means a direct exchange of goods and services
B. Barter is possible only when there is double coincidence of wants
C. Barter exists only in societies without a medium of exchange
D. Usually it is more difficult to practise barter in international trade than in domestic trade
10. 1993/II/31
Nowadays one can use a credit card or coins to make phone calls from public telephones. The telephone company
accepts the use of credit cards for phone calls because
(1) a credit card is legal tender
(2) a credit card is a means of deferred payment
(3) credit card holders are more trustworthy people
(4) the cost of handling coins can be reduced
A. (1) and (2) only B. (1) and (3) only C (2) and (4) only D. (3) and (4) only
11. 1993/II/58
Money will NOT exist if
A. there is no banking system B. only credit cards are accepted for payment
C. there is only one man on earth D. trade is totally banned among countries
12. 1994/II/41
Banknotes are preferred to cheques as means of payment because the former are more
A. divisible B. generally acceptable C. portable D. scarce
13. 1995/II/38
Which of the following about money is correct?
A. It must have intrinsic value.
B. It must be backed up by law to be the medium of exchange.
C. It must be convertible into some precious metal.
D. It must be generally acceptable as the medium of exchange.
14. 1995/II/39
Banknotes is a better form of money than demand deposits because the former is more
A. generally acceptable B. divisible C. durable D. portable
15. 1995/II/40
Arrange the following assets in terms of liquidity in descending order :
(1) ordinary shares (2) real estate (3) bank notes (4) demand deposits
A. (1), (3), (4), (2) B. (3), (4), (1), (2) C. (3), (4), (2), (1) D. (4), (3), (2), (1)
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16. 1995/II/50
Exchange with the use of money differs from barter exchange in that the former
A. is controlled by the government but the latter is not.
B. has a price for each good but the latter has not.
C. does not require the double coincidence of wants but the latter does.
D. involves competition but the latter does not.
17. 1996/II/34
During war time, gold is a better form of money than paper money mainly because gold is more
A. durable B. portable C. generally acceptable D. homogeneous
18. 1996/II/38
Arrange the following bank assets in descending order of liquidity:
(1) loans and advances
(2) deposits with others banks
(3) real estates owned by the bank
A. (1),(2),(3) B. (1),(3),(2) C. (2),(1),(3) D. (3),(2),(1)
19. 1997/II/32
99 gold is a better form of money than diamond because the former is more
(1) easily divisible
(2) scarce
(3) homogenous
A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. (1),(2) and (3)
20. 1997/II/39
Holders of a/an _________ has the least risk and the highest liquidity.
A. long-term corporate bond B. ordinary share
C. preference share D. savings deposit
21. 1998/II/32
Cheques are preferred to banknotes and coins when used as a medium of exchange in large transactions because
cheques are more
A. durable B. generally acceptable C. scarce D. portable
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22. 1999/II/35
9999 Gold is better as a form of money than jade because the former is more
(1) generally acceptable.
(2) easily divisible.
(3) homogeneous.
A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. (1), (2) and (3)
23. 2001/II/48
In Hong Kong, drivers can buy tickets from tunnel companies for using tunnel services. These tickets are
NOT a standard of deferred payment. In other words,
A. the purchasing power stored in the tickets can only be used for certain tunnel services.
B. most people in Hong Kong do not use the tickets for the tunnel services.
C. the value of most goods and services are not measured in terms of the tickets.
D. payment in the future in general is not denominated in the tickets.
24. 2002/II/34
Which of the following statements about money are correct?
(1) The purchasing power of money will remain unchanged in times of deflation.
(2) A wider use of electronic money will reduce the cash held by the public.
(3) Money helps people to accumulate their purchasing power.
A. (1) and (2) only B. (1) and (3) only C (2) and (3) only D. (1), (2) and (3)
25. 2003/II/50
Fish are NOT good units of account mainly because they are not
A. durable B. scarce C. homogeneous D. portable
26. 2004/II/35
When a barter economy changes to an economy that uses money in exchange,
(1) finding trading partners becomes easier.
(2) making transactions involving future settlement of debt becomes easier.
(3) agreeing upon prices takes a longer time.
A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. (1), (2) and (3)
27. 2004/II/36
A time deposit is better than a demand deposit in serving the __________ function of money because
the former __________.
A. unit of account … has a common unit B. store of value ... bears interest income
C. medium of exchange … is generally acceptable D. standard of deferred payments … is a liquid asset
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28. 2004/II/40
Which of the following kinds of assets has the lowest liquidity?
A. cash in hand B. ordinary shares C. demand deposits D. savings deposits
29. 2005/II/35
Country A used gold as is currency. Suppose the scientists in the country have found a method to produce
gold at nearly zero cost. As a result, the government has decided to give up using gold as its currency. This
illustrates that good money has to be
A. portable B. divisible C. scarce D. durable
30. 2006/II/33
Which of the following statements about money are correct?
(1) Under the electronic payment system, transactions are still settled with money
(2) Deflation reduces the purchasing power of money
(3) With the use off money in exchange, there is no need to have double coincidence of wants
A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. (1), (2) and (3)
31. 2006/II/34
9999 gold is a better form of money than grains of wheat because the former is more
(1) durable
(2) homogeneous
(3) easily divisible
A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. (1), (2) and (3)
32. 2007/II/35
During inflation, people are less willing to keep their wealth in the form of money. This is because at that time
the function of money to serve as a ____ is weakened.
A. medium of exchange B. store of value C. unit of account D. means of payment
33. 2008/II/34
An economy that changes from barter to using money in exchange would reduce
A. the need for specialization B. the need for exchange
C. the time for searching trading partners D. the frequency of making payments
34. 2008/II/35
As a form of money, polymer notes are more ___ than paper notes.
A. homogenous B. durable C. divisible D. portable
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35. 2008/II/36
A more popular use of electronic money can bring about the following advantages:
(1) a smaller amount of coins and notes to be handled
(2) a lower chance of receiving fake banknotes
(3) more interest earned by keeping the money in banks for a longer period of time
A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. (1), (2) and (3)
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1. 1993/II/34
In Hong Kong a restricted licensed bank faces more restrictions than a licensed bank with reference to :
(1) the types of deposits it can accept
(2) the minimum deposits it can accept
(3) the maximum deposits interest rate it can offer
A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. (1), (2) and (3)
2. 1994/II/39
Fanny plans to deposit HK$250 000 in a financial intermediary for three months. Which of the following
institutions can accepts her deposit?
(1) licensed banks
(2) restricted license banks
(3) deposit-taking companies
A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. (1), (2) and (3)
3. 1994/II/44
Which of the following descriptions of ‘demand deposits’ is correct?
A. They can be accepted by deposit-taking companies in Hong Kong.
B. They are legal tender in Hong Kong.
C. They are a form of credit money.
D. They are an interest-bearing asset.
4. 2000/II/31
Mr. Cheung has $100 000 cash in hand. He needs the money two months later to use as partial payment
for his new house. He may deposit the money into
(1) a licensed bank.
(2) a restricted license bank.
(3) a deposit-taking company.
A. (1) only B. (1) and (2) only C. (1) and (3) only D. (2) and (3) only
5. 2001/II/27
John wants to deposit $80 000 for 4 months in Hong Kong. Which of the following financial institutions
can accept his deposit?
A. a licensed bank
B. a restricted license bank
C. a deposit taking company
D. All of the above
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6. 2002/II/32
Which of the following financial institutions in Hong Kong can accept savings deposits?
A. licensed banks
B. restricted license banks
C. deposit-taking companies
D. all of the above are correct.
7. 2003/II/33
Sue wants to deposit $300 000 for 1 month. Which of the following institutions can accept her deposit?
(1) licensed banks
(2) restricted license banks
(3) deposit-taking companies
A. (1) only B. (1) and (3) only C. (2) and (3) only D. (1), (2) and (3)
8. 2005/II/36
Mr. Chan plans to deposit $500 000 for one month. Which of the following institutions can accept his deposit?
(1) licensed banks
(2) restricted license banks
(3) deposit-taking companies
A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. (1), (2) and (3)
9. 2007/II/38
If an individual plans to deposit $200 000 in a financial institution in Hong Kong for three months, which of the
following institutions can accept this deposit?
(1) licensed banks
(2) restricted license banks
(3) deposit-taking companies
A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. (1), (2) and (3)
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1. 1990/II/50
The Hong Kong Association of Banks (abolished)
A. sets the maximum deposit interest rate in Hong Kong.
B. manages the government reserves.
C. acts as a lender of last resort.
D. determines the monetary policy in Hong Kong.
2. 1993/II/59
Which of the following is NOT a function performed by the Exchange Fund?
A. to issue certificates of indebtedness to the note-issuing banks.
B. to manage foreign exchange reserves for the government.
C. to issue Exchange Fund bills.
D. to determine bank deposit interest rates.
3. 1994/II/45
Which of the following statements about Hong Kong’s note-issuing system is correct?
A. Any individual can exchange US dollars for Hong Kong dollars with the Monetary Authority at the rate
US$1 = HK$7.8.
B. Hong Kong dollar notes are issued by the Monetary Authority.
C. Hong Kong dollars will always be fixed against the US dollar at the rate US$1 = HK$7.8 in the foreign
exchange market.
D. To issue Hong Kong dollar notes, the note-issuing banks have to surrender US dollars to the Monetary
Authority in exchange for certificates of indebtedness.
4. 1995/II/41
Which of the following are the central-bank functions performed by the Hong Kong Monetary Authority ?
(1) supervision of banking activities
(2) financing the budget deficit
(3) maintaining the stability of the exchange rate of the Hong Kong dollar
(4) cheque clearing
A. (1) and (3) only B. (1) and (4) only C. (2) and (3) only D. (2) and (4) only
5. 1996/II/60
Which of the following is NOT a function of the Hong Kong Monetary Authority?
A. managing fiscal reserves for the government B. acting as a clearing house
C. supervising the banking system D. acting as the lender of last resort
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6. 2000/II/32
Which of the following about the central bank functions performed in Hong Kong is correct?
A. The Hong Kong Bank is responsible for the central clearance of the banking system.
B. The Exchange Fund acts as the government’s banker.
C. The Hong Kong Monetary Authority carries out monetary policies for the government.
D. The Hong Kong Association of Banks supervises banking activities.
7. 2001/II/49
Which of the following is NOT a function of the Hong Kong Monetary Authority?
A. to manage the foreign exchange reserves. B. to carry out monetary policy
C. to act as the lender of last resort D. to determine the best lending rate
8. 2003/II/37
Which of the following central bank functions are preformed by the Hong Kong Monetary Authority?
(1) managing the foreign exchange reserves
(2) determining the deposit interest rates of banks
(3) acting as the lender of last resort
A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. (1), (2) and (3)
9. 2007/II/37
Which of the following functions are performed by the Hong Kong Monetary Authority?
(1) maintaining the stability of the linked exchange rate
(2) supervising the liquidity position of the private banking institutions
(3) determining the market interest rate of Hong Kong
A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. (1), (2) and (3)
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1. 1990/II/32
If Mr. Wong transfers HK$100 from his savings account to his current account,
A. the total amount of bank deposits will increase.
B. the total money supply as measured by M1 will decrease.
C. the total money supply as measured by M2 will not change.
D. the total money supply as measured by M3 will increase.
2. 1990/II/45
Which of the following will increase the money supply in an economy?
A. A citizen withdraws cash from a bank and keeps it in a safe.
B. A manufacturer repays a bank loan.
C. A bank grants a loan to a real estate developer.
D. A bank increases the amount of excess reserves it holds.
3. 1991/II/34
Which of the following is a component of Hong Kong’s money supply M2?
A. savings deposits with licensed banks
B. time deposits with deposit-taking companies
C. negotiable certificates of deposit held by banks
D. one-thousand-dollar gold coins issued by the Hong Kong government and held by banks
4. 1992/II/32
In Hong Kong, savings deposits with licensed banks are
A. legal tender
B. included in the money supply M1
C. included in the money supply M2
D. included in the money supply M2, but excluded from the money supply M3
5. 1992/II/39
Which of the following methods of financing government expenditure would most likely increase the money
supply?
A. printing money B. selling government bonds
C. using government reserves D. raising tax rates
6. 1994/II/43
If an individual receives a cheque for $1000 from his friend and deposits it in his savings account, Hong Kong’s
money supply M1 will _______ and M2 will ________.
A. increase; increase B. remain unchanged; increase
C. decrease; remain unchanged D. remain unchanged; remain unchanged
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7. 1995/II/43
Mr. Chan withdraws $600 000 from his savings deposit with a commercial bank and then deposits $500 000
with a restricted license bank. The remaining $100 000 is kept at home. The immediate effect is that
A. M1 will increase by $100 000 B. M2 will decrease by $600 000
C. M2 will not change D. M3 will increase by $500 000
8. 1996/II/37
Mr. Chan paid $200000 in cash to buy from Mr. Wong a certificate of deposit issued by a deposit-taking
company. Mr. Wong then deposited this $200000 into his savings account. The immediate effects are
(1) M1 decrease by $200000
(2) M2 remains unchanged
(3) M3 increase by $200000
A. (1) and (2) only B. (1) and (3) only C. (2) and(3) only D. (1),(2) and (3)
9. 1997/II/35
In Hong Kong, a demand or savings account holder can use EPS card to pay for his purchases in certain shops.
The function of an EPS card is that the amount of money is immediately transferred from the customer's bank
account to the shop's bank account. The popular use of EPS in Hong Kong will
A. increase the ability of credit creation of the banking system
B. increase the buyer's cost of purchasing goods and services
C. increase the money supply M1 in Hong Kong
D. enable all bank deposits to act as a medium of exchange
10. 1997/II/36
Which of the following will increase M1 in Hong Kong?
A. a repayment of HK$5000 by cheque on a bank loan in Hong Kong
B. the lending of HK$5000 in cash by a bank to a citizen in Hong Kong
C. a new deposit of HK$5000 in a savings account with a bank in Hong Kong
D. a withdrawal of HK$5000 in cash from a current account with a bank in Hong Kong
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11. 1997/II/37
$billion
Total issue of legal tender 3
Legal tender in circulation 2
Demand deposits 7
Deposits with licensed banks AND negotiable certificates of deposits issued by licensed
banks (other than those held by authorized institutions)
10
Deposits with restricted license banks and deposit-taking companies AND negotiable
certificates of deposits issued by restricted licence banks and deposit-taking companies
(other than those held by authorized institutions)
80
The money supply M2 is
A. $9 billion B. $12 billion C. $13 billion D. $92 billion
12. 1998/II/35
In Hong Kong, the users of some services can use the Payment by Phone service (PPS) to pay their bills
over the telephone. After registration, they can make a phone call and transfer money from their bank accounts
(savings or current) to the bank account of the service provider. When the use of PPS becomes more popular,
A. the money supply M1 will decrease.
B. the money supply M2 will decrease.
C. the money supply M3 will decrease.
D. the amount of savings or current deposit of banks will decrease.
13. 1998/II/36
Which of the following will cause an immediate change in the money supply M1 of Hong Kong?
A. You receive $500 cash from your father and deposit it in your current account.
B. You pay $4 000 cash to the landlord, who puts the money in his safe.
C. A fire burnt most of the banknotes kept in a bank.
D. You buy $10 000 worth of furniture with a cheque. The shop owner deposits it into his time deposit account.
14. 1999/II/39
Suppose in a bank in Hong Kong, Mary withdraws HK$3 000 from her savings account and changes it for US
dollars in cash. Which of the following statements about the Hong Kong dollar money supply is correct?
A. HK$ M1 will increase while HK$ M2 will remain unchanged.
B. HK$ M1 will remain unchanged while HK$ M3 will decrease.
C. Both HK$ M1 and HK$ M3 will remain unchanged.
D. Both HK$ M1 and HK$ M2 will decrease.
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15. 2000/II/27
Mr. Wong withdraws $500 000 in cash from a deposit-taking company. He then deposits $300 000 with a
bank as time deposit and remits the remaining $200 000 overseas for the settlement of debts.
Which of the following about the money supply M1 and M3 is correct?
A. Both M1 and M3 will increase. B. Both M1 and M3 will decrease.
C. M1 will remain unchanged and M3 will decrease. D. Both M1 and M3 will remain unchanged.
16. 2000/II/28
Suppose the money supply of Hong Kong in a certain year was as follows:
$billion
Legal tender in circulation 10
Legal tender held by all deposit-taking institutions 2
Demand deposits with licensed banks 15
Savings and time deposits with licensed banks 60
Negotiable certificates of deposits issued by licensed banks and held by the public 25
Deposits with restricted license banks and negotiable certificates of deposits issued by restricted licence banks held by the public
32
The money supply M2 (in $ billion) was
A. 85 B. 110 C. 112 D. 144
17. 2001/II/25
In using the Easy Pay System (EPS) to settle a payment in exchange, and amount of money is immediately
transferred from the buyer’s bank account to the seller’s. In response to an increase in EPS’s service charge,
some shops have stopped accepting payment by EPS.
Which of the following would be the immediate effect of the above change on the money supply M1 and M2?
A. Both M1 and M2 will increase. B. M1 will increase and M2 will remain unchanged.
C. M1 will increase and M2 will decrease. D. Both M1 and M2 will decrease.
18. 2002/II/33
‘Currency in public circulation’ and ‘savings deposits’ are both included in Hong Kong’s money supply
(1) M1. (2) M2. (3) M3.
A. (2) only B. (3) only C. (1) and (2) only D. (2) and (3) only
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19. 2003/II/32
Mr. Chan withdraws HK$50000 from his savings account with a bank in Hong Kong and remits HK$40000
through a bank to the UK. He changes the remaining HK$10000 into the newly issued HK$10 notes and puts
them into safety deposit box in a bank. Which of the following would be the immediate effect the above actions
on the Hong Kong dollar money supply?
A. Both the HK$ M2 and M3 will decrease by HK$40000
B. HK$ M1 will increase by HK$ 10000 while HK$ M2 will decrease by HK$50000
C. HK$ M2 will decrease by HK$ 50000 while HK$ M3 will remain unchanged
D. HK$ M1 will remain unchanged while HK$ M2 will decrease by HK$40000
20. 2004/II/37
Which of the following would decrease the money supply M2 in Hong Kong?
A. Mr. Au repays a HK$10 000 loan in cash to a licensed bank in Hong Kong.
B. Mr. Bean withdraws HK$20 000 from a savings account with a licensed bank in Hong Kong and holds it
as cash.
C. Mr. Chan transfers HK$30 000 from his savings account to his current account with a licensed bank in
Hong Kong.
D. Mr. Ding withdraws HK$40 000 from his time deposit in a restricted license bank in Hong Kong and
remits the money overseas.
21. 2005/II/38
Suppose Mrs. Wong withdraws HK$300 000 from her saving deposit with a commercial bank. She converts
HK$200 000 of the above amount into Renminbi and deposits it into a Renminbi saving deposit with the
same bank. She keeps the remaining HK$100 000 at home. The immediate effect of the above event is:
A. Hong Kong dollar money supply M1 would increase by $100 000
B. Hong Kong dollar money supply M2 would decrease by $300 000
C. Hong Kong dollar money supply M2 would remain changed
D. Hong Kong dollar money supply M3 would increase by $100 000
22. 2006/II/35
Mr. Chan withdraws HK$ 20 000 from his deposit in a restricted license bank in Hong Kong. He later puts
HK$15 000 as time deposit in a licensed bank in Hong Kong and holds the remaining HK$5 000 as cash.
The immediate effect of the above action on the Hong Kong dollar money supply would be:
A. Both M2 and M3 decrease
B. Both M1 and M2 remain unchanged
C. M1 increases while M2 remains unchanged
D. M1 increases while M3 remains unchanged
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23. 2007/II/39
If an individual deposits $600 000 cash into a time deposit account with a deposit-taking company,
Hong Kong's money supply M1 will_______ and M2 will ________.
A. decrease…decrease
B. decrease…remain unchanged
C. remain unchanged… increase
D. increase…. increase
24. 2008/II/37
Suppose, after making a series of unsuccessful add-value transactions through EPS in which their banks
accounts were debited, more Octopus cardholders use cash to make their a add/value transactions. This
would immediately increase
A. the money supply M1
B. the money supply M2
C. the amount of savings deposits of banks
D. the amount of time deposits of banks
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1. 1991/II/31
The withdrawal of money from banks causes
A. a decrease in the value of the maximum possible banking multiplier.
B. a decrease in the cash reserves held by banks.
C. an increase in the deposits created.
D. a decrease in the minimum legal reserve ratio.
2. 1991/II/32
Bank A has total deposits of $1 000 million. It reserves are $240 million. Suppose the reserve ratio required
by the government is 25%. Which of the following will help Bank A fulfil the reserve requirement?
A. Bank A increases its lending to customers by $40 million.
B. Bank A borrows $10 million from the inter-bank market.
C. Customers increase deposits with Bank a by $10 million.
D. Customers withdraw deposits from Bank A by $ 40 million.
3. 1992/II/34
Assuming that a 20% reserve ratio is required by law, when the banking system has excess reserves of $20000,
it can at most increase its deposits by
A. $80000 B. $100000
C. the amount of its total reserves D. the amount of its excess reserves
4. 1992/II/35
The table below shows the total reserves, loans and deposits of a bank:
Assets($) Liabilities($)
Reserves 200 Loans 300
Deposits 500
From the table, we can say that
A. the legal minimum reserves are $200 B. the bank holds excess reserves of $100
C. the actual banking multiplier is 4 D. the actual reserve ratio is 40%
5. 1993/II/32
The following is a balance sheet of a banking system. The required reserve ratio is 20%
Assets($) Liabilities($)
Reserves 150 Loans 850
Deposits 1 000
Total 1 000 Total 1 000
Which of the following statements about banking system is correct?
A. It has excess reserves B. It has to increase its reserves by $100
C. It has to reduce loans by a total of $250 D. The deposit multiplier is 4
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6. 1994/II/40
If the required reserve ratio for banks is 100%, which of the following is correct?
A. The money supply will not change if banks accept deposits from the public.
B. The total amount of bank loans must be equal to the total amount of deposits.
C. Banks have no chance to make profits.
D. The banking multiplier is zero.
7. 1994/II/42
Suppose the required minimum reserve ratio for banks is 25%. The table below shows the balance sheet
of a certain bank.
Assets($) Liabilities($)
Reserves 600 Loans 900
Deposits 1500
A. The actual reserve ratio of the bank is 45 %.
B. The excess reserves of the bank is $300.
C. The banking multiplier is 5.
D. The banking system can expand its loans to customers by a maximum of $900.
8. 1995/II/42
Suppose the legal reserve ratio is 100%. If a person deposits $500 cash into his current account,
(1) the currency in circulation will decrease by $500.
(2) the bank deposits will remain unchanged.
(3) the bank loans will increase by $500.
(4) the money supply will remain unchanged.
A. (1) and (2) only B. (1) and (4) only C. (2) and (3) only D. (3) and (4) only
9. 1996/II/35
For Questions 9 and 10, refer to the following balance sheet of the banking system.
Assets($) Liabilities($)
Cash reserve 250 Loans 750
Deposits 1000
Assume that the legal minimum reserve ratio is 25% and a person withdraws $40 from a bank.
How much would the cash reserve in the banking system fall short of the legal requirement?
A. $10 B. $20 C. $30 D. $40
10. 1996/II/36
What would be the maximum amount of deposits that the banking system can hold after the withdrawal?
A. $750 B. $840 C. $880 D. $960
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11. 1997/II/33
Suppose the legal reserve ratio is 25%. If a person deposits $200 cash into his savings account, the maximum
possible change in
A. bank loans is an increase of $800 B. bank reserves is an increase of $200
C. M1 is a decrease of $50 D. M2 is an increase of $800
12. 1997/II/34
If a $100 deposit of newly-printed money into a bank results in a $400 increase in the total deposit of the
banking system, we can conclude that
A. the banking multiplier of the above deposit creation is 4 B. the legal reserve ration is 0.25
C. the money supply increases by $500 D. there is no cash leakage
13. 1998/II/33
Study the following balance sheet of Bank B.
Assets($) Liabilities($)
Reserves 1 000 Loans 2 000
Deposits 3 000
Suppose the required reserve ratio for banks is raised from 20% to 25%, what will be the decrease in Bank B’s
excess reserves?
A. 150 B. 250 C. 400 D. 600
14. 1998/II/34
Suppose the required reserve ratio for banks is 20%. The table below shows the balance sheet of the banking
system.
Assets($) Liabilities($)
Reserves 500 Loans 500
Deposits 1 000
Which of the following statements is correct?
A. The excess reserves of the banking system is $200
B. The actual banking system multiplier of the banking system is 5.
C. The banking system can expand its total deposits to $5 000.
D. The maximum amount of loans the banking system can make is $2 000.
15. 1998/II/52
An amount cash deposited into a bank will NOT lead to
A. an increase in bank loan made to the public.
B. an increase in the total deposits of the banks.
C. an increase in the value of the maximum banking multiplier.
D. an increase in the cash reserves held by banks.
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16. 1999/II/36
Refer to the following balance sheet of a banking system:
Assets($) Liabilities($)
Reserves 100 Loans 300
Deposits 400
The legal reserve ratio is 20%. Suppose that all banks loan out their excess reserves and all loans are
re-deposited into the banking system. After the credit creation process is completed, the amount of reserves
held by banks is ________ and the amount of loans will increase by __________ .
A. less than $100 … more than $100 B. equal to $100 … $100
C. equal to $100 … more than $100 D. more than $100 … less than $100
17. 1999/II/38
Which of the following would reduce the amount of deposits created in the process of multiple credit creation?
A. an increase in the holding of cash by the public
B. an increase in the use of cheques by the public
C. an increase in the use of electronic money by the public
D. an increase in the bank loans made to the public
18. 2000/II/29
A bank accepts a deposit of $1 000 from a foreign country. Through the credit creation process, the amount
of deposit of the whole banking system increases by $4 000. Based on the above information, we can conclude
that
A. the legal reserve ratio is 25%.
B. banks do not keep excess reserves.
C. the total money supply has increased by at least $4 000.
D. there is a cash leakage in the credit creation process.
19. 2000/II/30
As the use of the Octopus card for public transport becomes much more popular,
A. the money supply will increase because the card can perform the functions of money.
B. the volume of the legal tender in circulation will drop.
C. the value of money will drop because the demand for cash will be smaller.
D. the maximum amount of deposits created by the banking system will decrease.
20. 2001/II/26
Assets($) Liabilities($)
Reserves 200 Loans 400
Deposits 600
Suppose the legal reserve ratio of the banking system is 20%. If all banks no longer hold excess reserves, the
maximum increase in bank deposits is
A. $80 B. $160 C. $400 D. $1 000
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21. 2002/II/35
Answer Questions 21 and 22 by referring to the following balance sheet of a banking system which has an
excess reserve of $200.
Assets($) Liabilities($)
Reserves 500 Loans 700
Deposits 1 200
The required reserve ratio is
A. 15% B. 20% C. 25% D. 30%
22. 2002/II/36
Suppose someone has withdrawn $250 from the banking system. As a result, what would the maximum
possible amount of bank deposits be ?
A. $200 B. $600 C. $800 D. $1 000
23. 2002/II/37
Which of the following will reduce the deposit creation ability of the banking system?
(1) an increase in the use of credit cards by the public
(2) an increase in the amount of cash held by the public
(3) an increase in the legal reserve requirement for banks
A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. (1), (2) and (3)
24. 2002/II/38
Assume the whole banking system does not hold excess reserves and the required reserve ratio is 20%.
If a person withdraws $100 from a bank,
A. the amount of loans made by the banks to the public will fall by at most $400.
B. money supply will fall by at least $400.
C. the amount of deposits in the banking system will fall by at least $500.
D. the amount of cash reserve of the banks will fall by at most $80.
25. 2003/II/34
If the actual reserve is larger than the required reserve in a banking system, it follows that
A. there is cash leakage in the banking system
B. some banks decide to hold excess reserves
C. the demand for loans is insufficient
D. the banking system can create more deposits
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26. 2003/II/35
Answer Questions 26 and 27 by referring to the following balance sheet of banking system. Suppose the
required reserve ratio is 20%
Assets($) Liabilities($)
Reserves 500 Loans 1 500
Deposits 2 000
Which of the following statements about the above banking system is correct?
A. The maximum banking multiplier is 4
B. The maximum possible increase in loans will be the same as the maximum possible increase in deposits
C. The actual reserve ratio is equal to the required reserve ratio
D. The amount of reserves will decrease if all banks loan out their excess reserves
27. 2003/II/36
If the government increases the required reserve ratio to 40%, which of the following statements about
the above banking system is correct?
A. The amount of reserves will increase to $800
B. The amount of deposits will not change
C. The maximum amount loans will be $750
D. The maximum amount of deposits will be $1600
28. 2004/II/38
The following table shows the balance sheet of a bank in an economy:
Assets($) Liabilities($)
Cash reserves 500 Loans and investments 750
Deposits 1250
Suppose its customers withdraw $50 cash from the bank. Immediately after the withdrawal, the cash reserves
and the deposits would be________ and _____________ respectively.
A. $450 … $1 200 B. $450 … $1 250 C. $500 … $1 200 D. $500 … $1 250
29. 2004/II/39
Refer to the following balance sheet of a banking system which has an excess reserve of $200.
Assets($) Liabilities($)
Cash reserves 500 Loans and investments 1000
Deposits 1500
Suppose $300 worth of deposits is withdrawn from the banking system. What will the maximum possible
amount of bank deposits be?
A. $500 B. $1 000 C. $1 200 D. $6 000
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30. 2005/II/37
Below is the balance sheet of a banking system.
Assets($) Liabilities($)
Cash reserves 500 Loans 1 500
Deposits 2 000
Suppose the banking system has no excess reserves. After a withdrawal of $100 from the banks, the maximum
possible amount of deposits of the banking system would be
A. $1600 B. $1700 C. $1800 D. $1900
31. 2005/II/50
The central bank of Country B increases the legal reserves ratio in order to discourage the overheating activities
of lending and borrowing in the economy. Suppose the banking system has no excess reserves. The above
measure adopted by the central bank would NOT reduce
A. the ability of deposit creation of the banking system
B. the amount of reserves of the banking system
C. the banking multiplier
D. the money supply
32. 2006/II/36
The table below shows the balance sheet of a banking system. The amount of its excess reserves is $800.
Assets($) Liabilities($)
Reserves 1 000 Loans 1 000
Deposits 2 000
Which of the following statements about the banking system is correct?
A. The required reserve ratio is 50%
B. The maximum amount of deposits is $8000
C. The maximum banking multiplier is 5
D. The actual banking multiplier is 2
33. 2006/II/37
During the period around Lunar New Year every year, many people in Hong Kong withdraw cash from their
deposit accounts with banks. Thus, the amount of cash held by the public increases. Which of the following is
a definite consequence of the above situation?
A. The value of the maximum banking multiplier of the banking system of Hong Kong decreases
B. The maximum possible amount of deposits of the banking system of Hong Kong decreases
C. The amount of bank loans made to the public decreases
D. The money supply of Hong Kong decreases
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34. 2006/II/38
Which of the following may reduce the size of the actual banking multiplier of a banking system?
A. an increase in the use of cheques by the public
B. an increase in the demand for bank loans
C. an increase in the risk of non-repayment of bank loans
D. a reduction in the required reserve ratio
35. 2007/II/36
The table below shows the balance sheet of a banking system, which has an excess reserve of $50.
Assets($) Liabilities($)
Reserves 250 Loans 750
Deposits 1 000
Which of the following is correct?
A. The required reserve ratio is 25%
B. The actual reserve ratio is 20%
C. If $100 cash is deposited into a banking system, the total amount of deposits will be $1500
D. If $100 is withdrawn from the banking system, the maximum possible total deposits will be $750
36. 2008/II/38
Study the following balance sheet of a banking system which never holds excess reserves.
Assets($) Liabilities($)
Reserves 600 Loans 2 400
Deposits 3 000
Suppose the public in this economy always hold the same amount of cash. If $200 is withdrawn from the
bank deposits, the maximum possible amount of loans of the baking system would become______.
A. $1200 B. $1600 C. $2000 D. $2200
37. 2008/II/39
Which of the following will increase the maximum banking multiplier?
A. Octopus cards are widely used
B. The economy grows fast and investment opportunities flourish
C. Banks keep more reserves to avoid the risk of bank run
D. Commercial banks are allowed to increase the proportion of customers' deposits that can be loaned out
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1. 1991/II/33
Which of the following about the stock market in Hong Kong are correct?
(1) It helps firms to raise capital.
(2) It provides higher liquidity on investment.
(3) Only shares are traded on the stock market.
A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. (1), (2) and (3)
2. 1991/II/35
Mr. Kam sold a soyabean futures contract and used the money to buy some shares newly issued by a limited
company. In which financial markets did Mr. Kam participate?
(1) the capital (2) the money market (3) the exchange market (4) the commodity market
A. (1) and (2) only B. (1) and (4) only C. (2) and (3) only D. (3) and (4) only
3. 1992/II/31
Which of the following is the best definition of 'money market'?
A. A market where capital funds are raised
B. A market where foreign currencies are traded
C. A market were short-term financial assets are traded
D. A market where long-term financial assets are traded
4. 1999/II/37
The government acquired a large number of stocks and shares in the stock exchange market in 1998.
Which of the following is correct?
A. It will result in a loss of foreign exchange reserves.
B. It will lead to a contraction of the money supply M3.
C. It will stop the speculative activities in the stock market.
D. It will mean a greater extent of government intervention in market mechanism.
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1. 1990/II/31
Which of the following are indirect taxes?
(1) excise duty (2) estate duty (abolished on 11/2/2006)
(3) rates (4) profits tax
A. (1) and (2) only B. (1) and (4) only C. (2) and (3) only D. (3) and (4) only
2. 1992/II/38
Which of the following government revenue is classified as a capital revenue for the Hong Kong government?
A. profits tax B. rate C. fines D. land transactions
3. 1993/II/45
Which of the following is a correct description of direct tax?
A. Direct tax is regressive
B. The cost of collecting direct tax is greater than that of indirect tax
C. The revenue from direct tax will drop if there is a recession
D. Raising direct tax rates will lead to inflation
4. 1995/II/45
Direct taxes differ from indirect taxes in that
A. direct taxes are collected directly from the taxpayers but indirect taxes are not.
B. direct taxes are progressive whereas indirect taxes are regressive.
C. the tax burden of direct taxes cannot be shifted but that of indirect taxes can.
D. the direct tax revenue fluctuates with national income but the indirect tax revenue does not.
5. 1997/II/47
Which of the following descriptions of Hong Kong's taxation system is true?
A. Only income decried from Hong Kong are liable to tax
B. Rates are indirect tax
C. Import duties are imposed on some goods in an attempt to protect local industries
D. The profits tax rate of corporations is the same as the standard tax rate
6. 2000/II/42
Which of the following is a direct tax in Hong Kong?
A. estate duty (abolished on 11/2/2006) B. rates C. interest tax D. sales tax
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7. 2001/II/37
The following charts show the composition of the General Revenue Account of Hong Kong in 1998 and 1999.
Based on the above data, in the year 1999
A. the ratio of direct taxes to indirect taxes increased.
B. the total amount of tax revenue increased.
C. the proportion of tax revenue in total government revenue increased.
D. government revenue from rates decreased by 8%.
8. 2005/II/40
Which of the following is the difference between a direct tax and an indirect tax?
A. The tax burden of a direct tax cannot be shifted onto other people, but the tax burden of an indirect tax can.
B. A direct tax results in a more even income distribution, but an indirect tax results in a less even
income distribution.
C. The tax base of direct taxes is narrower, but the tax base of indirect taxes is broader.
D. All of the above are correct.
9. 2007/II/40
Which of the following taxes in Hong Kong is both 'direct' and 'progressive'?
A. stamp duty B. profits tax C. property tax D. salaries tax
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1. 1994/II/46
In Hong Kong, salaries tax is normally paid by two installments and the tax payment can be made through
the post. This practice agrees with the _______ principle of taxation.
A. equality B. convenience C. certainty D. economy
2. 1996/II/40
A Japan electronics firm produces and sells its products in Hong Kong. Therefore, it has to pay profits tax to
the Hong Kong government. Hong Kong is applying the
A. source principle B. residence principle C. equity principle D. convenience principle
3. 1998/II/37
A progressive tax is more effective than a proportional tax in achieving the following aim:
A. to increase government revenue
B. to lower the administrative costs of the government
C. to achieve a more equitable income distribution
D. to reallocate the resources of the economy
4. 2000/II/40
The payment of salaries tax and profits tax can be made by the Payment by Phone Service (PPS)
by which taxpayers can transfer money from their bank accounts to the government. This practice satisfies
the ________ principle of taxation.
A. source B. certainty C. convenience D. equity
5. 2002/II/39
Suppose the government of an economy announces that the people will have to pay a general sales tax of
2% of the selling price when they purchase any goods and services. The government also launches a series of
programmes to make sure that the public understands the new tax. Which of the following taxation principles is
illustrated by the above measures of the government?
A. equality B. certainty C. convenience D. economy
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6. 2006/II/41
The following lines A, B, C and D indicate different relationships between tax payment and taxable income.
Which of these four lines shows a relationship in accordance with the taxation principle of equality put forth
by Adam Smith?
A. line A B. line B C. line C D. line D
7. 2007/II/41
The introduction of a 5% Goods and Services Tax on specified items of goods and services is regressive
in nature and will incur large administrative costs. The above statement is concerned with the ____ principle
of taxation put forward by Adam Smith.
(1) equity
(2) certainty
(3) economy
A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. (1), (2) and (3)
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1. 1990/II/47
Which of the following diagrams approximates the structure of salaries tax in Hong Kong?
2. 1990/II/55
Mei Ling’s income has increased from $50 000 to $60 000 this year. The income tax is progressive if it
increases from
A. $1 000 to $1 200 B. $2 000 to $2 500 C. $3 000 to $3 600 D. $4 000 to $4 700
3. 1991/II/37
A sales tax on food is regarded as ______ tax.
A. a direct and regressive B. an indirect and regressive
C. a direct and proportional D. an indirect and progressive
4. 1992/II/36
Suppose the government asks everybody to pay a tax of $100 a year. This is an example of
A. regressive tax B. proportional tax C. income tax D. indirect tax
5. 1994/II/47
If the amount of tax increases as income increases, the tax may be considered a ______ tax.
(1) progressive
(2) proportional
(3) regressive
A. (1) only B. (1) or (2) C. (2) or (3) D. (1) or (2) or (3)
6. 1995/II/44
In July 1994, Mr Chan bought a new house in Shatin and moved in immediately. In this case, the taxes that
Mr Chan has to pay for the financial year 94-95 are:
(1) stamp duty
(2) property tax
(3) rates
A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. (1), (2) and (3)
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7. 1995/II/46
Study the following information carefully:
Taxable income ($) Total tax payment ($)
10 000 1 000
20 000 3 000
30 000 X
If the tax is progressive, X must be larger than
A. 3 000 B. 3 500 C. 4 000 D. 4 500
8. 1995/II/48
The following diagram shows the tax structure of Tax X:
Tax X is __________ within the income range OY1, and ________ within the income range Y1Y2.
A. proportional … progressive B. proportional … regressive
C. progressive … proportional D. progressive … regressive
9. 1996/II/41
Which two of the following diagrams describe a progressive tax?
A. (1) and (3) only B. (1) and (4) only C. (2) and (3) only D. (2) and (4) only
10. 1996/II/44
Suppose that inflation occurs and that money income increase at the same rate as inflation. A taxpayer under a
proportional tax system will pay
(1) a larger amount of tax.
(2) the same amount of tax.
(3) more tax in terms of purchasing power.
(4) the same amount of tax in terms of purchasing power.
A. (1) and (3) only B. (1) and (4) only C. (2) and (3) only D. (2) and (4) only
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11. 1997/II/40
The above tax is a
A. progressive tax B. proportional tax C. regressive tax D. lump-sum tax
12. 1997/II/41
The following are the annual income of Peter in Hong Kong in 1996.
According to the taxation system of Hong Kong, Peter has to pay
A. salaries tax only B. salaries tax and interest tax
C. salaries tax and property tax D. salaries tax, interest tax and property tax
13. 1998/II/39
Which of the following statements about tax is correct?
A. Progressive tax has a higher tax rate than regressive tax.
B. Progressive tax is a tax on income while regressive tax is a tax on goods.
C. The tax payment of a regressive tax decreases as the taxable income increases.
D. The percentage of income as tax of a progressive tax increases when taxable income increases.
14. 1998/II/40
Mr. Chan has the following incomes:
(1) year-end bonus
(2) dividend from shares
(3) capital gain in foreign exchange speculation
(4) rental income from leased properties
According to the tax system of Hong Kong, which of the above incomes are subject to taxation?
A. (1) and (2) only B. (1) and (4) only C. (2) and (3) only D. (3) and (4) only
Taxable income ($) Tax payment ($)
10 000 20 000 30 000 40 000
4000 7000 9000
10 000
Type of income Amount ($)
Salaries as a teacher in a secondary school Interest from local deposits Rental income from letting a flat to a Japanese
600 000 4000 300 000
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15. 2000/II/41
Which two of the following diagrams illustrate a regressive tax measured in terms of an average tax rate?
A. (1) and (3) only B. (1) and (4) only C. (2) and (3) only D. (2) and (4) only
16. 2000/II/43
Taxable income ($) Tax payment ($)
200 000 250 000 300 000
22 000 25 000 27 000
From the above information, we can conclude that
A. the tax is a progressive tax as the tax payment increases with taxable income.
B. the tax payment takes a decreasing portion of taxable income as taxable income increases.
C. the taxation system helps to reduce the income gap.
D. the taxation system reduces the work incentive.
17. 2001/II/35
The following graph shows the relationship between tax payment and income before and after a change in
the structure of a tax.
Compared to the old tax structure, the new tax structure
A. results in a less even income distribution B. has a lower tax rate for the same level of income.
C. has a larger tax allowance. D. has no effect on working incentive.
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18. 2001/II/36
Taxable income ($) Tax payment Under Tax A ($) Tax payment Under Tax B ($)
10 000 1 500 2 000
20 000 3 800 3 800
30 000 6 600 5 400
From the above data, we can conclude that
A. Tax A is a direct tax and Tax B is an indirect tax.
B. there would be a more even income distribution under Tax A.
C. the tax rate of Tax A is lower than that of Tax B for all levels of income.
D. The fluctuations of government tax revenue would be smaller under Tax A than under Tax B when
income fluctuates.
19. 2001/II/40
The following table shows the different sources of income earned by John in Hong Kong in the year 1999.
Source of income Amount ($)
Salary as a manager in a hotel Net rental income from letting his house to a foreigner Money left to him by his deceased father
650 000 250 000
1 000 000
According to the taxation system of Hong Kong, John has to pay
A. salaries tax only. B. salaries tax and estate duty* only.
C. salaries tax and property tax only. D. property tax and estate duty* only.
*The exemption level of estate tax is $7,500,000 for 1998/99.
20. 2002/II/40
If a general sales tax is introduced in Hong Kong,
A. the tax base would be widened.
B. the wealth gap would be reduced.
C. less Hong Kong people would shop in Shenzhen.
D. the proportion of direct tax in the government tax revenue would increase.
21. 2002/II/43
Tobacco duty in Hong Kong is a kind of
A. direct and proportional tax. B. direct and regressive tax.
C. indirect and proportional tax. D. indirect and regressive tax.
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22. 2003/II/38
Which of the following taxes are progressive?
A. (1) and (2) only B. (1) and (3) only C. (2) and (4) only D. (3) and (4) only
23. 2003/II/44
Which of the following statements about tax system of Hong Kong is correct?
A. The rental income derived from properties overseas is subject to the property tax of Hong Kong
B. All the business organizations in Hong Kong have to pay at the same profits tax rate, as it is a proportional
tax
C. Interest income from deposits denominated in Hong Kong dollars is subjects to interest tax in Hong Kong
D. The estate duty in Hong Kong is a progressive tax
24. 2004/II/41
Tax payment ($) Taxable income ($)
Tax A Tax B Tax C
10 000 500 800 1 000
20 000 1 000 1 700 1 000
30 000 1 500 2 700 1 000
According to the above table, which of the following statements is correct?
A. None of the above taxes is a regressive tax.
B. The taxation principle of equity put forth by Adam Smith applies to all the above taxes.
C. Tax A is the most effective in achieving a more even income distribution.
D. Tax B is a progressive tax.
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25. 2004/II/42
Which of the following lines A, B, C or D shows the relationship between the tax rate and the taxable
income under the profits tax system in Hong Kong?
A. line A B. line B C. line C D. line D
26. 2004/II/43
Suppose there is a change in an income tax as follows:
Under the new system,
A. the ratio of direct tax revenue to indirect tax revenue will decrease.
B. the government will have a budget surplus.
C. more people will fall into the tax net.
D. the income gap will be reduced.
27. 2004/II/44
Mr. Wong has the following expenses in Hong Kong:
(1) three nights’ room charge for a local hotel
(2) bets on football at the Hong Kong Jockey Club
(3) spending on cosmetics for his wife
Which of the above expenses are subject to an indirect tax in Hong Kong?
A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. (1), (2) and (3)
Marginal Tax Rate (%) Marginal Tax Band
Old System New System
First $30 000 taxable income Next $30 000 Next $30 000 Remainder
2.0 7.5
13.0 18.5
2.0 8.0
14.0 20.0
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28. 2005/II/39
Study the following data:
Taxable income ($) Tax amount ($)
0
10 000
20 000
0
1 500
X
If the above tax is progressive, the value of X must be
A. smaller than 3000
B. equal to 3000
C. greater than 3000
D. There is not sufficient information to do the calculation
29. 2005/II/43
Refer to the following relationship between the tax payment and the taxable income of a certain tax.
Which of the following is correct?
A. The above tax would lower the working incentives of workers
B. The above tax is in accordance with the equality principle put forth by Adam Smith
C. The tax allowance for the above tax is zero
D. Every employee has to pay the above tax
30. 2006/II/40
In September 2005, Mr Chan bought 800 HSBC shares at $120 per share and later sold them at $130 per share
on the Hong Kong stock market. In this case, which of the following taxes should Mr Chan pay to the
government of the HKSAR in the financial year 2005-06?
A. stamp duty B. capital gains tax C. profits tax D. All of the above
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31. 2007/II/42
Refer to the above data. When the tax system changes from A to B,
Tax Payment ($)
Taxable Income ($) Tax System A Tax System B
100 000 6 000 5 000
200 000 12 000 12 000
300 000 18 000 21 000
A. the income gap between the rich and the poor will be reduced
B. the work incentive of workers will increase
C. the tax base of the economy will be widened
D. the government budget position will be improved
32. 2008/II/40
The following are Mary's sources of income and wealth in Hong Kong in 2008. Which is subject to taxation
in Hong Kong?
A. the rental income from letting her flat
B. dividends earned from her shares in a listed company
C. an estate inherited from her grand father
D. the interest received from her time deposit in a bank
33. 2008/II/43
Which of the following diagrams describes a regressive tax?
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34. 2008/II/44
Suppose the salaries tax system of Hong Kong changes as follows:
Old System New System
Marginal Tax Band Tax Rate (%) Marginal Tax Band Tax Rate (%)
First $30 000 taxable income
Next $30 000
Next $30 000
Remainder
Standard Rate
2.0
7.0
13.0
19.0
16.0
First $40 000 taxable income
Next $40 000
Next $40 000
Remainder
Standard Rate
2.0
7.0
13.0
19.0
16.0
Under the new system, with the salaries of all taxpayers unchanged
A. fewer people will fall into the tax net
B. fewer people will have to pay at the standard rate
C. the income gap will not be affected
D. the government will run into a budget deficit
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1. 1990/II/52
Which of the following government measures would lead to more equal distribution of income within a country?
(1) an increase in subsidies on basic foodstuffs
(2) an increase in the progressivity of the tax system
(3) a decrease in estate duty
A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. (1), (2) and (3)
2. 1990/II/59
Which of the following is INCORRECT if a general sales tax is imposed in Hong Kong?
A. The fluctuations of government tax revenue will be reduced.
B. The proportion of direct tax in the government tax revenue will increase.
C. There will be a redistribution of income.
D. The general price level will increase.
3. 1991/II/39
Tax Amount ($) Income ($)
Policy A Policy B
10 000 50 000
100 000 500 000
1 000 5 000
10 000 50 000
1 000 4 000 7 000
30 000
Which of the following is likely to take place if the government changes from Policy A to Policy B?
A. less incentive to work
B. more uneven income distribution
C. a lower rate of economic growth
D. a fall in the consumption expenditure
4. 1992/II/37
The introduction of a sales tax on rice in Hong Kong would
A. decrease the revenue of the government B. encourage more imports of rice
C. raise the consumer price index D. lead to a more even distribution of income
\
5. 1992/II/43
In the financial year 1990-91, the government increased the tax allowance by about 5%. The inflation rate
at the same period was about 10%. Which of the following was a consequence of the above situation?
A. The government had to introduce a sales tax
B. More people fell into the tax net
C. The real income of Hong Kong people increased
D. The government collected more indirect tax revenue
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6. 1993/II/46
Taxpayers with the same net chargeable income paid different amount of tax in the two fiscal year 1990/91.
Several examples are shown below to illustrate this:
How does the change in the total tax payment affect the income distribution in Hong Kong?
A. It gives a more even income distribution
B. It gives a more uneven income distribution
C. It has no income distribution
D. The effect on income distribution is uncertain
7. 1993/II/47
If the government increases the personal allowance on the salaries tax, then
A. the taxpayers paying at the standard tax rate will have a higher working incentive.
B. we are not certain how the total tax revenue will change.
C. the government will have to cut its expenditure.
D. the tax base will be widened.
8. 1993/II/48
Which of the following government measures will increase the inequality of wealth distribution of
Hong Kong?
A. removing the tax on soft drinks
B. selling more flats under the Home Ownership Scheme at lower prices
C. increasing fees for medical services in government hospitals
D. increasing the personal allowance on the salaries tax
9. 1994/II/48
The aim of the Hong Kong government in increasing the proportion of indirect taxes to total taxation is to
A. increase the total tax revenue.
B. stabilize the tax revenue in different phases of a business cycle.
C. narrow the gap between the rich and the poor.
D. narrow the tax base.
Total net Total tax payment ($) chargeable income for the fiscal year of
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10. 1996/II/39
If the government greatly increases the salaries tax rate to finance provision of more public assistance to the
unemployed,
A. the government budget will be balanced because the increase in government expenditure will be financed
by increase in tax revenue.
B. The total consumption of the economy will not change as the decrease in consumption of the rich will be
compensated by an increase in the consumption of the poor.
C. The working incentive will decrease because a higher proportion of salary income will be taxed.
D. The size of the public sector will remain unchanged because the increase expenditure is matched by the
increase tax revenue.
11. 1996/II/43
Which of the following will lead to a more uneven income distribution?
A. decreasing the sales tax rate
B. imposing more indirect taxes on luxuries
C. increasing the housing allowance of senior civil servants
D. increasing the standard tax rate of the salaries tax.
12. 1996/II/45
Which of the following statements is true about progressive tax in Hong Kong?
A. It will lead to a more uneven distribution of income.
B. It is a tax levied on goods and services.
C. The tax burden can be shifted
D. It may discourage working incentive.
13. 1997/II/45
Suppose the Hong Kong government increases the salaries tax allowance by 5% while both the wage rates
and the inflation rate of the economy in the year increase by 10%. It follows that
A. more people would fall into the tax net
B. the ration of tax payment to income would decrease
C. the tax revenue would increase and the income distribution would be more even
D. the real income of the people after tax would remain unchanged
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14. 1997/II/46
Suppose the Hong Kong government spends $2 billion in the construction of a new highway which is
financed by its fiscal reserve. Which of the following would most likely to occur?
A. a narrower wealth gap between the rich and the poor
B. an increase in the employment rate
C. an increase in the inflation rate
D. a budget deficit in the years of construction
15. 1997/II/56
Suppose the government has put and end to all sorts of rent control in Hong Kong. This measure would NOT
A. lead to a wider wealth gap
B. increase the property tax revenue
C. lead to a shortage in the property market
D. increase the quantity supplied of rental accommodation
16. 1998/II/41
Suppose the sales tax rate of a good is raised. Which of the following statements is correct?
A. The total expenditure on the good will increase.
B. There will be inflation.
C. The total revenue net of tax to sellers will fall if the supply curve is upward sloping.
D. Income will be redistributed from the poor to the rich.
17. 1998/II/42
If the government of Hong Kong raises the tax allowance on the salaries tax,
A. the income distribution will be more uneven.
B. less people will fall into the tax net.
C. the working incentive of those paying at the standard tax rate will increase.
D. the tax bands will be widened.
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18. 1999/II/40
The following diagram shows a tax system :
Which of the following statements concerning the above tax is correct?
A. It is a progressive tax payment increases when income increases.
B. It would lead to an uneven distribution of income.
C. It would encourage the working incentive of workers.
D. The progressivity of the tax rate will increase when income rises.
19. 1999/II/42
During a recession, the refund of rates by the government to the people would
A. lead to a more efficient allocation of resources.
B. decrease the foreign exchange and gold reserves of Hong Kong.
C. increase the incentive to invest.
D. increase the consumption expenditure of the lower income group.
20. 1999/II/43
Which of the following government policies would lead to a more even distribution of income?
A. lowering the tax rates of regressive taxes
B. imposing more indirect taxes on necessities
C. increasing the depreciation allowance of the profits tax
D. reducing the standard tax rate of the salaries tax
21. 1999/II/44
If the income of Hong Kong people falls by 5% in a fiscal year,
A. more people will fall into the tax net.
B. the tax bands of the salaries tax will be narrowed.
C. the government revenue from the salaries tax will fall by more than 5%.
D. the wealth distribution of people in Hong Kong will remain unchanged.
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22. 2001/II/39
Which of the following will widen the tax base of Hong Kong?
A. an increase in the tax allowance
B. a decrease in the standard tax rate
C. an increase in the profits tax rate
D. the introduction of a sales tax
23. 2003/II/31
Suppose, in times of economic recession, the Hong Kong government has to reduce the unemployment
allowance and impose a general sales tax in order to reduce the budget deficit. These changes would lead to
A. an increase in the employment rate
B. an increase in the inflation rate
C. a wider wealth gap between the rich and the poor
D. an increase in the fiscal reserves of the government
24. 2003/II/39
Suppose the salaries tax allowance in Hong Kong decreases and the salaries of taxpayers remain constant.
It results that
A. some taxpayers paying at the standard tax rate may pay at a lower tax rate
B. the middle-income group would have to pay a larger proportion of their income as tax
C. less people would fall into the tax net
D. the after-tax income of all taxpayers would decrease
25. 2003/II/41
The following table describes a tax
Taxable Income ($) Tax Payment ($)
10 000 20 000 30 000 40 000 50 000
2 000 3 800 5 400 6 800 8 000
The above tax would
A. lead to a less even income distribution
B. reduce the working incentives of workers
C. improve the resource allocation of the economy
D. increase the consumption expenditure of the lower income group
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26. 2005/II/41
Which of the following government policies lead to a less even income distribution of Hong Kong citizens?
A. raising the standard tax rate of the salaries tax
B. reducing the personal allowance of the salaries tax
C. raising the profits tax rate
D. lower the excise tax rate of tobacco and wine
27. 2005/II/42
The introduction of a general sales tax would lead to
A. inflation B. lower output
C. higher consumption expenditure D. higher GDP
28. 2006/II/39
Suppose the salaries tax of an economy changes from tax system A to tax system B.
System A System B
Taxable income Marginal tax rate Marginal tax rate
First $20 000 3% 2%
Next $20 000 6% 5%
Next $20 000 10% 8%
Remainder 15% 12%
As a result,
A. less people would fall into the tax net
B. the working incentive of workers would increase
C. the income gap would be reduced
D. the ratio of direct tax revenue to indirect tax revenue would increase
29. 2006/II/42
Which of the following would widen the tax base of Hong Kong?
A. a reduction in the tax allowance
B. abolition of the first registration tax on motor vehicles
C. an increase in the progressivity of salaries tax
D. an increase in the profits tax rate
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30. 2007/II/43
In order to increase the competitiveness of Hong Kong, some businessmen propose to reduce the profits
tax rate. When the profits tax rate decreases,
A. the foreign exchange and gold reserve of Hong Kong would increase
B. the investment incentive would increase
C. the government tax revenue would decrease
D. the size of the public sector would decrease
31. 2008/II/41
When the government reduced the profits tax rate,
A. the unemployment rate will increase
B. the investment incentive will increase
C. the government tax revenue will decrease
D. the income inequality will be reduced
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1. 1991/II/38
The above chart indicates that
A. economic services was the largest item of government spending.
B. the price level was higher in Year 2 than that in Year 1.
C. the government spent less on environment protection in Year 2 than in Year 1.
D. the spending on the Kowloon Walled City was financed by China.
2. 1997/II/46
Suppose the Hong Kong government spends $2 billion in the construction of a new highway which is
financed by its fiscal reserve. Which of the following would most likely to occur?
A. a narrower wealth gap between the rich and the poor
B. an increase in the employment rate
C. an increase in the inflation rate
D. a budget deficit in the years of construction
3. 2000/II/45
The government will participate in the project for establishing Disneyland in Hong Kong. During the period
of construction, it must
A. increase the tax burden on taxpayers. B. increase the size of the public sector.
C. increase the ratio of public expenditure to GDP. D. discourage the incentive of private investment.
4. 2008/II/42
According to the 2007-08 Policy Address of the Chief Executive, the Government will launch 10 major
infrastructure projects in the coming years. This will result in
(1) an increase in the GDP of Hong Kong
(2) an decrease in the size of public sector
(3) government budgets deficits in the years of construction.
A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. (1), (2) and (3)
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1. 1994/II/49
According to the above table, the size of the public sector as measured by the RATIO of public expenditure
to GDP over the period 1987-1991 was
A. getting bigger.
B. getting smaller.
C. bigger at the beginning but smaller at the end.
D. stagnant.
2. 1996/II/42
Refer to the following diagram of an economy :
During the period 1980 to 1995, which of the following can be concluded from the above diagram?
A. Both the GDP and the government expenditure have not change in this period.
B. The GDP increase at the same rate as the government expenditure.
C. The ratio of government expenditure to GDP decreases over this period.
D. The growth rate of GDP remains constant because the government expenditure increase at a constant rate.
3. 2002/II/41
According to the above graph, the ratio of G to GDP is
A. increasing B. decreasing
C. first increasing and then decreasing D. first decreasing and then increasing
Year 1987-88 1988-89 1989-90 1990-91
Public Expenditure
GDP
536
3600
648
4 336
819
4 990
950
6 588
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200
1. 1991/II/40
Which of the following are tools of fiscal policy in Hong Kong?
(1) the linked exchange rate
(2) government expenditure on infrastructure
(3) the standard tax rate
(4) the minimum cash reserve ratio
A. (1) and (3) only B. (1) and (4) only C. (2) and (3) only D. (2) and (4) only
2. 1992/II/40
Which of the following is an expansionary fiscal policy
A. the introduction of a new tax
B. the construction of a new airport
C. the cutting of expenditure in some government departments
D. the increased purchase of water from China
3. 1992/II/41
A surplus budget will lead to
A. a decrease in government expenditure B. a fiscal surplus
C. a balance of payment surplus D. a contraction of the economy
4. 1993/II/38
Which of the following government policies will have an expansionary effect on the economy
A. increasing the transfer payments by using fiscal reserves
B. spending more money on imports
C. introducing a general sales tax
D. raising the reserve requirements of commercial banks
5. 1994/II/50
A __________ budget is one in which the _________ government revenue is greater
than the __________ government expenditure.
A. surplus; actual; actual B. surplus; estimated; estimated
C. deficit; estimated; actual D. deficit; actual ; estimated
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6. 1995/II/47 (NOT SUITABLE)
Which of the following were proposed in the 1994-1995 budget?
(1) A reduction in the profits tax rate
(2) A reduction in the standard tax rate
(3) A new grandparent allowance
(4) An increase in the airport passenger departure tax
A. (1) and (3) only B. (1) and (4) only C. (2) and (3) only D. (2) and (4) only
7. 1995/II/49
In general, a deficit budget will
A. reduce a country’s foreign exchange and gold reserves.
B. have an expansionary effect on economic activity.
C. lead to a more uneven distribution of income.
D. increase the government’s debt.
8. 1997/II/44
Which of the following would have an expansionary effect on Hong Kong economy?
A. a raise of rental of public housing units
B. the sale of existing public housing units to their tenants
C. the introduction of new tax to suppress speculative activities in the property market
D. an increase in construction of Home-Ownership-Scheme housing
9. 1998/II/38
When the profits tax rate decreases,
A. the government revenue will decrease. B. the government expenditure will decrease.
C. the incentive of investment will increase. D. the unemployment rate will increase.
10. 1999/II/41
A surplus budget could turn out to be a budgetary deficit if the actual government revenue is _________
than the actual government expenditure and the estimated government revenue is ________ than the
estimated government expenditure.
A. greater … greater B. smaller … greater C. greater … smaller D. smaller … smaller
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202
11. 2000/II/44
Suppose the government uses a great amount of its fiscal reserve to develop information technology in education.
Which of the following is correct ?
A. Government expenditure in other sectors will decrease.
B. The government will have a budget deficit.
C. The average labour productivity will be higher.
D. The banking system will be less able to create deposits.
12. 2003/II/40
If the government raises the profits tax rate,
A. the government revenue will increase
B. the unemployment rate will fall
C. the incentive for investment will decrease
D. the general price level will rise
13. 2003/II/42
Suppose the government of Hong Kong introduces a general sales tax. It follows that
A. the sales revenue net of tax to the sellers will decrease
B. there will be a persistent increase in the general price level
C. income will be redisturbed from the rich to the poor
D. the consumption expenditure of Hong Kong will increase
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1. 1990/II/42
A country gains from trade because
A. it obtains goods at a lower opportunity cost.
B. It collects tariff revenue.
C. It exports more than it imports.
D. It specializes in producing goods in which it enjoys an absolute advantage.
2. 1990/II/48
The table below slows the production of two goods in two countries:
One unit of resources can produce
clothes (units) toys (units)
Country X 10 OR 5
Country Y 2 OR 1
Suppose there are no barriers to trade between the two countries.
A. X will export clothes and toys to Y. B. X will export clothes and import toys from Y.
C. Y will export toys and import clothes from X. D. Neither country will benefit from their mutual trade.
3. 1991/II/53
The following table shows the number of man-hours required for the production of two goods X and Y in
Countries A and B.
According to the principle of comparative advantage,
A. Country A will export X and import Y. B. Country A will export Y and import X.
C. Country A will import X and Y from Country B. D. Country A will export Y and import Y to Country B.
4. 1992/II/51
Refer to the following table:
Toys (units) Machinery (units)
HK’s output per man-hour
USA’s output per man-hour
30 OR 20
50 OR 40
(1) The USA has an absolute advantage in producing both goods
(2) The USA has an absolute advantage in producing machinery only
(3) Hong Kong has a comparative advantage in producing toys
(4) Hong Kong has a comparative advantage in producing machinery
A. (1) and (3) only B. (1) and (4) only C. (2) and (3) only D. (2) and (4) only
Country A Country B
1 unit of X
1 unit of Y
1 man-hour
3 man-hours
2 man-hours
4 man-hours
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5. 1992/II/53
International trade is beneficial to a country if
A. that country exports more than it imports
B. that country imports more than it exports
C. it allows a more efficient use of resources
D. it enables the government to collect tariff revenue
6. 1993/II/52
One unit of resources
Wheat (units) Cotton (units)
Country X 2 OR 4
Country Y 1 OR 3
According to the above table, country X has a _______ opportunity cost in producing wheat and country Y has a
comparative advantage in producing ________. Therefore, country Y will import __________ from country X.
A. lower; cotton; wheat B. lower; wheat; cotton
C. higher; wheat; wheat D. higher; cotton; cotton
7. 1994/II/52
Suppose a country has an absolute advantage in good X. Which of the following is correct?
A. It is possible that the country has a higher opportunity cost of producing good X than another country.
B. The country can produce a greater amount of good X than another good with the same amount of resources.
C. The country will also have a comparative advantage in good X.
D. The country will have an absolute disadvantage in another good.
8. 1995/II/51
If a country has a comparative advantage in good X, it will
A. have an absolute advantage in X.
B. have a comparative disadvantage in some other good(s).
C. specialize in producing X and export all its output of X to other countries.
D. completely specialize in the production of X.
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9. 1996/II/46
Given a unit of input, the amount of output produced by Countries A and B are shown below:
Which of the following is/are true?
(1) the opportunity cost of producing shoes in Country B is lower than that of Country A.
(2) Country B enjoys absolute advantage in the production of both goods.
(3) If trading opportunities were opened up, Country B would export garment and import shoes.
A. (1) only B. (3) only C. (1) and (2) only D. (2) and (3) only
10. 1996/II/47
A country will gain from international trade if
A. it specializes in producing goods in which it enjoys comparative advantage.
B. The price of its exports is higher than that of its imports.
C. The quantity of its exports is greater than the quantity of its imports.
D. The price of its imports is less than the unit cost of producing these goods itself.
11. 1996/II/53
Which of the following economic principles can best explain why a doctor, who is the fastest typist in town ,
chooses to employ a typist to do all the typing for him?
A. economics of scale B. comparative advantage
C. diversification of work D. law of diminishing returns
12. 1997/II/48
The production of good X involves two different tasks. When Mary focus on one tasks and Peter on another,
Their totally daily output is greater than that when each of them has to do both tasks. This can be explained by
(1) economies of scale
(2) the principle of comparative advantage
(3) the advantages of division of labour.
A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. (1), (2) and (3)
Garment (units) Shoes (units)
Country A
Country B
2 OR 6
4 OR 8
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13. 1997/II/53
Suppose the production of cars and shirts in Mainland China an in the USA is as follows:
Suppose Hong Kong is willing to exchange 45 units of shirts for 9 units of cars. Under free trade, in order
to obtain the maximum gain per unit of export/ import,
A. Mainland China would export shirts to Hong Kong
B. The USA would export cars to Hong Kong
C. Hong Kong would import shirts from the USA
D. Mainland China would imports shirts from the USA
14. 1998/II/43
Question 14 and 15 refer to the table below. Suppose there are only two countries, Country A and Country B.
The output of bananas and shoes per unit of input of the two countries are as follows:
Which of the following statements is correct?
A. Country A has both an absolute and comparative advantage in the production of bananas.
B. Country A will export shoes.
C. Country B will import bananas.
D. Both countries will gain if 1 unit of bananas is exchanged for 4 units of shoes.
15. 1998/II/44
There are 4 units of resources in each country. Before trade, both countries use 1 unit of input to produce
bananas and 3 units to produce shoes. If complete specialization takes place in the two countries, what will be
the change in the total output of bananas and shoes of the two countries?
A. Only the production of bananas will increase.
B. Only the production of shoes will increase.
C. The production of bananas will increase but the production of shoes will decrease.
D. The production of both bananas and shoes will increase.
One unit of resources can produce
Cars (units) Shirts (units)
Mainland China
USA
1 OR 4
2 OR 3
Banana (units) Shoes (units)
Country A
Country B
4 OR 12
2 OR 4
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16. 1999/II/46
If a country specializes and exports good X, it implies that
A. this country needs to give up less of other goods than other countries in order to produce good X.
B. this country has more resources than other countries for producing good X.
C. this country uses less resources than other countries for producing the same amount of good X.
D. this country can produce good X at a lower cost than other goods.
17. 1999/II/48
Suppose the output per man-hour of China, Japan and the US are as follows:
According to the table,
A. The US has a comparative advantage in producing both goods.
B. The US has a comparative advantage in producing VCDs only.
C. China has a comparative advantage in producing DVDs only.
D. Japan has a comparative advantage in producing DVDs only.
18. 2000/II/46
Suppose there are good X and good Y only. If a country has a comparative advantage in good X, it will have
A. an absolute advantage in Y.
B. an absolute disadvantage in Y.
C. a comparative advantage in Y too.
D. a higher opportunity cost in producing Y.
19. 2000/II/47
Answer questions 19 and 20 by referring to the following table. It shows the amount of resources (in man-hours)
required to produce 1 unit of good X or 1 unit of good Y in country A and country B, respectively.
With 1 unit of resources, country A can produce either _____ unit(s) of X or ______ unit(s) of Y while country B
can produce either ____ unit(s) of X or ____ unit(s) of Y.
A. 1… 1/2… 1/3… 1/4 B. 1… 2… 3… 4
C. 1… 1/2 … 1… 3/4 D. 2… 1… 3/4 …1
DVD (units) VCD (units)
China 10 OR 30
Japan 20 OR 20
US 30 OR 50
Good X Good Y
Country A
Country B
1
3
2
4
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20. 2000/II/48
Both countries will gain from trade if 1 unit of X can be exchanged for
A. 0.5 Y B. 0.6 Y C. 0.75 Y D. 1 Y
21. 2001/II/43
Questions 21 and 22 refer to the following table which shows the data about country A.
Good X (units) Good Y (units)
Total output with no international trade 40 OR 60
Total output with specialization and
international trade
0 OR 110
Total consumption with international trade 50 OR 80
After specialization, country A produces _______ units less of goods X and ______ units more of good Y.
Therefore the opportunity cost of producing 1 unit of good Y is ________ units of good X.
A. 40...50... 4/5 B. 40...50... 5/4 C. 50...30... 3/5 D. 50...30... 5/3
22. 2001/II/44
In trading, country A exports _______ units of good Y and imports _______ units of good X. Therefore the
terms of trade is ________.
A. 20 ... 10 ... 1Y =2
1X B. 20 ... 10 ... 1Y = 2 X
C. 30 ... 50 ... 1Y =5
3X D. 30 ... 50 ... 1Y =
3
5X
23. 2002/II/44
Suppose Mrs Wong, a sole proprietor of a garment factory, is the best cook in town, but she leaves all the
cooking to her domestic helper at home. Which of the following would be correct ?
A. The domestic helper has a comparative advantage in cooking.
B. Both Mrs Wong and the domestic helper provide a labour service and receive wages.
C. Complex division of labour is illustrated in this case.
D. Both Mrs Wong and the domestic helper are tertiary producers.
24. 2002/II/47
Consider the trade between two countries X and Y, both of which produce garments and computers only.
If country X has the comparative advantage in producing garments, then country X
A. produces more garments per unit of resources than country Y.
B. produces better quality garments than country Y.
C. gives up a smaller amount of computers in order to produce a unit of garments than country Y.
D. gains more from their trade than country Y.
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25. 2004/II/45
Both countries A and B produce goods X and Y. Under which of the following conditions does country A
have a comparative advantage in the production of X?
A. One unit of X can be exchanged for more units of Y in country A than in country B.
B. In producing one unit of X, country A forgoes a smaller amount of Y than country B.
C. The opportunity cost of producing X in country A is smaller than that of Y in country B.
D. The amount of resources used in producing one unit of X is less in country A than in country B.
26. 2004/II/46
Refer to the information below and answer questions 26 and 27.
Both country A and country B produce rice and wine. Suppose country A has ONE unit of resources while
country B has TWO units of resources. Each country allocates half of their resources in the production of
each product. The amounts of output in country A and country B are shown below.
Rice (Units) Wine (Units)
Country A
Country B
6 AND 9
10 AND 8
With ONE unit of resources,
(1) country A can produce either 6 units of rice or 9 units of wine.
(2) country A can produce either 12 units of rice or 18 units of wine.
(3) country B can produce either 5 units of rice or 4 units of wine.
(4) country B can produce either 10 units of rice or 8 units of wine.
A. (1) and (3) only B. (1) and (4) only C. (2) and (3) only D. (2) and (4) only
27. 2004/II/47
Which of the following statements is correct?
A. According to the principle of comparative advantage, country A will import wine.
B. According to the principle of comparative advantage, country B will import rice.
C. Country A has an absolute advantage in the production of wine.
D. Country B has an absolute advantage in the production of rice.
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28. 2005/II/45
Answer Question 28 and 29 with reference to the following table.
The following table shows the number of man-hours required by Country A and Country B in the production
of toys and watches.
1 unit of Toys 1 unit of Watches
Country A
Country B
1 man-hour
2 man-hours
3 man-hours
4 man-hours
Which of the following descriptions are correct?
(1) Country A enjoys an absolute advantage in the production of both goods
(2) Country A enjoys an absolute advantage only in the production of toys
(3) Country B enjoys a comparative advantage in the production of toys
(4) Country B enjoys a comparative advantage in the production of watches
A. (1) and (3) only B. (1) and (4) only C. (2) and (3) only D. (2) and (4) only
29. 2005/II/46
According to the principle of comparative advantage, when the two countries trade with each other, Country
A will export ____ and import ____, and a mutually beneficial terms of trade can be 1 unit of toys equals ___
A. toys ... watches ... 0.4 units of watches
B. toys ... watches ... 2.5 units of watches
C. watches ... toys ... 0.4 units of watches
D. watches ... toys ... 2.5 units of watches
30. 2006/II/43
Under free trade, a country exports computer and imports cars. Which of the following statements about the
country MUST be correct?
The country
A. has an absolute advantage in producing cars
B. has an absolute advantage in producing computers
C. has a comparative disadvantage in producing cars
D. requires less resources to produce each unit of computers
31. 2006/II/46
If Country X is more productive in producing every good than Country Y, then
A. the two countries may still trade with each other
B. the gain from trade of Country X will be greater than that of Country Y
C. Country X will have a lower opportunity cost in producing every good than Country Y
D. no trade will take place between the two countries
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32. 2007/II/44
By using one unit of resources, Country A can produce 10 units of good X or 5 units of good Y. We can then
conclude that
A. Country A has a comparative advantage in producing good X
B. Country A has a comparative advantage in producing good Y
C. Country A may benefit from exporting good X if the international exchange ratio is 1X = 1Y
D. Country A may benefit from exporting good Y if the international exchange ratio is 1X = 1Y
33. 2007/II/45
Which of the following statements about international trade is correct if transportation cost increases?
A. The price of exported goods will increase if the exporting country has to bear the transportation costs
B. The net gains from the trade of the trading partners will remain unchanged as long as trade countries
C. Comparative advantages will disappear if the transportation costs are higher than the total gains from trade
D. Mutually beneficial trade is possible only if the transportation costs are lower than the total gains from trade
34. 2008/II/45
Suppose there are two countries A and B. The following tables shows the output per unit of resources in these two
countries in a certain year:
Good X (Units) Good Y (Units)
Country A
Country B
2 AND 4
3 AND 1
According to the above table, Country A has a comparative advantage in producing Good __ because ___.
A. Y ... with the same amount of resources, Country A can produce more Y than Country B
B. Y ... Country A has a lower opportunity cost in producing 1 unit of Y than in producing 1 unit of X
C. Y ... Country A's opportunity cost of producing 1 unit of Y is lower than Country B
D. X ... Country A's opportunity cost of producing 1 unit of X is lower than that of Country B
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1. 1994/II/53
The following table shows the production of two goods in two countries:
Suppose 1 unit of clocks can be exchanged for 2 units of toys through trade.
A. Both A and B will gain from trade. B. Both A and B will not gain from trade.
C. A will not gain from trade. D. B will not gain from trade.
2. 1995/II/52
Suppose in Country A one unit of resources can produce either 1 unit of X or 3 units of Y. If from trade 1
unit of X can exchange for 2 units of Y, Country A will export ________ and gain _________ for each unit of
export.
A. X … 1 unit of Y B. X … 1/6 units of Y C. Y … 1 unit of X D. Y … 1/6 units of X
3. 1998/II/45
If Country X can produce the same amount of each good with less resources than Country Y, then
A. there is no favourable terms of trade between Country X and Country Y.
B. Country Y may still produce some goods at a lower opportunity cost.
C. trade can still take place based on absolute advantage.
D. Country X possesses comparative advantage on all goods.
4. 2001/II/42
The production cost of 1 unit of food in country X is 3 units of clothing. When country X trades with country
Y, it can obtain 1 unit of clothing import by exporting 0.2 units of food. What is country X’s total gain from
trade if it exports 10 units of food to country Y?
A. 20 units of clothing B. 30 units of clothing minus 10 units of food
C. 50 units of clothing D. 50 units of clothing minus 10 units of food
5. 2002/II/45
The following table shows the output of X and Y per unit of resources in countries A and B.
Which of the following is / are the terms of trade under which trade between the two countries is mutually
beneficial ?
A. 1 X = 2 Y B. 1 X = 3 Y C. 2 X = 5 Y D. All of the above are correct.
One unit of resources can produce
Country A
Country B
Clocks (units) Toys (units)
2 or 4
6 or 8
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6. 2003/II/45
Answer questions 6 and 7 by referring to the following table.
Good X (units) Good Y (units)
Country A
Country B
100 AND 250
100 AND 50
Which of the following about the two countries is correct?
A. Country B has a comparative advantage in producing Good Y
B. Country A can produce the same amount of Good Y with fewer resources
C. Trade between the two countries would not be mutually beneficial if the transportation cost of trading
1 units of Good X is 2 units of Good Y
D. Country A would have a larger gain than Country B from each unit of Good X traded
7. 2003/II/46
Suppose each country has to pay a transportation cost of 0.5 units of Good X in trading 1 units of Good Y.
Which of the following terms of trade is mutually beneficial?
A. 1Y = 0.5X B. 1Y = 1X C. 1Y = 1.5X D. 1Y = 2X
8. 2006/II/44
The output of DVDs and MP3 players per unit of input of Countries A and B are shown below respectively.
DVD (Units) MP3 Player (Units)
Country A
Country B
10 OR 30
8 OR 12
If both countries have 3 units of inputs and complete specialization take place according to the principle of
comparative advantage, the total output of the two countries is ___ units of DVD and ___ units of MP3 player.
A. 24 ... 36 B. 24 ... 90 C. 30 ... 36 D. 30 ... 90
9. 2007/II/46
The table below shows the amount of resources required to produce good X and good Y by Country A and
Country B respectively.
1 unit of Good X 1 unit of Good Y
Country A 20 units 25 units
Country B 10 units 25 units
Which of the following can be a mutually beneficial terms of trade?
A. 1X = 0.4Y B. 1X = 0.5Y C. 1X = 0.8Y D. 1X = 0.9Y
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1. 1990/II/36
Which of the following will have favorable effects on the current account of Hong Kong’s balance of payments?
(1) A Japanese tourist spends a day in the Ocean Park.
(2) An American bank sets up a representative office in Hong Kong.
(3) The Hong Kong government buys a computer system from the U.S.A.
(4) A Hong Kong resident receives dividends from his U.S. stocks.
A. (1) and (2) only B. (1) and (4) only C. (2) and (3) only D. (3) and (4) only
2. 1990/II/46
There will be a worsening of both the balance of payments and the balance of trade if
A. exports increase. B. re-exports decrease.
C. investment in foreign countries decreases. D. the government gives more aid to foreign countries.
3. 1990/II/60
Which of the following is NOT an effect of importing foreign skilled labour for the construction industry?
A. a favourable effect on Hong Kong’s balance of payments
B. pressure on Hong Kong’s social services
C. a slower increase in the real wage rate of Hong Kong’s construction workers
D. a favourable effect on Hong Kong’s GDP
4. 1991/II/49
The rental income earned from a property in Canada and remitted to Hong Kong by a Hong Kong citizen
A. is included in the GDP of Hong Kong.
B. has a favorable effect on Hong Kong’s balance of visible trade.
C. has a favorable effect on Hong Kong’s balance of payment.
D. is taxable in Hong Kong.
5. 1991/II/50
The following table shows the balance of payments of a country:
$billion
Exports 30
Imports X
Capital inflow 50
Capital outflow 60
Foreign exchange and gold reserves decrease by $20 billion.
What is the value of X?
A. 10 B. 20 C. 30 D. 40
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6. 1991/II/60
The _____ of Hong Kong is NOT affected when some goods are imported to Hong Kong.
A. visible trade balance B. current account
C. capital account D. foreign exchange and gold account
7. 1992/II/30
What would the possible effect be on the economy if the domestic interest rate increases drastically?
A. an increase in investment B. a decrease in the unemployment rate
C. an increase in capital inflow D. an increase in the money supply
8. 1992/II/44
Which of the following is ‘stock’ concepts?
A. The balance in a savings account at December 31, 1991 B. Hong Kong ‘s balance of payments
C. Hong Kong ‘s GDP D. Hong Kong ‘s total exports
9. 1992/II/52
Calculate the value of net exports from the following information:
Domestic exports of goods $300
Re-exports of goods $150
Imports of goods $350
A. -$50 B. $100 C. $450 D. $800
10. 1992/II/60
Which of the following items would NOT be entered in the capital account of Hong Kong ‘s balance of
payments?
A. A Hong Kong citizen buying a factory in Japan
B. A Hong Kong citizen buying a computer made in the USA
C. A Hong Kong citizen buying securities in London’s stock market
D. A Hong Kong citizen buying a house in the USA
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11. 1993/II/40
Answer Question 11 referring to the following data of an economy in a certain year:
$ million Private consumption expenditure 40 Government consumption expenditure 10 Gross domestic fixed capital formation 10 Change in stocks 1 Total exports of goods 80 Domestic exports 70 Re-exports 10 Imports of goods 60 Exports of services 20 Imports of services 30 Inflow of capital 30 Outflow of capital 15
The balance of payments of the economy in that year is
A. $10 million B. $15 million C. $20 million D. $25 million
12. 1993/II/54
Which of the following will improve the capital account of Hong Kong ‘s balance of payments?
A. A Hong Kong businessman set up a computer firm in the USA
B. A British investor buys a commercial building in Hong Kong
C. A Hong Kong shipping company receives rental income for providing shipping services to a foreign
merchant
D. A Hong Kong investor receives a dividend from an overseas investment.
13. 1994/II/51
From the below information, find the value of re-exports:
Domestic exports $500
Trade balance $250
Imports $450
A. $50 B. $200 C. $250 D. $300
14. 1994/II/55
Which of the following has a favorable effect on the current account on Hong Kong’s balance of payments?
A. A Macau citizen leaves Hong Kong by using the service provided by a Hong Kong hydrofoil company.
B. A businessman from Mainland China invests in the real estate market in Hong Kong.
C. A local bank pays interest to an overseas depositor.
D. A company in mainland china issues shares in Hong Kong.
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15. 1994/II/56
Mr. Chan, who is an imported worker in Hong Kong, remits his income to his family in China. Which of the
following statements is correct?
A. Mr. Chan’s income is included in Hong Kong’s GNP.
B. The remittance has an unfavorable effect on Hong Kong’s balance of visible trade .
C. The remittance has a favorable effect on Hong Kong’s balance of invisible trade.
D. The remittance has favorable effect on China‘s balance of payments.
16. 1995/II/54
Consider the following balance of payments account of an economy :
$million
Export of good & services 2 800
Import of good & services 3 200
Capital inflows Z
Capital outflows 700
Increase in foreign exchange & gold reserves 40
Z is
A. 260 B. 340 C. 1 060 D. 1 140
17. 1995/II/56
If an American tourist gives money to local beggars, Hong Kong’s GDP will _______ and its balance of
payments will ________ .
A. increase … be improved B. increase … remain unchanged
C. remain unchanged … be improved D. remain unchanged … remain unchanged
18. 1995/II/57
Based on the above chart, which of the following are correct?
(1) The payments for imports of goods usually exceed the receipts from exports of goods.
(2) Over the years, net exports of services accounted for more than 7% of Hong Kong’s GDP.
(3) Hong Kong’s current account has a surplus in recent year.
A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. (1), (2) and (3)
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19. 1996/II/48
Which of the following will worsen the balance of payments but not the balance of trade of Hong Kong?
A. A Japanese pop singer cancelled his concerts in Hong Kong.
B. A charity organization in Hong Kong reduces its donations to Mainland China.
C. U.S. businessmen reduced their investment in Hong Kong.
D. Re-export from Hong Kong to mainland China decreased.
20. 1996/II/50
Which of the following is favorable to the capital account of Hong Kong’s balance of payments?
A. An American firm buys some certificates of deposit issued by a bank in Hong Kong.
B. An American firm donates money to a charitable organization in Hong Kong.
C. A Hong Kong firm buys a hotel in Canada.
D. A Hong Kong firm receives interest and dividends from its investment in the U.S.A.
21. 1996/II/51
Refer to the following data in the balance of payments account of a country.
$billion
Visible exports 15
Visible imports 13
Invisible exports 8
Invisible imports 11
Inflow of capital 9
Outflow of capital 12
This country has a/an __________ balance of visible trade and a/an ________ balance of payments.
A. favorable ………… favorable B. favorable ………… unfavorable
C. unfavorable ………….. favorable D. unfavorable …………. unfavorable
22. 1996/II/54
The tourism industry
(1) involves tertiary production only.
(2) Increase the GDP of a country.
(3) Has its earnings counted as net income from abroad.
(4) Has its earnings recorded in the current account of a country.
A. (1) and (3) only B. (1) and (4) only C. (2) and (3) only D. (2) and (4) only
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23. 1997/II/50
Answer Question 23 and 24 by referring to the data below of an economy in a certain year:
$ Billion
Domestic export of goods 50
Re-export 35
Import of goods 60
Export of services 25
Import of services 10
The balance of visible trade (in $ billion) is
A. -5 B. -2 C. 3 D. 6
24. 1997/II/51
The balance of payments (in $ billion) is
A. -4 B. 0 C. 1 D. 4
25. 1997/II/52
Which of the following will produce a favorable effect on the balance of payments of Country A?
A. The citizens of Country A increase their investment abroad
B. The government of Country A abolishes the tariffs on imports
C. The citizens of Country A receive interest from the US government bonds they hold
D. The government of Country A pays for the service of a foreign consultant firm
26. 1998/II/46
Which of the following is an invisible export in Hong Kong’s balance of payments accounts?
A. A Japanese firm buys shares on the Hong Kong Stock Exchange.
B. A Hong Kong citizen buys tickets from Japanese airlines.
C. A Hong Kong citizen remits money to his son in Japan.
D. A Japanese tourist consults a local doctor in Hong Kong.
27. 1998/II/47
An employment center in Hong Kong arranges for a maid from the Philippines to work in Hong Kong. It
receives commissions from both the maid and the local employer before the maid comes to Hong Kong. Which
of the following statements is/are correct?
(1) The GDP of Hong Kong rises.
(2) The balance of payments of Hong Kong improves.
(3) The visible trade balance of Hong Kong improves.
A. (1) only B. (2) only C. (1) and (2) only D. (1), (2) and (3)
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28. 1998/II/53
Which of the following statements about the firework display for the handover ceremony of Hong Kong to
China is INCORRECT?
A. Consumption was involved when people watched the firework display.
B. The nominal GDP of Hong Kong increased.
C. There was a favorable effect on the visible trade balance of Hong Kong.
D. The firework display has an opportunity cost because the money spent on it has other uses.
29. 1999//II/47
The following information shows the trade statistics of an economy in a certain year:
$ million
Domestic export of goods 30
Re-exports 40
Import of goods 50
Export of services 60
Import of services 80
According to the above data, the economy
A. has a visible trade surplus.
B. has a visible trade deficit.
C. has no visible trade surplus or visible trade deficit.
D. there is not enough information to obtain the answer.
30. 1999/II/53
Being a Hong Kong resident, Mr Wong earns a living in Hong Kong. He gets married to Mei-ling who lives
in Mainland China. Which of the following events will NOT affect the balance of payments of Hong Kong?
A. He buys a wedding ring in Hong Kong and takes it to her by himself.
B. He remits a sum of money as the betrothal gifts through a bank to Mei-ling’s parents.
C. He pays for the honeymoon trip to Thailand.
D. He rents a residential apartment for her in Shenzhen.
31. 1999/II/54
Which of the following is NOT included in the calculation of the balance of Hong Kong’s current account?
A. The investment of a U.S. company in a Hong Kong computer firm
B. Japanese cars sold in Hong Kong
C. A drama performance attended by the tourists in Hong Kong
D. The exports of China handled in the container port of Hong Kong
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32. 2000/II/50
Suppose country A has a balance of payments deficit in Year 1. In Year 2, the changes in the balance of
payments are as shown below :
$ Billion
Export of goods +28
Export of services +7
Import of goods +35
Import of services +13
Capital inflows +5
Capital outflows +8
Based on the above information, we can conclude that
A. in Year 2, the visible trade deficit has increased.
B. in Year 2, the visible trade deficit has decreased.
C. in Year 2, the balance of payments deficit has increased.
D. in Year 2, the balance of payments deficit has decreased.
33. 2000/II/51
Which of the following should be included in the calculation of the balance of Hong Kong’s current account ?
A. A company in Hong Kong pays interests for loans from a bank in the U.K.
B. A Hong Kong resident purchases a new flat in Shenzhen.
C. A U.S. investor purchases 5000 units of the Tracker Fund of Hong Kong.
D. An author in Hong Kong sells the copyright for his new book to a publisher in Taiwan.
34. 2001/II/41
Which of the following should be included in the calculation of the balance of Hong Kong’s current account?
A. A foreigner buys shares issued by a local property developer.
B. A foreigner receives rental income from his property in Hong Kong.
C. A company in Hong Kong donates medical equipment to a hospital in Mainland China.
D. A US manufacturer sets up a factory in Hong Kong.
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35. 2001/II/45
Hong Kong’s Balance of Payments Account
$ million
Current Account
Goods
Service
Factor income
Current transfers
Capital and Financial Account
Net errors and omissions
72000
-25 000
81 000
27 000
-11 000
-76 000
4 000
Total sum = 0
According to the above data,
(1) the visible trade deficit is $25 000 million.
(2) the invisible trade surplus is $81 000 million.
(3) the balance of payments account is in balance.
A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. (1), (2) and (3)
36. 2002/II/48
Which of the following should be included in the calculation of the balance of Hong Kong’s current account?
A. A Hong Kong resident buys a life insurance policy from an insurance company in the US.
B. A company in Hong Kong purchases the copyright of a film from a British film producer.
C. A Hong Kong resident purchases a house in the US.
D. A Hong Kong investor buys a number of shares of a listed company in the US.
37. 2003/II/43
Refer to the data of an economy in a certain year below:
$ Billion
Domestic exports of goods 20
Imports of goods 50
Visible trade balance -5
The re-exports (in $ billion) are
A. 15 B. 25 C. 30 D. 35
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38. 2003/II/48
According to the above diagram, from Year 4 to Year 6,
A. the economy has suffered from visible trade deficit B. the value of import of goods has increased
C. the value of total export of goods has decreased D. the visible trade deficit has improved
39. 2004/II/50
Mr Wong, a Mainland resident, comes to visit Hong Kong for a week. Which of
the following should be included in Hong Kong’s current account?
A. the transport service he bought from a Mainland airline.
B. the accommodation service he bought from a Hong Kong hotel
C. the residential flat in Tsim Sha Tsui he bought
D. the Bank of Chain (H.K.) Ltd shares he bought
40. 2005/II/44
After the introduction of the 'individual visit' scheme, the Chinese government allows individuals from the
mainland to travel in Hong Kong. This measure will increase Hong Kong's
(1) tertiary production
(2) GDP
(3) invisible trade surplus
A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. (1),(2) and (3)
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41. 2005/II/47
According to the above diagram, from Year 2 to Year 5, the value of domestic exports of goods
A. was decreasing B. was increasing C. remained constant D. was indeterminate
42. 2006/II/45
Many tourists from Mainland China buy souvenirs at Hong Kong Disneyland. Suppose these souvenirs are
made in Mainland China. Then the tourist spending mentioned above is a/an ______ to Hong Kong.
A. domestic export of goods B. re-export of goods
C. export of services D. import of services
43. 2006/II/48
An Indonesian maid who works for a family in Hong Kong remits part of her wage earnings to Indonesia.
In which component of the current account of Hong Kong's balance of payments should the above remittance be
recorded?
A. goods B. services C. income D. current transfers
44. 2007/II/48
Refer to the data of an economy in a certain year:
$ Billion
Domestic export of goods 20
Re-export 25
Import of goods 40
Export of services 23
Import of services 19
The visible trade balance is $___ billion.
A. -20 B. -5 C. 5 D. 9
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45. 2007/II/49
In which of the following situations will the import volume of Hong Kong from Japan increase?
A. The income of Hong Kong people falls
B. The national income of Japan rises
C. The exchange rate of the Hong Kong dollar to the Japanese yen changes from HK$6.7 = JPY100
D. The Hong Kong economy is in the recovery stage
46. 2007/II/50
An increase in the value of exports and a decrease in the value of imports in Country X would
A. decease its GDP
B. result in a surplus of is trade account
C. improve the balance of its current account
D. result in a depreciation of its domestic currency
47. 2008/II/46
Which of the following should be included in the calculation of the invisible imports of Hong Kong?
A. A Hong Kong citizen purchases shares in a state-owned enterprise of the Hong Kong stock market
B. A Hong Kong citizen buys some air tickets from a Mainland Chinese airline
C. A mainland student pays tuition fee for his studies at a university of Hong Kong
D. A mainland investor purchases a residential apartment in Hong Kong
48. 2008/II/47
Refer to the data of an economy in a certain year:
$ Billion
Domestic export of goods 50
Re-export 35
Import of goods 60
Export of services 25
Import of services 10
There is a/an __________ of $ __________ billion.
A. visible trade surplus … 25 B. visible trade deficit … 10
C. invisible trade surplus… 40 D. invisible trade deficit … 15
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49. 2008/II/48
Last year, a film crew came to Hong Kong to make a Batman movie. The shooting of the film in Hong Kong
would
(1) improve the visible trade balance of Hong Kong
(2) improve the invisible trade balance of Hong Kong
(3) increase the GDP of Hong Kong
A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. (1), (2) and (3)
50. 2008/II/49
A US engineer is working in Hong Kong. Which of the following amounts should be included in the calculation
of the balance of Hong Kong’s current account?
A. the part of her salary earnings that she deposits with a bank in Hong Kong
B. the part of her salary earnings that she remits to her family in the US
C. the money she pays to buy shares in Chinese state-owned enterprise quoted on the Hong Kong Stock
Exchange
D. the money she spends on buying clothes and toys in Hong Kong which are sent to her children in the US
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1. 1991/II/52
The imposition of an import tariff on a good
A. promotes mutual beneficial trade.
B. promotes fair competition as it eliminates the cost difference between countries.
C. benefits local consumers.
D. will increase the local production of the good.
2. 1991//II/54
Which of the following can be classified as a protectionist measure?
A. The government gives subsides to local industries whose products are competing with imports.
B. The government imposes a sales tax on both locally-produced and imported beverages.
C. The government forbids the sale of cigarettes to teenagers.
D. The government bans the ivory trade in support of the international issue of protecting elephants.
3. 1992/II/54
‘In our country, a large amount of textile workers are now out of work. We should use all means to reduce the
imports of textile products from other countries.’ From the above statement, the argument for protectionism is
A. to protect the infant industry B. to protect the local textile workers
C. to protect the quality of textile products D. to protect local consumers
4. 1992/II/55
An increase in the imports surcharge from 5% to 10% would definitely lead to the following :
A. a larger quantity of imports B. a smaller payment to foreign exporters
C. more tax revenue from the import surcharge D. a lower consumption of locally-produced substitutes
5. 1993/II/53
Country A prefers to impose quota rather than tariffs in restricting the amount of imports.
Which of the following is a possible reason?
A. The government wants to increase its revenue
B. The effect of quotas on the amount of imports will be more certain
C. Local consumers can enjoy cheaper imports
D. It will lead to less retaliation from the exporting countries
6. 1994/II/54
The imposition of a quota on an imported good
A. will lower its quality.
B. will benefit the consumer of the importing country.
C. will worsen the balance of trade of the importing country.
D. will help to encourage the production of the local import competing industries.
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7. 1995/II/53
Which of the following will occur in a country if it imposes an effective quota on imports?
A. The quality of locally-produced goods will improve.
B. The quality of imported goods will be lowered.
C. The supply of imports will be more elastic and local consumers will spend more on imports.
D. Local consumers will spend more on imports if the demand is inelastic.
8. 1997/II/11
If a country imposes a per-unit tariff on its imported computers and reduced the quantity of imported
computers by half,
(1) the tariff revenue of the country will increase
(2) the demand for domestic-produced computers will increase
(3) the balance of trade will improve
A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. (1), (2) and (3)
9. 1999/II/45
According to a news report, the use of U.S. import quota for Hong Kong garments has decreased because
of keen competition from other Asian countries. This has led to some of the quota remaining unused for the first
time. Which of the following diagrams correctly shows the situation of Hong Kong’s garment exports in the U.S.
market as described above?
A. B. C. S2 S1 D. S
D1 D1
D2 D2 D D1
D2
10. 1999/II/49
Consider the trade between two countries, A and B. If Country A increases the per unit tariff imposed on the
imports from Country B, then
A. the import value of Country A will increase because its import prices increase.
B. the import prices of Country A will decrease because its imports decrease in quantity.
C. the tariff revenue of Country A will increase because the above tariff is increased.
D. the export value of Country B will decrease because its exports decrease in quantity.
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11. 2000/II/49
Suppose the US government decreases the quota for HK garments exported to the USA. This will lead to
A. a shortage of HK garments in the USA.
B. an increase in the income of garment producers in the USA.
C. a surplus in the balance of trade in the USA.
D. a decrease in the expenditure of US consumers on HK garments.
12. 2002/II/46
Now that China has become a member of the World Trade Organization (WTO), the Chinese government will
have to lower the per unit tax on imports. As a result, in China,
A. the tariff revenue of the government will decrease but the import volume will increase.
B. the supply of imports will increase but the domestic price of imports will fall.
C. the supply of imports will increase but the import value will decrease.
D. both the demand for imports and the import volume will increase.
13. 2003/II/6
If a country reduces a per-unit tariff on its imported garments,
A. the domestic demand for imported garments would increase
B. local consumers’ expenditure on imported garments would increase
C. the sales revenue of domestic garment producers would decrease
D. the tariff revenue of the country coming from imported garments would decrease
14. 2004/II/48
In which of the following situations will the export volume of a country increase?
(1) an increase in the tariffs on imports
(2) a depreciation of the domestic currency
(3) an appreciation of the domestic currency
(4) an increase in income for the trading partners
A. (1) and (2) only B. (1) and (3) only C. (2) and (4) only D. (3) and (4) only
15. 2005/II/48
If the US government cancels the effective import quota restrictions on the textile products from Hong Kong,
then the US import price of Hong Kong textile products will _____ and US import spending on Hong Kong
textile products will _________.
A. rise … increase B. rise … be indeterminate
C. fall … increase D. fall … be indeterminate
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16. 2007/II/47
In Mainland China, the import of cotton is subject to a per unit tariff. If the government of China reduced the
per unit tariff of cotton,
A. the shortage of cotton would increase
B. the total import value of cotton, exclusive of tariff, would increase
C. the volume of imports of cotton would decrease.
D. the tariff revenue would decrease
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1. 1991/II/51
The appreciation of the Japanese yen may cause
A. a decrease in the price of Japanese goods in Hong Kong.
B. a decrease in the number of Hong Kong tourists visiting Japan.
C. an increase in the quantity of goods exported by Japan.
D. a decrease in Japanese investment abroad.
2. 1993/II/33
Which of the following about the linked exchange rate in Hong Kong is correct?
A. It is determined by market forces
B. If has been change several times by the government
C. The linked rate system is used to stabilize the exchange rate of the Hong Kong dollar
D. It is an exchange rate between the Hong Kong dollar and a basket of foreign currencies
3. 1993/II/36
Which of the following will lower the value of the Hong Kong dollar?
A. The US dollar appreciates against other countries
B. The government issues new $10 coins replace $10 notes
C. The money income increases
D. The GDP deflator increases
4. 1993/II/55
The above change in the exchange rate of the Hong Kong dollar against the Japanese yen would lead to
A. a slower growth rate imports from Japan
B. a smaller volume of Hong Kong garments exported to Japan
C. less Japanese investments in Hong Kong’s real estates
D. a trade surplus in Hong Kong against Japan
5. 1994/II/57
If the Hong Kong dollar depreciates against the Japanese yen,
A. Fewer Japanese tourists will be willing to come to Hong Kong.
B. The price of imports from Japan will fall.
C. The competitive power of Hong Kong products in Japan will fall.
D. Those who hold Japanese yen deposits will gain.
Year Exchange rates
1990
1991
HK$576 = 10 000 Japanese yen
HK$622 = 10 000 Japanese yen
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6. 1995/II/55
Under the linked exchanged rate system, if the US dollar depreciates against the Japanese yen sharply,
A. more US tourists will visit Japan.
B. more Japanese tourists will visit Hong Kong.
C. fewer Hong Kong products will be exported to the US.
D. fewer Hong Kong products will be exported to Japan.
7. 1996/II/52
Hong Kong practices a linked exchange rate system. In the foreign exchange market the exchange rate of the
Hong Kong dollar relative to the US dollar is ____________ and that relative to other currencies is ________.
A. fixed at US$1 = HK$7.8 …………. fixed
B. fixed at US$1 = HK$7.8 …………. not fixed
C. not fixed …………. fixed
D. not fixed …………. not fixed
8. 1997/II/54
When the HK dollar appreciates against the British pound,
A. the volume of the exports of Hong Kong to the US will increase
B. the volume of the imports to Hong Kong from the UK will increase
C. the volume of the imports to Hong Kong from the US will increase
D. the capital inflow to Hong Kong from the UK will increase
9. 1998/II/48
What will be the effect on Hong Kong’s trade with Canada if the exchange rate changes from
C$1 = HK$5.7 to C$1 = HK$5?
A. The volume of Hong Kong’s exports to Canada will increase.
B. The volume of Hong Kong’s imports from Canada will increase.
C. Hong Kong’s imports from Canada will be more expensive.
D. Hong Kong’s expenditure in Hong Kong dollars on imports from Canada will increase.
10. 1998/II/49
Under the linked exchange rate system of Hong Kong, which of the following statements is true?
A. The exchange rate of the HK dollar relative to Renminbi is fixed.
B. The market exchange rate of the HK dollar relative to the US$ is fixed at US$1 = HK$7.8.
C. The competitiveness of Hong Kong exports decreases when the US dollar appreciates against other
currencies.
D. Hong Kong will not have a balance of payments problem.
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11. 1999/II/34
Banks in Hong Kong offered a high interest rate for HK$ deposits in the first half of 1998 because
A. there was a keen competition among banks after the total removal of the interest rate agreement.
B. It was believed that the supply of Hong Kong dollars would fall short.
C. the government wanted to maintain the linked exchange rate at US$1 = HK$7.5.
D. the government used the reserves kept by the Exchange Fund to acquire stocks and shares in the stock
market.
12. 2000/II/52
Suppose the Japanese Yen appreciates greatly against the US dollar. Due to the linked exchange rate system,
A. the HK dollar will depreciate greatly against the Japanese Yen.
B. the US dollar will depreciate greatly against the Japanese Yen.
C. the US dollar will depreciate greatly against the euro.
D. the HK dollar will depreciate greatly against the euro.
13. 2001/II/46
Under the linked exchange rate system in Hong Kong,
A. the market exchange rate of the HK dollar relative to the US dollar is fixed.
B. the market exchange rates of the HK dollar relative to currencies other than the US dollar are fixed.
C. the HK dollar will depreciate against the Australian dollar if the US dollar appreciates against the
Australian dollar.
D. the HK dollar will appreciate against the Japanese yen if the US dollar appreciates against the Japanese yen.
14. 2003/II/47
What would result from the following change in the exchange rate between the HK dollar and the Japanese Yen?
15th February HK$6.4 = 100 yen
15th March in the same year HK$6.1 = 100 yen
(1) the volume of imported goods from Japan to Hong Kong would increase
(2) the number of Japanese tourists to Hong Kong would increase
(3) the prices of the exported goods from Hong Kong to Japan in terms of Japanese yen would increase.
A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. (1), (2) and (3)
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15. 2005/II/49
Under the linked exchange rate system, the above change in the exchange rate between the US dollar and the
Japanese yen will lead to
A. a decrease in the number of Hong Kong people visiting the US
B. an increase in the number of Hong Kong people visiting Japan
C. a decrease in the quantity of Japanese electrical appliances exported to Hong Kong
D. a decrease in the quantity of Hong Kong made fashions exported to Japan
16. 2006/II/47
Under the linked exchange rate system in Hong Kong, which of the following statements is correct?
A. The exchange rate of the Hong Kong dollar(HKD) relatively to the US dollar (USD) is fixed at
USD1= HKD7.8 on the foreign exchange market
B. If Mainland China has a visible trade surplus, Hong Kong will also have a visible trade surplus
C. When the USD depreciates against the Euro, the HKD will also depreciates against the Euro
D. All of the above
17. 2008/II/50
Under the linked exchange rate system of Hong Kong, the above change in the exchange rate between the
US dollar and the Japanese yen would lead to _________.
(1) an increase in the competitiveness of Hong Kong exports to Japan
(2) a decrease in the number of Hong Kong tourists to Japan
(3) a decrease in the total value of Hong Kong imported from Japan (in terms of HKD)
A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. (1), (2) and (3)
Year X Exchange rates
January
May
US$1 = 120 Japanese yen
US$1 = 105 Japanese yen
Date Exchange rates
11th July 2007
14th November 2007
US$1 = ¥122
US$1 = ¥111
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1. 1995/II/58
The above graph shows that in recent years,
A. the value of Hong Kong’s trade with countries other than China has decreased.
B. Hong Kong has gained an increasing surplus from its trade with China.
C. the flow of people between Hong Kong and China has increased.
D. China has become the largest trading partner of Hong Kong.
2. 2000/II/54
In recent years, the government has taken several measures to promote Hong Kong’s status as a world
financial centre. Which of the following is NOT such a measure taken by the government?
A. breaking the bank cartel such as the abolition of its interest rate agreements
B. merging the Stock Exchange of Hong Kong Limited and the Hong Kong Futures Exchange
C. establishing a growth enterprise market to help medium-sized companies to raise capital funds
D. setting up a government unit trust fund, the Tracker Fund of Hong Kong, made up of stocks with a
connection to China for the public to invest in
HKCEE ECONOMICS | 12.6 HK’s international trade and its financial centres | P.1
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HKCEE Economics Paper II Answers 1990-2008 1.1 Scarcity 01. D 02. B 03. D 04. C 05. D 06. B 07. D 08. B 09. D 10. D 1.2 Choice and opportunity cost 01. A 02. A 03. A 04. D 05. D 06. C 07. C 08. C 09. C 10. D 11. C 12. A 13. A 14. D 15. C 16. D 17. D 18. A 19. A 20. C 21. C 22. C 23. C 24. C 25. C 26. D 1.3 Goods 01. C 02. C 03. D 04. C 05. B 06. C 07. D 08. A 09. D 10. D 11. D 12. C 13. C 14. D 15. B 16. C 17. C 18. B 19. C 20. C 21. B 22. D 23. B 24. B 25. C 26. D 27. D 28. B 29. C 30. A 1.4 Three basic economic problems 01. B 02. D 03. C 04. D 05. C 06. C 07. D 08. C 09. D 10. C 11. D 12. B 13. C 14. B 15. C 16. A 17. C 18. D 19. D 20. B 2.1 Demand and Supply 01. B 02. D 03. D 04. C 05. A 06. C 07. C 08. A 09. D 10. C 11. A 12. C 13. A 14. A 15. B 16. A 17. D 18. B 19. C 20. B 21. A 22. C 23. A 24. D 25. A 26. D 27. B 28. A 29. B 30. A 31. B 32. D 33. C 34. C 35. B 36. D 37. C 38. C 39. A 40. B 41. B 42. D 43. D 44. C 45. D 46. A 47. C 48. A 49. D 50. A 51. C 52. B 53. D 54. C 55. B 56. C 57. D 58. D 59. C 60. B 61. D 62. C 63. D 64. B 65. D 66. A 67. C 68. B 69. C 70. A 71. C 72. D 73. B 74. D 75. A 76. B 77. B 2.2 Price elasticity of demand and supply 01. C 02. D 03. B 04. C 05. A 06. C 07. B 08. B 09. C 10. C 11. D 12. C 13. B 14. A 15. D 16. C 17. C 18. D 19. C 20. A 21. D 22. B 23. D 3.1 Price ceiling 01. A 02. A 03. B 04. B 3.2 Price floor 01. D 02. B 03. D 04. C 05. A 06. B 07. C 08. D
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3.3 Quota 01. B 02. D 03. A 04. B 04. B 05. C 3.4 Unit tax 01. A 02. B 03. C 04. C 05. A 06. B 07. B 08. C 09. B 10. B 11. D 12. A 13. C 14. B 15. B 16. C 17. B 18. D 19. C 20. C 3.5 Unit subsidy 01. C 02. B 03. B 04. C 05. D 06. D 07. A 08. B 4.1 Types of production 01. D 02. B 03. C 04. D 05. D 06. C 07. B 08. D 09. C 10. D 4.2 Division of labour 01. A 02. D 03. A 04. A 05. B 06. D 07. D 08. D 09. D 10. C 4.3 Factors of production 01. C 02. D 03. D 04. D 05. D 06. B 07. D 08. D 09. C 10. B 11. D 12. D 13. B 14. C 15. C 16. A 17. B 18. C 19. C 20. B 21. A 22. A 23. D 24. C 25. A 26. A 27. B 28. C 29. B 30. B 31. A 32. D 33. A 34. B 35. D 36. D 37. B 38. C 39. D 40. D 41. A 42. A 43. A 44. C 45. D 46. B 47. A 48. B 49. D 50. B 51. B 52. D 53. B 54. D 55. A 56. D 57. D 58. D 59. A 60. B 61. A 62. D 63. D 64. C 65. C 66. D 67. C 68. A 69. C 70. B 71. B 72. C 73. A 74. B 75. B 76. C 4.4 Short run and long run 01. C 02. B 03. D 04. C 05. C 06. B 07. D 08. B 09. A 10. A 11. D 12. B 13. B 14. C 15. C 16. C 17. C 18. D 19. B 20. C 21. A 22. D 23. B 24. A 25. D 26. D 27. D 5.1 Definition of a firm 01. B 5.2 Types of private enterprise 01. C 02. B 03. B 04. D 05. C 06. D 07. C 08. B 09. C 10. B 11. B 12. C 13. D 14. C 15. C 16. C 17. C 18. D 19. D 20. A 21. C 22. C 23. C 24. A 25. C 26. A
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5.3 Comparing different types of private enterprise 01. C 02. C 03. B 04. D 05. A 06. C 07. C 08. C 09. B 10. C 11. B 12. D 13. A 14. D 15. D 16. B 17. C 18. C 19. C 20. D 21. A 22. B 23. D 24. B 25. C 5.4 Methods of raising capital and different types of shareholders 01. D 02. B 03. C 04. B 05. D 06. C 07. A 08. A 09. B 10. B 11. A 12. D 13. A 14. D 15. B 16. A 17. B 18. D 5.5 Public enterprise 01. D 02. A 03. A 04. A 05. A 06. A 6.1 Types of integration 01. B 02. A 03. A 04. A 05. B 06. D 07. D 08. A 6.2 Motives of integration 01. D 02. C 03. A 04. A 05. A 06. A 07. B 08. D 09. D 10. C 11. D 12. D 13. A 14. A 7.1 Market and competition 01. D 02. A 03. D 04. D 05. C 06. A 7.2 Types of market structure 01. B 02. C 03. C 04. A 05. D 06. C 07. C 08. D 09. D 10. C 11. B 12. B 13. B 14. D 15. A 16. C 17. B 18. D 19. C 8.1 Circular flow of income 01. A 02. D 03. C 04. B 05. C 06. B 07. B 8.2 GDP - Production (Value-added) approach 01. A 02. D 03. D 04. D 05. A 06. A 07. B 08. C 09. C 10. B 11. A 8.3 GDP – Expenditure approach 01. A 02. A 03. C 04. D 05. C 06. C 07. C 08. C 09. B 10. B 11. B 12. D 13. B 8.4 GDP - Income approach 01. A 02. A 03. B
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8.5 Whether an item is included in GDP 01. B 02. C 03. D 04. A 05. A 06. B 07. A 08. B 09. A 10. B 11. A 12. C 13. A 14. A 15. A 16. B 17. B 18. A 19. D 8.6 GNP 01. D 02. B 03. B 04. A 05. C 06. D 07. D 08. C 09. D 10. B 11. A 12. A 13. D 14. C 15. C 8.7 GDP at factor cost 01. B 02. C 03. B 04. C 05. B 06. C 07. C 08. C 8.8 GDP at current and constant market prices 01. D 02. C 03. A 04. B 05. A 06. A 07. A 08. C 09. D 10. A 11. B 12. A 13. A 8.9 Factors affecting GDP 01. C 02. A 03. A 04. B 05. C 06. A 07. C 08. C 09. D 8.10 Limitations of GDP statistics 01. D 02. C 03. C 04. D 05. A 9.1 Business cycle 01. A 02. D 03. A 04. D 05. A 06. D 07. D 08. D 09. D 10. C 11. A 12. A 13. A 14. A 15. D 16. A 9.2 Unemployment 01. A 02. D 03. C 04. A 05. D 06. B 07. B 08. A 09. A 10. A 11. C 12. D 13. B 14. A 15. B 16. A 17. B 18. B 19. C 20. C 21. C 9.3 Changes in the general price level 01. A 02. B 03. D 04. B 05. D 06. A 07. B 08. D 09. B 10. B 11. A 12. C 13. D 14. B 15. B 16. D 17. D 18. D 19. A 20. C 21. D 22. B 23. C 24. D 25. B 26. A 27. B 28. B 29. D 30. D 31. D 32. A 33. C 34. C 35. C
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10.1 Nature and functions of money 01. A 02. C 03. D 04. C 05. A 06. A 07. B 08. D 09. C 10. C 11. C 12. B 13. D 14. A 15. B 16. C 17. C 18. C 19. B 20. D 21. D 22. D 23. D 24. C 25. C 26. A 27. B 28. B 29. C 30. B 31. A 32. B 33. C 34. B 35. D 10.2 Three-tier banking system 01. A 02. B 03. C 04. A 05. A 06. A 07. A 08. A 09. B 10.3 Functions of central bank 01. A 02. D 03. D 04. A 05. B 06. C 07. D 08. B 09. A 10.4 Money supply 01. C 02. C 03. A 04. C 05. A 06. C 07. A 08. A 09. A 10. B 11. B 12. A 13. D 14. B 15. C 16. B 17. B 18. D 19. A 20. A 21. A 22. D 23. A 24. A 10.5 Deposit creation 01. B 02. B 03. B 04. D 05. C 06. A 07. D 08. B 09. C 10. B 11. B 12. A 13. A 14. D 15. C 16. B 17. A 18. C 19. B 20. C 21. C 22. D 23. C 24. A 25. D 26. B 27. C 28. A 29. B 30. A 31. B 32. D 33. B 34. C 35. D 36. B 37. D 10.6 Classification of financial market 01. A 02. B 03. C 04. D 11.1 Type and nature of tax 01. B 02. D 03. C 04. C 05. A 06. A 07. A 08. A 09. D 11.2 Principles of taxation 01. B 02. A 03. C 04. C 05. B 06. B 07. D 11.3 Classification of tax system 01. D 02. B 03. B 04. A 05. D 06. B 07. D 08. B 09. A 10. B 11. C 12. C 13. D 14. B 15. A 16. B 17. A 18. B 19. C 20. A 21. D 22. A 23. D 24. D 25. D 26. D 27. A 28. C 29. B 30. A 31. A 32. A 33. D 34. B
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11.4 Economic effect on taxation 01. A 02. B 03. B 04. C 05. B 06. A 07. B 08. C 09. B 10. C 11. C 12. D 13. A 14. B 15. C 16. C 17. B 18. B 19. D 20. A 21. C 22. D 23. C 24. B 25. A 26. B 27. B 28. B 29. A 30. B 31. B 11.5 Public expenditure 01. C 02. B 03. B 04. A 11.6 Public expenditure as a proportion of GDP 01. C 02. C 03. A 11.7 Fiscal policy 01. C 02. B 03. D 04. A 05. B 06. A 07. B 08. D 09. C 10. B 11. C 12. C 13. A 12.1 Absolute and comparative advantage 01. A 02. D 03. A 04. A 05. C 06. A 07. A 08. B 09. D 10. D 11. B 12. C 13. B 14. B 15. A 16. A 17. D 18. D 19. A 20. B 21. A 22. D 23. A 24. C 25. B 26. D 27. C 28. B 29. A 30. C 31. A 32. C 33. D 34. C 12.2 Terms of trade 01. C 02. D 03. B 04. A 05. C 06. C 07. B 08. B 09. B 12.3 Balance of payments 01. B 02. B 03. A 04. C 05. D 06. C 07. C 08. A 09. B 10. B 11. D 12. B 13. B 14. A 15. D 16. D 17. C 18. D 19. C 20. A 21. B 22. D 23. C 24. D 25. C 26. D 27. C 28. C 29. A 30. A 31. A 32. C 33. A 34. B 35. D 36. A 37. B 38. C 39. B 40. D 41. A 42. C 43. D 44. C 45. D 46. C 47. B 48. A 49. C 50. B 12.4 Protectionism 01. D 02. A 03. B 04. B 05. B 06. B 07. D 08. D 09. A 10. D 11. B 12. B 13. C 14. C 15. D 16. B 12.5 Exchange rate 01. B 02. C 03. D 04. A 05. D 06. B 07. D 08. B 09. B 10. C 11. B 12. A 13. D 14. B 15. C 16. C 17. A
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12.6 HK’s international trade and its financial centres 01. D 02. D