HKCEE Economics Multiple Choice

CONTENTS
HKCEE Economics Multiple Choices

SECTION 1 THE BASIC ECONOMIC PROBLEMS 1.1 Scarcity 1.2 Choice and opportunity cost 1.3 Goods 1.4 The three basic economic problems P.1.2 P.3-7 P.8-13 P.14-17
SECTION 2 DEMAND SUPPLY AND PRICE ELASTICITY 2.1 Demand and supply 2.2 Price elasticity of demand and supply SECTION 3 MARKET INTERVENTION 3.1 Price ceiling 3.2 Price floor 3.3 Quota 3.4 Unit tax 3.5 Unit subsidy SECTION 4 PRODUCTION 4.1 Types of production 4.2 Division of labour 4.3 Factors of production 4.4 Short run and long run SECTION 5 FIRMS AND BUSINESS OWNERSHIP 5.1 Definition of a firm 5.2 Types of private enterprise 5.3 Comparing different types of private enterprise 5.4 Methods of raising capital and different types of shareholders 5.5 Public enterprise SECTION 6 GOWTH OF FIRMS 6.1 Types of integration 6.2 Motives of integration SECTION 7 MARKET STRUCTURE 7.1 Market and competition 7.2 Types of market structure P.101-102 P.103-106 P.96-97 P.98-100 P.91-94 P.95 P.85-90 P.79 P.80-84 P.54-56 P.57-58 P.59-72 P.73-78 P.41 P.42-43 P.44-45 P.46-50 P.51-53 P.18-35 P.36-40
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 8.4 Income approach 8.5 Whether an item is included in GDP 8.6 GNP 8.7 GDP at factor cost P.113-115 P.116 P.117-120 P.121-123 P.124-126
8.8 GDP at current and constant market prices P.127-129 8.9 Factors affecting GDP 8.10 Limitations of GDP statistics P.130-131 P.132
SECTION 9 BUSINESS CYCLE, UNEMPLOYMENT AND CHANGES IN THE GENERAL PRICE LEVEL 9.1 Business cycle 9.2 Unemployment 9.3 Changes in the general price level SECTION 10 MONEY AND BANKING 10.1 Nature and functions of money 10.2 Three-tier banking system 10.3 Functions of central bank 10.4 Money supply 10.5 Deposit creation 10.6 Classification of financial market SECTION 11 PUBLIC FINANCE 11.1 Type and nature of tax 11.2 Principles of taxation 11.3 Classification of tax system 11.4 Economic effect on taxation 11.5 Public expenditure P.176-177 P.178-179 P.180-189 P.190-197 P.198 P.151-156 P.157-158 P.159-160 P.161-166 P.167-174 P.175 P.133-136 P.137-141 P.142-150
11.6 Public expenditure as a proportion of GDP P.199 11.7 Fiscal policy SECTION 12 INTERNATIONAL TRADE 12.1 Absolute and comparative advantage 12.2 Terms of trade 12.3 Balance of Payments 12.4 Protectionism 12.5 Exchange rate 12.6 Hong Kongs international trade and its financial centre Multiple-Choices Answers (By Topics) Multiple-Choices Answers (By Years) P.235 P.236-242 P.243 P.203-211 P.212-213 P.214-226 P.227-230 P.231-234 P.200-202
HKCEE ECONOMICS |
1.1 Scarcity |
P.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) A. compete against one another. (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 Japans 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.2
6. 1995/II/2 Scarcity exists A. because there is more than one person in the world. B. if at least one persons 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. B. C. D. the economy is planned economy. there is competition for the good. effective price control is imposed on that good. 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. C. D. all markets are perfectly competitive. the quantity supplied of all goods is fixed. 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 |
1.2 Choice and opportunity cost
P.1
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 C. the tuition fee she paid for her training as a teacher B. the income from being a singer 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) 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. Lees opportunity cost of using the studio by itself? A. $10000 per month B. $20000 per month C. $30000 per month D. $40000 per month
C.
(2) and (4)
D.
(3) and (4)
HKCEE ECONOMICS |
P.2
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. B. C. D. $1 million $5000 a year $5000 a month 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: Number of coupon 10 20 30 Gifts 1 camera 1 TV set 1 air ticket
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. C. D. there is a shortage of gifts for all customers the promotion campaign is successfully and there is an increase in the demand for the companys products customers has an extra cost to obtain the gifts
HKCEE ECONOMICS |
P.3
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. D. the opportunity cost of the queuing time of theses elderly people was lower than that of the potential buyers 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. B. C. D. The import-export firm increases its staffs welfare The department store offers a higher salary There is a third offer paying a higher salary than the original two offers 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 C. People choose to option with the least cost B. People have to choose if there is scarcity 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 |
P.4
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 19. 2002/II/4 Which of the following would affect the cost of constructing the West Rail ? A. B. C. D. an increase in the damage to the natural environment along the railway caused by the construction an increase in the wages of the maintenance staff for the operation of the train service a decrease in the profit from providing the train service a decrease in the revenue of the bus company operating a bus service along the railway
D.
(2) and (3) only
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 C. The wage rate for F.5 graduates decreases B. The tuition fee for studying F.6 decreases D. Peters 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 |
P.5
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) (3) A. the official ticket price was set below the market clearing level. the opportunity cost of obtaining a ticket was higher that its official selling price. (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 ones health D. All of the above are correct
HKCEE ECONOMICS |
1.3 Goods |
P.1
1. 1990/II/2 A free good is a good which A. nobody wants. C. is not scarce.
B. D.
is provided by the government free of charge. 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. D. The 9 years free education provided by the Hong Kong government is a scarce good. 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 C. can be allocated by means of price
B. is not an economic good D. cannot be used for further production
HKCEE ECONOMICS |
1.3 Goods |
P.2
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 peoples wants 8. 1993/II/56 Which of the following statements about wealth is FALSE? A. A persons wealth is his total earnings over a period of time B. Retired peoples experience is part of societys wealth C. A persons 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.3
13. 1997/II/12
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
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. D. an economic good because more of the food is preferred to less of it 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. C. its quantity supplied is smaller than its quantity demanded at all prices.
B. its price will increase. 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. A. (1) and (2) B. (1) and (4) (4) C. Outputs are economic goods. (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. C. digital versatile disc (DVD) and laser disc (LD) player hardback book and printing paper B. wool and mutton D. electricity and light bulb
18. 1999/II/10 Which of the following are capital goods of a school? (1) teachers knowledge of economics (2) notes taken by the students A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only (3) watch-dogs D. (1), (2) and (3)
10
HKCEE ECONOMICS |
1.3 Goods |
P.4
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. B. C. D. a companys stock whose price has been falling for two months the votes for the candidates in a Legislative Council election stray and homeless dogs in the streets 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. B. C. D. The ice is a gift of nature. More of the ice is not preferred. The price of the ice is zero. 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. B. C. D. free goods because there are plenty of songs and pictures on the Internet. free goods because their original owners have not received any payments. economic goods because the cost involved in using the Internet is negligible. 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.
11
HKCEE ECONOMICS |
1.3 Goods |
P.5
24. 2004/II/3 Good X is an economic good if A. more than one person needs it. C. it can satisfy human wants.
B. more of it is preferred. 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 C. the wants for this rice are unlimited B. rice can satisfy peoples wants 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
12
HKCEE ECONOMICS |
1.3 Goods |
P.6
29. 2007/II/12 Flour is a _______ when __________ A. capital good it is used by Mrs Chan to make a cake for her daughters 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. B. C. D. people will not compete for free goods. money price is the only criterion of competition for scarce goods resources with alternative uses are scarce there is no scarcity in barter economy
13
HKCEE ECONOMICS |
1.4 Three basic economic problems
P.1
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 fathers 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?
14
HKCEE ECONOMICS |
P.2
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. C. has a less even income distribution. must have a lower unemployment rate. B. must have a lower inflation 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 (3) bank loans A. (1) and (2) only B. (2) education (4) electrical appliances (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.
15
HKCEE ECONOMICS |
P.3
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)
16
HKCEE ECONOMICS |
P.4
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. B. C. D. most of the markets are perfectly competitive most of the resources are allocated by the price mechanism most of the goods are economic goods most of the public utilities are privately owned
17
HKCEE ECONOMICS |
2.1 Demand and Supply
P.1
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
Unit price D1 D2
Quantity
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. B. C. D. The country imposes a quota on the imported oil. The cost of exploration for oil increases substantially. The country undergoes rapid industrialization. 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.
18
HKCEE ECONOMICS |
P.2
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
19
HKCEE ECONOMICS |
P.3
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
20
HKCEE ECONOMICS |
P.4
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
21
HKCEE ECONOMICS |
P.5
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
Lane Crawford 50% discount on all items !
This method of sales promotion can be explained by A. C. the law of supply. the law of demand. B. D. economies of scale. 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. D. the price of this type of housing is below its cost. 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)
22
HKCEE ECONOMICS |
P.6
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?
23
HKCEE ECONOMICS |
P.7
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. C. the demand for it is inelastic . the price of its complement decreases. B. the demand for it is perfectly elastic. 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
24
HKCEE ECONOMICS |
P.8
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 Kongs 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. C. the excess demand will disappear. B. the quantity transacted will decrease. 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.
25
HKCEE ECONOMICS |
P.9
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 Quantity demanded (units) Quantity supplied (units) $25 120 60 $30 100 75 $35 80 80 $40 75 100 $45 60 120
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. D. a higher salaries tax would raise the market price to a price greater than $35. the seller could set the price at $40 to gain the highest profit.
42. 2000/II/9 Which of the following is an example of joint demand? A. the courier service () of a local firm and the postal service of the government B. C. D. the Airport Express train service and the Tung Chung Line train service magazines and printing paper floppy diskettes and floppy diskette drives
26
HKCEE ECONOMICS |
P.10
43. 2000/II/12 Which of the following diagrams shows the result of an improvement in the technology used in producing digital versatile disc (DVD) players ?
44. 2001/II/3 Compared to last year, more watermelons were sold this summer and the price was lower. This is because there was a (an) __________ in the __________ watermelons. A. increase demand for B. decrease demand for C. increase supply of D. decrease supply of 45. 2001/II/4 A rise in the price of a good will cause a decrease in demand for it and an increase in its supply. The above statement is A. correct because a change in price will change both demand and supply. B. incorrect because a rise in price will only increase the supply. C. incorrect because a rise in price will only decrease the demand D. incorrect because both demand and supply will not change as a result of a change in price.
46. 2001/II/5 Which of the following diagrams shows the result of a significant increase in the annual license fee for private cars.
27
HKCEE ECONOMICS |
P.11
47. 2001/II/10 The diagram below shows the supply and demand curves of imported Japanese automobiles in Hong Kong. The original equilibrium point is at E.
If there is an increase in the transportation cost from Japan to Hong Kong and more similar models of Korean automobiles with cheaper price are imported, the new equilibrium points will be at A. E1 B. E2 C. E3 D. E4 48. 2002/II/6 The following table shows the supply of and demand for Good X Unit price ($) Quantity demanded (units)
Quantity supplied (units)
2 20 4 4 16 8 6 12 12 8 8 16 10 4 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
28
HKCEE ECONOMICS |
P.12
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?
29
HKCEE ECONOMICS |
P.13
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.
30
HKCEE ECONOMICS |
P.14
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
31
HKCEE ECONOMICS |
P.15
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 C. an increase in the sales revenue D. B. an increase in the quantity transacted 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
32
HKCEE ECONOMICS |
P.16
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
33
HKCEE ECONOMICS |
P.17
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
34
HKCEE ECONOMICS |
P.18
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 ($) 5 4 3 2 1 Quantity demanded (units) 10 12 15 20 27 Quantity supplied (units) 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
35
HKCEE ECONOMICS |
2.2 Price elasticity of demand and supply |
P.1
1. 1991/II/19 Price $2 $4 $6 $8 $10 Quantity demanded (unit) 10 6 4 3 1 $4 to $10 Total revenue $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.
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 Tunnels 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
36
HKCEE ECONOMICS |
P.2
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 C. The supply is elastic B. The demand is inelastic 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. C. D. not change the fares before 9 am but reduce the fares after 9 am. increase the fates before 9 am. But reduce the fares after 9 am. not change the fares before 9am. But increase the fares after 9am.
37
HKCEE ECONOMICS |
P.3
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%
38
HKCEE ECONOMICS |
P.4
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. Marys 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 $80 18. 2003/II/13 A marker researcher reports to the manager of a company, Even if we cut prices to boost sale, the sales revenue will remain unchanged because of the elasticity of demand of our product? According to the market researcher, their products elasticity of demand is A. perfectly inelastic B. inelastic C. elastic D. unitarily elastic 19. 2004/II/9
In the above diagram, DD is a demand curve. In the price range P1 to P2, the elasticity of demand A. is less than 1. B. is equal to 1. C. is greater than 1. D. may be less than or greater than 1, depending on the exact values of P1, P1, Q1 and Q2.
39
HKCEE ECONOMICS |
P.5
20. 2005/II/12 The table below shows the relationship between the price of Good X and its total sales revenue. Price ($) Total sales revenue ($) 1 100 2 200 3 300
Within the above price range, the elasticity of demand of Good X is A. equal to zero B. greater than zero and smaller than one C. equal to one D. greater than one
21. 2006/II/9 Fearing an outbreak of bird flu, people tend to consume less live poultry but more canned food. As a result, the price of the canned food of a particular brand changed by 50% and its quantity transacted rose from 1000 cans to 1350 cans per month. We can conclude that within the above price range this canned food had A. an elastic demand B. an inelastic demand C. an elastic supply D. an inelastic supply
22. 2007/II/9 The table below shows the relationship between the price of Good X and its sales revenue. Price ($) Total sales revenue ($) 10 1 000 20 1 500 30 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
40
HKCEE ECONOMICS |
3.1 Price ceiling |
P.1
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 C. remain unchanged 2. 1994/II/10 B. decrease D. either increase or decrease, depending on its price elasticity of demand
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. C. the supply is reduced.
B. an effective price ceiling is imposed. 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
41
HKCEE ECONOMICS |
3.2 Price floor
P.1
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 Unit price ($) 7 6 5 4 3
Quantity Demanded (units) 8 12 16 20 24
Quantity Supplied (units) 20 18 16 14 12
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.
42
HKCEE ECONOMICS |
3.2 Price floor
P.2
5. 2000/II/6 Hong Kongs 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 6. 2004/II/12
D.
(1), (3) and (4) only
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
43
HKCEE ECONOMICS |
3.3 Quota |
P.1
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. increaseincrease B. increasedecrease C. decreaseincrease D. decreasedecrease 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
44
HKCEE ECONOMICS |
3.3 Quota |
P.2
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 As market of clothing imported from Country B? E1 is the original equilibrium point and E 2 is the new equilibrium point.
45
HKCEE ECONOMICS |
3.4 Unit tax |
P.1
1. 1990/II/51 Suppose the government increases the tax on cigarettes by $2. Consequently, the price of each packet of cigarettes increases by $1.5. Which of the following statements is true? A. The producers bear 1/4 of the tax. B. The demand for cigarettes is elastic. C. The supply of cigarettes is elastic. D. The tax is progressive in nature. 2. 1994/II/8 For Question No. 2 and 3, consider the following supply and demand schedule of wine in a certain country: Price ($) Quantity demanded (units) Quantity supplied (Units) 30 32 34 36 38 40 Suppose initially the wine market is in equilibrium. 90 80 70 60 50 40 60 65 70 75 80 85
If the government imposes a tax of $6 for each unit of the wine sold, the new equilibrium price will be A. $32 B. $36 C. $38 D. $40 3. 1994/II/9 Government revenue from the above tax will be _______. A. $240 B. $300 C. $360 D. $420 4. 1995/II/11 Suppose the government imposes a per unit sales tax of $5 on good X. Under what condition will the price increase by $5? A. The supply of X is unitary elastic. B. The supply of X is perfectly inelastic. C. The demand for X is perfectly inelastic. D. The demand for X is unitary elastic. 5. 1996/II/7 Price ($) 6 8 10 12 14 Quantity demanded (units) 60 55 50 45 40 Quantity supplied (units) 40 45 50 55 60
Refer to the above information about a good. What will be consumer tax burden if a per-unit tax of $4 is imposed? A. $90 B. $100 C. $110 D. $180
46
HKCEE ECONOMICS |
3.4 Unit tax |
P.2
6. 1999/II/8 Refer to the following supply and demand schedule for good Y and answer questions 6 and 7. Unit Price ($) Quantity demanded (Units) Quantity supplied (Units) 12 40 280 11 60 240 10 80 200 9 100 160 8 120 120 7 140 80
If the government imposed a $3 per unit tax on Y, what would the new total sales revenue be? A. $360 B. $800 C. $960 D. $1320 7. 1999/II/9 The ratio of the buyers tax burden to the sellers tax burden is A. 1 : 1 B. 2 : 1 C. 1 : 2 D. 3 : 0 8. 2001/II/8 Suppose a per unit sales tax is imposed on good X. The sellers would bear a relatively smaller proportion of the tax burden if the demand for the good is __________ and the supply is _________. A. elastic elastic B. elastic inelastic C. inelastic elastic D. inelastic inelastic
9. 2002/II/11 Suppose the government imposes a unit sales tax on a good. The producers revenue after deduction of the sales tax will remain unchanged if A. the demand for the good is perfectly elastic. C. the supply of the good is perfectly elastic. B. the demand for the good is perfectly inelastic. D. the supply of the good is perfectly inelastic.
Refer to the following market demand schedule of a good and answer questions 10 and 11 Price($) Quantity demanded(unit) 11 160 12 140 13 120 14 100
Suppose the government imposes a unit sales tax of $3 on the good. As a result, the equilibrium price of the good increase from $12 per unit to $13 per unit. 10. 2003/II/11 Which of the following descriptions is correct? A. The consumers bear a larger tax burden than the producers B. The elasticity of demand of the good is greater than 1 C. The total tax burden is $120 D. The total sales revenue (including tax) has increased
47
HKCEE ECONOMICS |
3.4 Unit tax |
P.3
11. 2003/II/12 If the equilibrium price of the good falls back to $12 per unit due to a decrease in production cost, A. the producers will bear all the tax burden B. the total tax burden will be $360 C. there will be excess demand D. the total sales revenue net of tax will be $1260 12. 2004/II/10 Suppose the government imposes a per unit sales tax on good X of which the supply is perfectly inelastic. Only ___________ will bear the tax burden, and the quantity transacted will ___________. A. sellers remain unchanged C. buyers remain unchanged B. sellers decrease D. buyers decrease
Study the following table and answer Questions 13 and 14. Good X (unit price) $6 $9 $12 $15 $18 Quantity demanded in the market (unit) 60 55 50 45 40 Quantity supplied in the market (unit) 40 45 50 55 60
13. 2005/II/10 If the government fixes the production quota of Good X at 45 units, the market price of Good X will be A. $9 B. $12 C. $15 D. $18 14. 2005/II/11 If the government uses a unit tax instead to fix the output of Good X at 45 units, the unit tax imposed on good X will be A. $3 B. $6 C. $9 D. $12
48
HKCEE ECONOMICS |
3.4 Unit tax |
P.4
Answer Questions 15 and 16 by referring to the following information The graph below shows the market situation of Good A when a per-unit sales tax of $30 is charged on it.
15. 2006/II/11 Suppose the above per-unit sales tax is abolished. The new market price would be A. $100 B. $120 C. $140 D. $160
16. 2006/II/12 With the range of the original and new market prices, the elasticity of demand of Good A is A. smaller than its elasticity of supply B. equal to its elasticity of supply C. greater than its elasticity of supply D. unity 17. 2007/II/6 Refer to the following demand and supply schedules of a good. Price per unit Quantity supplied (units) $20 80 $25 100 80 $30 80 80 $35 75 80 $40 60 80 Quantity demanded (units) 120
If the government imposes a per-unit tax of $5 on the good, the new equilibrium price inclusive of tax will be _______. A. $25 B. $30 C. $35 D. $40
18. 2007/II/11 The imposition of a per unit sales tax on a good will reduce its equilibrium quantity if A. the demand is inelastic B. the demand is elastic C. the demand is unitarily elastic D. All of the above is correct
49
HKCEE ECONOMICS |
3.4 Unit tax |
P.5
19. 2008/II/7 The following table shows the supply of and demand for Good X. Unit price ($) 5 4 3 2 1 Quantity demanded (units) 10 20 30 40 50 Quantity supplied (units) 50 40 30 20 10
If the government imposes a $2 per unit sales tax on Good X, the new equilibrium price will be ________ A. $2 B. $3 C. $4 D. $5 20. 2008/II/8 Suppose the per unit sales tax on red wine is reduced. The sellers will enjoy a smaller proportion of a reduction in tax burden than the buyers if the demand for red wine is _________ and the supply is __________ . A. B. C. D. elastic.elastic elastic.inelastic inelasticelastic inelasticinelastic
50
HKCEE ECONOMICS |
3.5 Unit subsidy |
P.1
1. 1990/II/24 If a government abandons the policy of giving subsidy to farm products, then the price of farm products will __________ and the quantity of farm products transacted will __________ . A. increase, increase B. decrease, decrease C. increase, decrease D. decrease, increase 2. 1994/II/11 The demand for good X is perfectly inelastic. If the government offers subsidy of $4 for each unit of X produced, the equilibrium price of X will A. remain unchanged C. decrease by less than $4 3. 1995/II/10 B. decrease by $4 D. decrease by more than $4
The above diagram shows the supply and demand for good X. If the government offers a subsidy of $2 for each unit of output, the market price will A. decrease to $3. B. decrease to $4. C. increase to $6. D. increase to $7
51
HKCEE ECONOMICS |
3.5 Unit subsidy |
P.2
4. 1996/II/11
The diagram below shows that the unit price of a commodity falls from $10 to $8 when the government provides a per-unit subsidy of $5 to its suppliers. What is the total amount of suppliers benefit from the government subsidy? A. $80 B. $120 C. $150 D. $250
5. 1999/II/4 Case I : The market price of Good X decreases by $4 per unit after the provision of a $10 per unit subsidy. Case II : The market price of Good X decreases by $6 per unit after the provision of a $10 per unit subsidy. We can conclude that in comparing the two cases, Good X in Case I has a ______ demand or a _______ supply. A. less elastic less elastic B. more elastic more elastic C. less elastic more elastic D. more elastic less elastic
6. 2000/II/11 Suppose the government imposes a unit subsidy on good Y causing a shift of its supply curve from S1 to S2.
The amount of subsidy benefit enjoyed by the sellers of good Y is A. (P2 P1) Q1 B. (P3 P1) Q1 C. (P3 P2) Q2 D. (P4 P3) Q2
52
HKCEE ECONOMICS |
3.5 Unit subsidy |
P.3
7. 2001/II/7
The above diagram shows the increase in supply of a good from S1 to S2 as a result of the provision of a per unit subsidy for the good by the government. Suppliers new total revenue excluding the subsidy ______ their old total revenue before the provision of the subsidy. A. is smaller than B. is equal to C. is larger than D. may be larger or smaller than 8. 2004/II/11 The following table shows the market demand and supply of a good. Unit Price ($) Market quantity demanded (Units) Market quantity supplied (Units) 10 9 8 7 6 5 70 90 110 130 150 170 130 120 110 100 90 80
If the government provides a per unit subsidy of $3 to the suppliers, A. the new equilibrium price is $5 per unit. B. the total amount of subsidy provided is $390. C. the subsidy benefit enjoyed by the consumers is greater than that of the suppliers. D. the total expenditure of consumers will decrease.
53
HKCEE ECONOMICS |
4.1 Types of production |
P.1
1. 1992/II/4 Which of the following is classified as consumption? A. A student saves up unused Christmas cards until next Christmas B. A student helps to clean his classroom. C. Mrs. Wong teaches a TV audience how to cook D. A student watches a music TV programme
2. 1993/II/4 Which of the following are examples of tertiary producers? (1) (2) (3) (4) a pop singer a baker a bank teller a truck driver C. (1), (3) and (5) only D. (2), (3) and (4) only
(5) a film-developing operator A. (1), (2) and (5) only B. (1), (3) and (4) only
3. 1994/II/14 Mrs. Wong retried last year. Since then she has been helping to do the housework in her daughters house and receiving no money in payment for it. The daughter works as an accountant in her own accounting firm. Which of the following statements is correct? A. Although Mrs. Wong receives no money in payment, her service is counted in the national income. B. As Mrs. Wong receives no money in payment, she is not classified as a producer. C. To the daughter, the opportunity cost of working as an accountant is lower than that of staying at home just doing her homework. D. To avoid double counting, the daughters profits from her firm are not counted in the national income.
4. 1994/II/60 Which of the following activities is NOT classified as production? A. a mother teaching her child to read B. a son helping his mother to serve dinner at home C. a father repairing a TV set at home D. a daughter playing with her cat at home
5. 1995/II/4 Mary is a sewing worker in a garment factory in the daytime. In the evening, she works as a waitress in a restaurant. Mary is a _________ producer. A. secondary B. tertiary C. primary and secondary D. secondary and tertiary
54
HKCEE ECONOMICS |
P.2
6. 1999/II/13 Mr. Law is a full-time teacher in an aided secondary school in Hong Kong. He is a __________ producer and he is paid using a ________ method. A. secondary time rate B. secondary piece rate C. tertiary time rate D. tertiary piece rate 7. 2002/II/12 Which of the following statements about production is correct? A. Developed countries have no primary production. B. C. D. Students selling flags for charity organizations are engaging in production. An Indian restaurant engages in tertiary production only. The car repair work belongs to secondary production.
8. 2003/II/15 Which of the following activities are classified as production in economics? (1) a man delivering newspaper (2) a girl sewing her own dress (3) a boy selling pirated compact discs (CD) A. (1) and (2) only B. (1) and (3) only
C.
(2) and (3) only
D.
(1), (2) and (3)
9. 2005/II/14 The following graph shows the relationship of the three stages of production. What does P and Q stand for respectively?
A.
services; consumer goods
B. producer goods; consumer goods C. raw materials; services D. natural resources; producer goods
55
HKCEE ECONOMICS |
P.3
10. 2007/II/13 The following table shows the employment distribution of Hong Kong. Year Sector Primary Secondary Tertiary (Total) 2.2 % 43.5 % 54.3 % 100 % 0.5 % 20.4 % 79.1 % 100 % 0.4 % 13.7 % 86.0 % 100 % 1985 1997 2005
From the above table, we can conclude that from 1985 to 2005, A. the number of people engaged in the primary and secondary sectors decreased while that in the tertiary B. C. D. sector increased. the overall unemployment rate remained constant. the contribution to gross domestic product (GDP) of the tertiary sector increased. the relative importance of the secondary sector in terms of employment decreased.
56
HKCEE ECONOMICS |
4.2 Division of labour |
P.1
1. 1992/II/11 The Ha family and the Wong family are living next door to each other and their children go to the same kindergarten. The children are taken to school by Mr. Ha and brought home by Mr. Wong. This is an example of A. division of labour B. diseconomies of scale C. diminishing returns D. absolute advantage 2. 1993/II/15 Specialization is beneficial to an economy because A. more resources are used in producing capital goods B. the threat of protectionism can be avoided C. the risk of unemployment is lowered D. the productivity of the factors of production is raised
3. 1994/II/59 Which of the following is NOT an advantage of division of labour? A. higher work incentive B. higher labor productivity C. a smaller amount of tools required D. the right person doing the right job
4. 1999/II/52 Which of the following is NOT an advantage of division of labour? A. greater economies of scale B. economy in the use of capital C. higher labour productivity D. improved skill through more practice 5. 2000/II/19 When division of labour is practised, A. workers have greater job satisfaction. B. machines are used more intensively. C. producers produce a greater variety of goods to suit different consumer tastes. D. the occupational mobility of workers increases.
57
HKCEE ECONOMICS |
4.2 Division of labour |
P.2
6. 2001/II/16 Which of the following is an advantage of division of labour? A. A wider choice of goods and services can be provided. B. Workers have a greater incentive to work. C. Workers have higher occupational mobility. D. Less time is required to train workers.
7. 2003/II/17 In a secondary school, different teachers are responsible for teaching different subjects. Which of the following are reasons for the above arrangement? (1) It can reduce the cost of training. (2) Practice makes perfect. (3) Different teachers are good at teaching different subjects. A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. (1), (2) and (3)
8. 2004/II/17 When division of labour is practiced, A. firms will enjoy greater economies of scale. B. workers will have a higher occupational mobility. C. workers will have a higher income. D. output per man-hour will increase.
9. 2006/II/15 When division of labour is practiced, workers will have a ________ occupational mobility because ______. A. higherthe labour productivity is raised B. higherthe capital goods are used more fully C. lower work becomes dull and monotonous D. lowerworkers are only trained for a particular skill 10. 2007/II/14 Division of labour can raise labour productivity. One reason is that A. fewer tools are needed. B. geographical mobility is increased C. time is saved from not moving from task to task D. there would be a higher degree of interdependence among different producing stages
58
HKCEE ECONOMICS |
4.3 Factors of production |
P.1
1. 1990/II/9 The ban on the ivory trade in general harms the __________ craftsmen most because of their relatively _____ _________ mobility. A. younger, low, occupational B. younger, high, geographical C. older, low, occupational D. older, high, geographical 2. 1990/II/11 Which of the following is regarded as a fixed cost of a restaurant? A. the water charges B. the wages of the part-time workers C. the expenditure on meat and vegetables D. the rent of the restaurant
3. 1990/II/13 Which of the following is an example of land in economics? A. reservoirs B. factories C. rubber plantations D. mineral deposits
4. 1990/II/20 Which of the following will increase the supply of labour? A. The legal minimum working age is raised. B. The government introduces an unemployment benefit scheme. C. Workers are willing to work for longer hours at the same wage rate. D. The retirement age is raised.
5. 1990/II/28 Which of the following factors of production would have its return determined only after the products are sold? A. land B. labour C. capital D. entrepreneurship
6. 1991/II/6 Suppose the government provides housing subsidies to teachers serving in the same school for over 10 years. Such a measure will tend to _____ the occupational mobility and ______ the geographical mobility of these teachers. A. increase, increase B. decrease, decrease C. increase, decrease D. decrease, increase
7. 1991/II/7 Which factor return has all of the following characteristics? I. It can be negative. II. It can be very large. III It is not know before the sale of finished products. A. rent B. wages C. interest D. profits
59
HKCEE ECONOMICS |
P.2
8. 1991/II/8 Private tuition is usually paid for by time rates because A. the incentive to work is stronger. B. better examination results are guaranteed. C. the tuition fee is less. D. The output is difficult to measure. 9. 1991/II/9 Which of the following will improve the average productivity of labour? A. a larger population B. longer working-hours C. more opportunities for tertiary education D. the emigration of skilled workers
10. 1991/II/10 Which of the following is an example of land in economics? A. reclaimed land B. crude oil underground C. gasoline stored underground D. Victoria Harbour following improvements 11. 1991/II/56 The supply of labour does NOT depend on A. the size of the population. C. the legal minimum working age.
B. D.
the composition of the population. the productivity of workers.
12. 1992/II/7 The war in the Middle East has led to fires in the oil wells in Kuwait. Teams of firemen were risking their lives to put out the fires. Economists classify crude oil as______, oil pumps as _______, firemen as _________ and the owners of the oil wells as ____________. A. capital; capital; entreneurships; entreneurships B. capital; land; labour; labour C. land; land; capital; entreneurships D. land; capital; labour; entreneurships 13. 1992/II/8 The main function of entreneurship is A. to design new products C. to provide technical expertise
B. to bear risks D. to make routine business decisions
14. 1992/II/9 Which of the following can increase the occupational mobility of labour? A. the development of industries requiring high technology B. the setting up of more professional associations C. the expansion of vocational training courses D. the extension of the Mass Transit Railway network
60
HKCEE ECONOMICS |
P.3
15. 1992/II/10 Which of the following can increase the productivity of factory workers? (1) abandoning the price-rate system (2) installing more machinery (3) importing labour from Mainland China (4) providing a better working environment A. (1) and (2) only B. (1) and (3) only
C.
(2) and (4) only
D.
(3) and (4) only
16. 1993/II/6 Which of the following will improve the average productivity of labour in an economy? (1) extending compulsory education to a high level (2) raising the retirement age (3) increasing the quantity of capital goods (4) raising unemployment benefits A. (1) and (3) only B. (1) and (4) only
C.
(2) and (3) only
D.
(2) and (4) only
17. 1993/II/8 Which of the following belongs to the factor of production 'land'? A. the reclaimed land in West Kowloon C. the MacLehose Trail B. the fishing grounds in the South China Sea D. the killer whale in the Ocean Park
18. 1993/II/14 Lawyers generally have a low occupational mobility because A. they enjoy social status B. they are not skillful in other professional C. they have high occupational cost in changing jobs D. they are members of the Hong Kong Law Society 19. 1993/II/19 The following table shows the output of dresses from a factory in 1991 and 1992. Year 1991 1992 Number of workers employed 20 25 Units of dresses produced 90 000 80 000 Number of working hours per workers 3 000 2 000 The factory employed a _______ quantity of labour in 1992 and the average labour productivity was ______ in that year. A. larger; higher B. larger; lower C. smaller; higher D. smaller; lower
20. 1994/II/15 In economics, the covered playground of a government school is classified as _________ while the principal of the school is classified as a _________. A. capital, entrepreneur B. capital, labour C. land, entrepreneur D. land, labour
61
HKCEE ECONOMICS |
P.4
21. 1994/II/16 Capital differs from land in that, for example, A. capital is produced from scarce resources but land is not. B. capital has a smaller supply elasticity. C. the demand for capital is a derived demand but that of land is not. D. capital generates a higher return to its owners.
22. 1994/II/17 Which of the following factors would tend to increase the labor supply in Hong Kong? (1) (2) (3) (4) A. The government re-employs some retired civil servants. There are more public holidays each year. There is a greater proportion of males in the population. The educational level of workers becomes higher. B. (1) and (4) only C. (2) and (3) only D. (2) and (4) only
(1) and (3) only
23. 1994/II/18 Instead of receiving only a fixed monthly salary, hotel waiters in Hong Kong generally earn a low basic monthly salary and receive tips from customers. To the hotel owners, which of the following in an advantage of the latter method of payment compared to the former method? A. It is easier to calculate the output of the waiters. B. Fewer waiters are needed. C. There is a better relationship among the waiters. D. The waiters provide better service.
24. 1995/II/16 Which of the following will increase the average productivity of labour? (1) a larger labour force (2) better education and training of workers (3) better organization of production (4) fewer public holidays A. (1) and (2) only B. (1) and (4) only C. (2) and (3) only D. (3) and (4) only
25. 1995/II/17 Secondary school teachers in Hong Kong are in general paid by time rates because (1) the tasks of a teacher are not standardized. (2) the output cannot be easily measured. (3) there is a higher incentive to work. A. (1) and (2) only B. (1) and (3) only
C.
(2) and (3) only
D.
(1), (2) and (3)
62
HKCEE ECONOMICS |
P.5
26. 1995/II/18 The payment for the use of some well-known franchised names such as McDonalds and 7-Eleven can be regarded as A. interest B. rent C. profit D. wage 27. 1995/II/19 Which of the following about the return for entrepreneurship is true? A. It can be determined before the commodity is sold. B. C. It does not vary with the business performance of the firm. D. 28. 1995/II/21 Which of the following will raise the occupational mobility of labour? (1) a higher degree of specialization of skills (2) more information about job vacancies (3) greater power of labour unions (4) provision of retraining programmes A. (1) and (2) only B. (1) and (3) only C. (2) and (4) only D. (3) and (4) only
It can be positive or negative. It is higher than the return for labour.
29. 1996/II/12 Which of the following will decrease the labor supply of a country? A. fewer job vacancies C. an increase in the retirement age of workers 30. 1996/II/13 Refer to the table below for Questions 30 and 31: Firm A Number of workers employed Number of working hours per worker Units of output produced Which of the following comparisons is correct? A. Workers in Firm B have a higher productivity. C. Firm B enjoys a greater economics of scale. 200 1000 100 000 B. D. Firm B 120 1900 110 000 B. more universities places for students D. an increase in the number of immigrants
Firm B employs more labor services. Production in Firm B is more capital-intensive.
31. 1996/II/14 Which of the following is a possible reason for the difference in labor productivity of Firm A and Firm B? A. Better training of workers in Firm A B. Better working environment in Firm B C. A larger labor force in Firm A D. A higher wage rate in Firm B
63
HKCEE ECONOMICS |
P.6
32. 1996/II/15 Which one of the following is an example of land? A. Solar energy collected from sunlight by a power plant C. Land reclaimed from the sea
B. Rainwater collected in reservoirs D. Dew on farmland in the morning
33. 1996/II/16 An employer has changed the method of payment to his employees and observed the following results: Old system Output per worker (per day) Output with quality below standard A. time rate .. piece rate C. a profit sharing scheme time rate 34. 1997/II/13 Which of the following is classified as land in economics A. live fisher sold in a seafood restaurant C. the newly reclaimed land in Western Kowloon 35. 1997/II/14 Which of the following has the least occupational mobility? A. lorry driver B. salesman C. actor D. dental surgeon 200 20 New system 300 50
Most probably the old system is ____________ and the new system is ___________ . B. piece rate . time rate D. piece rate . A profit sharing scheme
B. silver ore in a mine D. a piece of cultivated land
36. 1998/II/12 Which of the following is classified as land in economics? A. land reclaimed along the Victoria Harbour B. fish caught in the high seas C. plants grown in the country parks D. crude oil newly discovered underground 37. 1998/II/14 The average productivity of labour will increase if (1) there is an increase in the number of machines. (2) there is an increase in the size of the labour force. (3) there is an improvement in the health conditions of workers (4) workers work more hours per day. A. (1) and (2) only B. (1) and (3) only C. (2) and (4) only
D.
(3) and (4) only
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P.7
38. 1998/II/15 Which of the following would increase the labour supply of Hong Kong? A. The demand for imported workers increases. B. All women are not allowed to work overtime. C. More employers provided child care services to their employees. D. More job vacancies are available.
39. 1998/II/16 Knowledge A. B. C. D. is not capital because it does not have a physical form. is not capital because its ownership is not transferable. is capital because it is desired by everybody. is capital because it can increase wealth in the future.
40. 1998/II/17 Private piano teachers are usually paid at an hourly rate instead of a piece rate. Which of the following statements are true? (1) They tend to work longer hours. (2) They are not encouraged to rush through more music pieces in a lesson. (3) Their output is difficult to measure. A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. (1), (2) and (3)
41. 1998/II/21 When a shampoo manufacturer introduces a new product shampoo for children, it aims at (1) diversifying its market. (2) gaining the economies of scale in marketing. (3) ensuring a market outlet for its products. A. (1) and (2) only B. (1) and (3) only 42. 1999/II/11 Land is different from capital in that A. land cannot be increased but capital can. B. land is more demand inelastic than capital. C. D. the use of land does not cost anything but the use of capital does. land is less occupationally mobile than capital. C. (2) and (3) only D. (1), (2) and (3)
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P.8
43. 1999/II/14 Which of the following would increase the labour supply of Hong Kong? A. the provision of more day-time child-care services B. a change in the payment system from piece rate to time rate C. an increase in the number of public holidays in a year D. a decrease in the number of people migrating to other countries
44. 1999/II/16 Which of the following types of people is more occupationally mobile? A. C. professors in economics in a university salesmen B. D. accountants company secretaries
45. 1999/II/20 Refer to the following table: Firm A Number of workers employed 100 Number of working hours per worker 350 Output (Units) 140 000 Which of the following concerning Firm A and Firm B is correct? A. B. C. D. Firm B has a higher average labour productivity than Firm A. Firm A has a higher average labour productivity than Firm B. Firm A has a larger labour supply than Firm B. Firm B has a larger labour supply than Firm A. Firm B 60 650 156 000
46. 1999/II/51 Assume that the payment system of some civil servants is changed from time rate to piece rate. This change will NOT result in A. an increase in their income. B. an improvement in the quality of their work. C. an increase in the monitoring and supervision cost of their work. D. an increase in the quantity of work completed by them. 47. 2000/II/13 Which of the following is classified as capital? A. the singing skill of a superstar B. C. a strong current in the ocean D.
the sunlight people enjoy on the beach an oasis in the desert
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P.9
48. 2000/II/14 Wild birds in the forests are classified as land in economics. This statement is A. true, because they are free goods. B. true, because they are natural resources. C. false, because they can move while land is geographically immobile. D. false, because their supply is not fixed.
49. 2000/II/15 Refer to the staff recruitment advertisements below :
A. B. C. D.
The cost of measuring wage payment is higher in the XYZ Company. The working incentive of mail assistants is higher in the XYZ Company. The income of a mail assistant is higher in the ABC Company. The cost of supervision is lower in the ABC Company.
50. 2001/II/9 Which of the following statements about land and capital is correct? A. B. C. D. Land has no occupational mobility but capital does. There is no cost of producing land but there is cost of producing capital. Land is a free good but capital is an economic good. Over time, the quantity of land is fixed but that of capital is not.
51. 2001/II/11 Which of the following is classified as capital? A. sunshine in California B. oil wells in Kuwait C. sand in the Sahara Desert D. fresh air in the Alps
52. 2001/II/12 Dennis opened a convenience store and he has employed his friend, John, as a storekeeper. Dennis work is classified as _______ and Johns work is classified as _______. A. C. secondary production labour labour secondary production B. D. tertiary production entrepreneurship entrepreneurship tertiary production
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P.10
53. 2001/II/13 Under which of the following situations would the labour supply in Hong Kong decrease? A. All universities in Hong Kong admit fewer full time students. B. More Hong Kong companies provide training courses to their staff during office hours. C. Fewer Hong Kong people are allowed to emigrate to the US. D. The Hong Kong government provides subsidies to private firms for installing high-tech equipment.
54. 2001/II/14 Suppose the government starts to recruit experienced Putonghua teachers from Mainland China. This would ________ the ________ mobility of experienced Putonghua teachers in Mainland China. A. reduce occupational B. reduce geographical C. increase occupational D. increase geographical 55. 2001/II/15 Refer to the following table : Firm A Firm B Number of workers employed 60 40 Total number of working hours 1 200 1 000 Total output (units) 10 800 9 500 Which of the following is a possible reason for the difference in the labour productivity of Firm A and Firm B? A. Firm B has a better working environment. B. Firm A has a higher degree of division of labour. C. Firm A enjoys greater economies of scale. D. Firm B uses a more labour intensive method of production. 56. 2002/II/14 A higher average labour productivity means a higher A. average output per worker. B. marginal product per man. C. total output per worker. D. total product per unit of labour.
57. 2002/II/15 In economics, which of the following statements about capital is correct ? A. The quantity of fixed capital cannot be changed in the short run. B. Capital earns the highest rate of return among all factors of production. C. D. Capital is produced to satisfy consumers wants directly. The geographical mobility of capital is greater than that of land.
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P.11
58. 2002/II/16 Under the previous wage payment system, Mrs Chan found that her workers were lazy. Now, she has adopted another wage payment system under which the quantity as well as the quality of the output of her firm has been raised. This improvement could be due to the fact that the previous wage payment system was _______ and the present one is _________. A. C. piece rate ... time rate time rate ... piece rate B. D. piece rate ... profit-sharing time rate ... profit-sharing
59. 2003/II/10 Suppose the MTR extends its service hours on New Year's Eve. Which of the following are the MTR's variable cost of extending the services hours? (1) electricity expense (2) overtime payment to the drivers (3) interest payment for loans from banks A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. All of the above
60. 2003/II/16 Which of the following statements about 'land' is correct? A. The supply of land may be increased through human effort B. The supply of land may change over time C. Land is a free good because it is part of nature D. Land is a scarce good because it cannot be produced 61. 2003/II/18 A factory owner has changed the method of payment to his workers and observes a higher labour productivity of his workers, but a lower quality of output. Most probably the old payment system is ________ and the new payment system is_________. A. time rate; piece rate C. profit share scheme; time rate B. D. piece rate; time rate piece rate; profit sharing scheme
62. 2004/II/14 Michael Owen is a famous football player for Liverpool Football Club. In economics, he provides the service of ________ and he engages in ______________ production. A. entrepreneurship secondary C. labour secondary B. entrepreneurship tertiary D. labour tertiary
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P.12
63. 2004/II/15 In order of attract more Mainland professionals to work in Hong Kong, some firms plan to provide a housing allowance for them. This would _______ the ___________ of these Mainland professionals. A. reduce occupational mobility B. increase occupational mobility C. reduce geographical mobility D. increase geographical mobility 64. 2004/II/16 The labour supply will increase if A. more job vacancies are available. B. more universities offer 4-year degree courses instead of 3-year degree courses. C. the number of public holidays in a calendar year is reduced. D. the retirement age is reduced. 65. 2005/II/15 Which of the following is classified as land in economics? A. soil with chemical fertilizers added to it B. trees in a plantation area C. underground coal reserves D. a piece of cultivated land
66. 2005/II/16 Study the following table: Economy A Number of workers 20 Weekly working hours per worker 5 Total output 11 000 Which economy has the largest labour supply? A. A B. B C. C D. D
B 5 25 12 000
C 30 5 9 000
D 15 20 10 000
67. 2005/II/17 Which of the following situations will increase the average labour productivity? A. employing more workers B. extending the working hours C. changing from time rates to piece rates D. reducing the degree of division of labour 68. 2006/II/13 Mr Chan is the owner of a printing factory and he employs Mary as an accountant. The factory engages in _______ production and Mary provides the services of the factor _________. A. secondary ... labour B. secondary ... entrepreneurship C. tertiary ... labour D. tertiary ... entrepreneurship
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P.13
69. 2006/II/14 Which of the following would raise the average labour productivity? A. a larger working population B. fewer public holidays C. a larger quantity of advanced equipment D. a lower degree of occupational mobility of labour 70. 2006/II/16 Suppose the wage payment system of the salesmen employed in ABC Company changes as follows: Salary : $15 000 per month Salary : $7 000 per month plus commission B. a lower cost of monitoring the salesmen's performance D. a lower quality of services provided by the salesmen
It results in: A. a lower cost of calculating the wage payments C. a lower income for salesmen 71. 2007/II/15 Number of workers Average working hours of workers per day
Country A 100 8
Country B X Y
Total output (unit) 7200 7200 In the above table, if the labour productivity in Country B is higher, the possible value of X and Y would be ________ and ________ respectively A. 140 ... 6 B. 150 ... 5 C. 200 ... 4 D. 300 ... 3
72. 2007/II/16 Which of the following statements about land is correct? A. Crude oil unextracted is land because it is fixed in supply B. Ocean is land because it is geographical immobile C. Rainfall on a piece of farmland is land because it is a gift of nature for production D. Wood being cut in the tropical forests is land because it is used for production 73. 2007/II/17 Land is different from capital in that A. the supply of land cannot be controlled, whereas that of capital can be B. land is a free good but capital is an economic good C. land has a lower occupational mobility than capital D. land has a greater supply elasticity than capital 74. 2007/II/18 In Economics, a taxi is classified as _______ and the income of the taxi owner from renting the taxi to a driver is classified as _______. A. land ... rent B. capital ... interest C. land ... interest D. capital ... profit
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P.14
75. 2008/II/14 Which of the following are land in economics? (1) the Chinese white dolphins living in the waters around Lantau Island (2) the giant pandas living in Ocean Park Hong Kong (3) migratory birds found in the Deep Bay A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. (1),(2) and (3)
76. 2008/II/15 In which of the following situations will the occupational mobility of labour increase? A. improvement of the transportation network B. tightened restrictions on obtaining a professional license C. provisions of more retraining programmes D. raising the legal retirement age
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4.4 Short run and long run |
P.1
1. 1990/II/6 No. of Workers Marginal Output 1 10 2 12 3 14 4 13 5 12 From the above table, the average output will be the highest when __________ workers are employed. A. 2 B. 3 C. 4 D. 5 2. 1990/II/22 As the carrying capacity of a bus increases, the oil consumption increases. However, the oil consumption increases at a slower rate than the carrying capacity. This is an example of A. C. external economies of scale. management economies of scale. B. D. technical economies of scale. research economies of scale.
3. 1991/II/20 The cost per tones of goods transported by a bigger lorry is lower than that of a smaller one. This is an example of A. management economies. B. marking economies. C. financial economies. D. technical economies.
4. 1994/II/21 The law of diminishing returns A. B. C. D. states that firms will keep on adding variable factors to fixed factors. implies that firms will eventually operate at a loss. implies that marginal product can be negative. explains production in the long run.
5. 1994/II/22 A producer increase all his input to double the output. He finds that the total production cost increase by 80%. This can be explained by A. The law of supply. B. The law of diminishing returns. C. Economies of scale. D. Diseconomies of scale. 6. 1995/II/22 Which of the following about economies of scale is true? A. B. C. D. It applies to short-run as well as long-run production. It will lead to a decrease in the average cost of production when the output increases. It occurs only when the scale of production is sufficiently large. It will lead to a decrease in the total cost of production when the output increases.
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P.2
7. 1996/II/22 Short run is a period in which (1) there are fixed factors of production (2) there are variable factors of production. (3) The technology of production is fixed. A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. (1),(2) and (3)
8. 1996/II/23 No. of workers 1 2 3 4 Average product (units) 2 6 7 4 Refer to the above table. Diminishing marginal return sets in after ________ workers are employed in production. A. 1 B. 2 C. 3 D. 4 9. 1996/II/24 No. of machines No. of workers Total output 5 7 100 5 8 120 5 9 150 5 10 200 Refer to the above table. Which of the following is possible reason for the increase in total output? A. Division of labor B. The law of diminishing returns C. The law of comparative advantage D. Economies of scale 10. 1997/II/15 During the busy season before Christmas, a factory increases the number of workers to increase output. The result is shown below: No. of workers Total production (Units) 21 210 22 242 23 276 24 300 25 310 The change in output can be explained by A. the law of diminishing returns B. diseconomies of scale C. the principle of indivisibility D. the principle of multiples
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P.3
11. 1999/II/15 No. of workers Marginal Output (Units) 1 10 2 12 3 11 4 10 5 7 From the above table, the average output will start to diminish when the _______ worker is put to work. A. first B. second C. third D. fourth 12. 2000/II/16 Number of machines Number of workers Total output (units) 3 3 90 3 4 160 3 5 250 3 6 360 The above data refer to a _________ situation in which ________ . A. short run ... the law of diminishing returns applies B. C. D. short run ... the law of diminishing returns does not apply long run ... economies of scale exist long run ... diseconomies of scale exist
13. 2000/II/17 Which of the following implies the existence of economies of scale? A. The total cost of production decreases when output increases. B. The average cost of production decreases when the production scale increases. C. D. Profit increases when output increases. The amount of output increases by a smaller proportion than that of inputs.
14. 2001/II/17 The table below shows the production of Good X in a firm. Only two inputs are required in the production process. Capital (Units) Labour (Units) Total output (Units) Total Cost ($) 1 1 20 100 2 2 35 200 3 3 45 300 4 4 50 400 From the above data, A. B. C. D. the law of diminishing marginal returns applies to the firm. the firm enjoys economies of scale. diseconomies of scale exist for the firm. the firm produces at its optimal scale of production.
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P.4
15. 2002/II/13 The following table shows the monthly production of a firm with two inputs, labour and machines. Machines (Units) Labour (Units) Total Product (Units) 1 3 18 1 4 28 1 5 40 1 6 50 1 7 X If the law of diminishing marginal returns applies to the firm, X A. C. must be smaller than 50. must be smaller than 60. B. D. can be any value greater than 50. is equal to 60.
16. 2003/II/20 The information below refers to Mr Chan's factory No. of workers Average Output (Units) 10 5 11 6 12 7 Suppose diminishing marginal return sets in when more than 12 workers take part in production. The total output of 13 workers A. can be greater than 102 units C. must be less than 102 units B. may be equal to 102 units D. is indeterminate
17. 2004/II/18 The input-output relationship of Firm A is as follows: Labour (Units) Machinery (Units) Average Output of Machinery (Units) 4 1 6 4 2 7 4 3 8 4 4 7 4 5 5 According to the above table, diminishing marginal returns set in when the unit of machinery is employed. A. 2nd B. 3rd C. 4th D. 5th 18. 2004/II/20 Compared with small stores, large supermarkets purchase a large stock of goods from suppliers at a lower average cost. It shows that these large supermarkets enjoy _______ economies of scale. A. finance B. management C. technical D. marketing 19. 2005/II/18 When a firm enjoys economies of scale, it is in the ________ and its _________ is decreasing. A. short run average cost B. long run average cost C. short run total cost D. long run total cost
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P.5
20. 2005/II/19 The table below shows the production of Good X in a firm. Only two inputs are required in the producing process. Capital (Units) Number of workers Average working hours of Total Output (Units) workers per day 2 10 10 5 000 2 10 9 4 900 2 10 8 4 700 2 10 7 4 400 Due to a fall in market demand, the firm reduces the output by cutting working hours of the workers from 10 hours a day to 8 hours a day. Based on the above information, we can conclude that A. the supply of Good X by the firm decreases B. the amount of labour employed by the firm remains constant C. the law of diminishing marginal returns applies to the firm D. the firm enjoys economies of scale
21. 2006/II/17 The input-output relationship of Firm A is as follow: Labour (Units) Machine (Units) Marginal Product of Labour (Units) 1 2 14 2 2 16 3 2 18 4 2 X Diminishing marginal returns set in after the 3rd unit of labour is employed. The average product of 4 units of labour can be ________ units of output. A. 16 B. 16.5 C. 17 D. 17.5
22. 2006/II/18 If large publishers are more able to fully utilize their machinery to lower the average cost than small publishers, then these large publishers enjoy __________ economies of scale. A. financial B. management C. marketing D. technical 23. 2006/II/19 A producer increases all his outputs to double the output. The following table shows the change in average cost after a change in output. Total Output (units) 10 000 20 000 Based on the above information, we can conclude that A. the firm enjoys economies of scale Average Cost ($) 6 7
B. the firm suffers from diseconomies of scale C. the law of diminishing marginal returns applies to the firm D. the firm produces at the optimal scale of production
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P.6
24. 2007/II/19 The input-output relationship of Firm A is as follows: Capital (Units) Labour (Units) Marginal output (Units) 1 10 10 1 11 9 1 12 8 1 13 7 From the above table, we can conclude that, as the labour input increase A. total output is increasing B. average output is increasing C. firm A is experiencing diseconomies of scale D. the average cost of production is decreasing 25. 2008/II/16 The input-output relationship of a firm is as follows: Labour (Units) Machine (Units) Average product of labour (Units) 1 2 14 2 2 15 3 2 16 Diminishing margin returns sets in after the 3rd unit off labour is employed. The marginal product of the 4th unit of labour must be any number of output smaller than _______units. A. 15 B. 16 C. 17 D. 18 26. 2008/II/17 Compared with local small accounting firms, large accounting firms in Hong Kong are more willing to use resources to familiarize themselves with China's laws in order to expand their business into Mainland China. One possible reason is that large accounting firms enjoy A. financial economies of scale B. technical economies of scale C. marketing economies of scale D. economies of scale in research and development 27. 2008/II/18 When a firm expands production by only employing more labour, A. the wage rate of its workers will increase B. the average productivity of its workers will increase C. the firm will enjoy economies of scale D. the marginal product of its workers will eventually decrease
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5.1 Definition of a firm |
P.1
1. 1991/II/11 Which of the following is a common feature of all firms? A. They aim at profit-making. B. They have entrepreneurs to organize factors of production. C. They are legal entities. D. They are owned by private individuals.
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5.2 Types of private enterprise |
P.1
1. 1990/II/12 The advantages of sole-proprietorship include (1) limited liability. (2) flexibility in decision making. (3) a high degree of division of labour. (4) more personal contact with customers. A. (1) and (2) only B. (1) and (3) only C. (2) and (4) only D. (3) and (4) only
2. 1990/II/21 Mr Chan was one of the owners of a trading firm which recently went bankrupt. The court then took over his personal property. To what kind of business ownership did this trading firm belong? A. sole-proprietorship B. partnership C. private limited company D. public limited company 3. 1992/II/15 Which of the following about limited partnership is true? A. All partners have equal rights in managing the firm B. The liability of limited partnership is limited C. The liability of all partners is limited D. A limited partnership has to disclose its account to the public 4. 1993/II/3 Mr Chan has purchased some share in a public limited company. Which of the following statements is correct? A. He cannot participate in management of the firm B. He will automatically receive a dividend from the company every year C. His personal accounts have to be disclosed to the public D. His ownership in the company is freely transferable 5. 1993/II/9 Peter and Joan form a general partnership. Which of the following is true? A. One of them enjoys limited liability B. Peter and Joan share the profits, if any, equally C. If Peter borrow money in the name of the partnership, Joan is also liable for his debt D. Peter can transfer his ownership in the partnership without Joan's agreement
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P.2
6. 1993/II/10 The Bank of Credit and Commerce Hong Kong Limited was a private limited company. When it was closed in 1991, A. the shareholders could avoid losses by selling their shares on the stock market B. the government took over the bank under the Banking Ordinance C. the depositors had the right to claim their money after the shareholders D. the losses of the shareholders were limited to their investments in the bank 7. 1994/II/19 What is the economic role of shareholders in a public limited company? A. preparing the companys accounts B. making production decisions C. bearing risk D. sharing profits
8. 1994/II/24 A limited company is a legal entity. This implies that A. the company must obey the law. B. the company may sue other persons in its own name. C. management and ownership of the company are separated. D. its shares can be quoted on the stock exchange.
9. 1995/II/23 Fanny and Estella are the only owners of a firm.
They must obtain the others consent before they can transfer
their ownership to other people. Besides, their liability to the firm is confined to their individual investment in the firm. Based on this information, the firm is a A. limited partnership B. general partnership C. private limited company D. public limited company 10. 1995/II/24 It is possible for a shareholder to sue his company because A. a company enjoys limited liability. B. a company is a legal entity. C. a company is managed by a board of directors. D. of the separation of management and ownership. 11. 1996/II/18 Which of the following is a feature of a general partnership? A. Only the sleeping partners enjoy limited liability. B. The business will be dissolved on the death of any one partner. C. All partners enjoy an equal share of the firms profit. D. The consent of the majority of partners is needed for the transfer of shares.
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P.3
12. 1997/II/17 Amy, Betty and Carl form a limited partnership with Amy being the limited partnership. Which of the following is true? A. Betty enjoys limited liability B. They have to share the profit equally C. Amy is not allowed to participate in the management of the partnership. D. The death of Amy will bring the partnership to an end 13. 1998/II/20 Study the following card issued by the ABC Cake Shop. ABC Cake Shop Promises to give the holder of this card on demand ONE DOZEN ASSORTED CAKES The cake shop claims that it will keep the promise forever. Now suppose the cake shop liquidates and cannot repay its debts to the cardholders. By law, the cake shop owner(s) need not keep the promise mentioned above if it is a A. sole proprietorship. B. general partnership. C. limited partnership D. limited company.
14. 1999/II/17 Mr Lee is a medical doctor and manages a clinic. He is responsible for the loss in excess of the capital he has contributed to the firm. The firm is a ________ and Mr Lee is a _______. (1) sole proprietorship sole proprietor (2) partnership general partner (3) partnership limited partner A. (1) only B. (2) only C.
(1) or (2)
D.
(2) or (3)
15. 1999/II/18 John, Andy and Sammie form a general partnership. Which of the following is true? A. They share profit equally. B. They can transfer their ownership freely without the consent of other partners. C. They have to bear unlimited liability. D. They have to disclose the financial conditions of the partnership.
16. 1999/II/19 Tom is one of the owners of a firm. He must obtain the others consent before he can transfer his ownership to anyone else. Toms liability to the firm is also confined to his investment in the firm. Based on the above information, the firm is a (1) general partnership. (2) limited partnership. (3) private limited company. (4) public limited company. A. (1) or (2) B. (1) or (4) C. (2) or (3) D. (3) or (4)
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P.4
17. 2000/II/20 Mr Wong and Mr Chan have formed a partnership. Which of the following statements is correct ? A. They enjoy limited liability. B. The transfer of ownership does not need the other partners consent. C. Each of them is responsible for the business decisions of the other. D. The accounts of the partnership have to be disclosed to the public.
18. 2002/II/17 Which of the following statements about limited companies in Hong Kong is correct ? A. B. C. D. Preference shareholders and debenture holders have to bear unlimited liability. Issuing more debentures will increase the risk of being taken over. Shares and debentures of public limited companies are traded on the stock exchange. Debenture holders can claim the companys assets prior to shareholders when the company goes bankrupt.
19. 2002/II/19 Amy is an owner of a firm.
Her liability to the firm is confined to her investment in the firm and she can
transfer her ownership to anyone else without the consent of other owners. Based on the above information, the firm is a A. general partnership. B. limited partnership. C. private limited company. D. public limited company. 20. 2002/II/20 Because of the economic downturn, Mrs Chans restaurant closed down and she had to use her personal property to pay its debts. Mrs Chan was _______ or _______ of the restaurant. A. C. the sole proprietor ... a general partner the sole proprietor ... a shareholder B. D. the sole proprietor ... a limited partner a general partner ... a limited partner
21. 2003/II/19 Mr Chan is one of the owners of a firm which is a legal entity. Moreover, the transfer of Mr Chan's ownership in the firm needs the consent of other owners. The firm is a A. general partnership B. limited partnership C. private limited company D. public limited company
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P.5
22. 2003/II/21 Alex, Angie and Bonnie formed a limited partnership with Alex as the only limited partnership. Which of the following is correct? A. Alex should have a smaller share of the profit while Angie and Bonnie should have an equal share of profit B. Bonnie and Angie invested an equal amount of money in the partnership C. Only Bonnie and Angie have the right to manage the partnership D. Alex's withdrawal would not bring the partnership to an end 23. 2004/II/21 David, Paul and Mary formed a limited partnership, with David being the only general partner. Which of the following is correct? A. Mary can participate in the management of the partnership. B. Mary gets her share of the profits before the other partners. C. Pauls maximum loss is limited to the amount he has invested in the partnership. D. David can transfer his ownership freely without the consent of the other partners. 24. 2006/II/20 Angel, Bonnie and Catherine jointly own a firm. The firm is a legal entity. Which of the following statements about firm must be correct? A. The firm can issue shares to raise capital B. At least one of the owners has to bear unlimited liability C. The firm will be dissolved on the death of any one owner D. The accounts of the firm have to be disclosed to the public 25. 2006/II/21 If the owners of a firms have the right to sue their firm but they cannot transfer their ownership freely without the consent of other owners, the firm is a A. general partnership B. limited partnership C. private limited company D. public limited company
26. 2007/II/22 Which of the following about a public limited company is correct? A. The company can be a shareholder of a listed company B. The share issued by the company are traded on a stock exchange C. The maximum number of shareholders is 50 D. It earns greater returns than private limited company
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5.3 Comparing different types of private enterprise |
P.1
1. 1991/II/15 Which of the following is an advantage of a partnership over a sole proprietorship? A. a stronger incentive for efficiency B. more flexibility in making management decisions C. a wider range of abilities and talents in management D. limited liability to all partners
2. 1991/II/16 Which of the following is regarded as an advantage for a private limited company to go public? A. Shareholders enjoy limited liability. B. There is separation of ownership and management. C. There is a wider scope for raising capital. D. Shares become transferable. 3. 1993/II/13 One of the advantages of a private limited company 'going public' is A. limited liability B. more access to funds C. being subject to lower profits tax rate D. being less likely to be taken over by another company 4. 1993/II/17 In Hong Kong, a public radio broadcasting company companies enjoys the following advantage over a private radio broadcasting company: A. lower production costs B. priority in obtaining world news C. a more extensive division of labour D. the ability to deal more easily with financial difficulties 5. 1994/II/25 A public limited company differs from a private limited company in that, for example, A. there is no legal maximum limit on the number of shareholders. B. its shareholders enjoy limited liability. C. it need not submit the memorandum of Associations to the Registrar of Companies. D. it is subject to a higher profits tax rate.
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P.2
6. 1995/II/25 A public limited company has more advantages in raising capital over a private limited company because the former A. is owned by the government but the latter is not. B. has more directors. C. D. can issue shares to the general public but the latter cant. has a larger scale of production.
7. 1996/II/17 Which of the following are the advantages of turning a sole-proprietorship into a private limited company? (1) greater flexibly in decision-marking (2) wider sources of capital (3) higher incentive to work (4) limited liability A. (1) and (2) only B. (1) and (3) only C. (2) and (4) only D. (3) and (4) only
8. 1997/II/16 If a listed company is converted into a private limited company, A. it can avoid being controlled by the government B. its firm size will be reduced C. it can reduce the risk of being taken over D. it loses the status of legal entity 9. 1997/II/19 Refer to the following information concerning Firm A and Firm B: Firm A Number of owners Transfer of ownership Legal status of the firm 6 need the consent of other owners legal entity Firm B 7 need the consent of other owners not a legal entity
The type of ownership of Firm A and Firm B is ___ and ___ respectively A. public limited company; private limited company B. private limited company; partnership C. partnership; private limited company D. public limited company; partnership
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P.3
10. 1997/II/58 Mr Wai solely owns a restaurant in Tai Po and his wife runs the business for him. As compared to a public limited company, the type of ownership of the restaurant has the following advantages EXPECT A. making prompt decision on management B. paying profits tax at a lower tax rate C. separation of ownership and management D. not having to disclose the financial status to the public 11. 1998/II/18 Being a small investor, Peter prefers to be a shareholder of a public limited company rather than that of a private limited company. This is because A. he can enjoy limited liability. B. the transfer of ownership is easier. C. D. shareholders have the right to sue the company. there is no legal maximum limit on the number of shareholders of a public limited company.
12. 1999/II/21 Partnership ___________ than sole proprietorship. A. has more capital B. is a less risky type of ownership C. D. enjoys more economies of scale has less flexibility in decision making
13. 1999/II/22 Which of the following is an advantage of a public limited company over a private limited company? A. a wider source of capital B. C. D. larger economies of scale a better specialization in management a larger number of shareholders
14. 2000/II/21 Which of the following are advantages of turning a private limited company into a listed company in the stock market? (1) The company gains the status of a legal entity. (2) The company enjoys economies of scale. (3) The company enjoys a wider source of capital. (4) Ownership of the company can be transferred freely in the market. A. (1) and (2) only B. (1) and (4) only C. (2) and (3) only D. (3) and (4) only
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P.4
15. 2000/II/22 Limited partners are different from general partners in that the former A. can only transfer their shares to the existing partners of the firm. B. can only hold a limited amount of shares of the firm. C. can only share a limited amount of the profit of the firm. D. have a limited liability in the business of the firm.
16. 2001/II/18 Firm A Legal Status Liability Transfer of ownership Legal entity Limited Does not need the consent of other owner(s) Firm B Legal entity Limited Needs the consent of other owner(s)
Refer to the above table. Which of the following is correct? A. B. C. D. Firm A has more capital than Firm B. Firm A has a greater risk of being taken over by another firm than Firm B. Firm A is a listed company but Firm B is not. Both firms have to disclose their financial statements to the public.
17. 2001/II/19 Jason and Calvin form a partnership. Later they decide to admit James into their partnership. However, the liabilities of James in the partnership are limited. Which of the following is correct? A. Their firm has become a limited company. B. Jason and Calvin each has a greater share in profits than James. C. James is not allowed to take part in the management of the firm. D. James has the right to sue the firm but Jason and Calvin do not. 18. 2002/II/18 As a small investor, Calvin prefers to purchase the shares of a listed company rather than those of a private limited company in Hong Kong because A. the accounts of a listed company have to be audited by certified accountants. B. there is a separation between ownership and management in a listed company. C. the shares of a listed company are freely transferable on the stock market. D. the liability of the shareholders of a listed company is limited to their investment in the company.
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P.5
19. 2002/II/21 If a private limited company in Hong Kong is turned into a public limited company, A. the company will pay the profits tax at a higher rate. B. the company will gain the status of a legal entity. C. the company will have a wider source of capital. D. the original owners must increase their investments in the company.
20. 2004/II/22 Compared with a limited company, a general partnership A. has a lasting continuity. B. has to pay at a higher profits tax rate. C. has a wider source of capital. D. has a simpler legal set-up procedure. 21. 2005/II/20 If a listed public limited company is turned into a private limited company in Hong Kong, A. the company will be at a lower risk of being taken over B. the company will pay the profits tax at a lower rate C. the company will lose its legal entity D. the shareholders will bear unlimited liability 22. 2005/II/22 Which of the following is an advantage of general partnership over sole proprietorship? A. The owners enjoy limited liability B. C. D. It has a wider source of capital The risk of running the business is lower There is no need to disclose its financial accounts to the public
23. 2005/II/23 Study the following information about firm A and firm B Firm A Number of owners Transfer of ownership Liability 2 Freely transferable Limited Firm B 12 Needs the consent of other owners unlimited
According to the above information, Firm A is a _______ and Firm B is a ______. A. public limited company ... private limited company B. private limited company ... partnership C. partnership ... private limited company D. public limited company ... partnership
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P.6
24. 2007/II/20 Which of the following is a possible reason for turning a partnership into a private limited company? A. The owners will make more profit B. The owners will enjoy limited liability C. It will ensure the financial privacy of the firm D. Ownership of the firm can be transferred without the consent of other owners
25. 2008/II/19 Firm A Number of owners Transfer of ownership Legal status 3 Needs the consent of other owners Legal entity Firm B 12 Needs the consent of other owners Not a legal entity
According to the above information, which of the following descriptions of Firm A and Firm B in Hong Kong is correct? A. All owners of Firm A are legally bound by other owner's business decisions while those of Firm B are not B. Firm A has to disclose its financial statement to the public while Firm B need not C. Firm A is subject to a higher profits tax rate than Firm B D. Firm A has a higher risk of being taken over by other firms than Firm B
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5.4 Methods of raising capital and different types of shareholders
P.1
1. 1990/II/14 Who will receive the repayment first when a company liquidates? A. ordinary shareholders B. preference shareholders C.
directors
D.
debenture-holders
2. 1991/II/18 Which of the following correctly describes the difference between ordinary shareholders and preference shareholders? A. Preference shareholders have greater influence in the management of the company. B. Preference shareholders have a higher priority in claiming the company assets if the company winds up. C. Ordinary shareholders receive a fixed rate of dividend. D. Ordinary shareholders receive a higher rate of dividend. 3. 1992/II/18 On the liquidation of a public limited company, which of the following parties will get back money before the others? A. the shareholders B. the debenture-holders C. the government D. the employees of the company 4. 1993/II/7 From the viewpoint of a public limited company, which of the following is an advantage of issuing debentures over issuing shares to raise capital? A. The company can raise more capital B. The existing shareholders have a better control of ownership of the company C. The company can pay less to debenture holders than to shareholders when its profit is small D. It is easier to obtain more bank loans if the company issues more debenture rather than more shares 5. 1994/II/26 An investor may prefer to purchase a companys preference shares rather than its ordinary shares because the preference shareholders A. have greater voting rights. B. C. D. can receive a fixed dividend even if the company suffers a loss. can get back all their investment in the company if it closes down. can receive full dividend payment before ordinary shareholders.
6. 1995/II/26 Which of the following about preference shareholders is true? A. They are creditors of the company. B. They receive fixed dividends whether the company gains or loses. C. D. They usually have no voting rights in the companys general meetings. They receive more dividends than ordinary shareholders if the company earns a huge profit.
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P.2
7. 1996/II/19 Mr. Chan is a lawyer. He wants to start his own business by opening a law firm. He can raise funds by (1) Borrowing from banks. (2) Admitting his friends as limited partners to form a limited partnership. (3) Forming a private limited company and issuing shares. A. (1) only B. (1) and (2) only C. (2) and (3) only D. (1),(2) and (3)
8. 1997/II/18 Which of the following sources of finance would most probably reduce the controlling power of the existing shareholders of a public limited company? A. a new issue of ordinary shares to the public C. a new issue of debentures to the public B. a new issue of preference shares to the public D. a short term loan borrowed from a bank
9. 2000/II/23 Which of the following about preference shares is correct? A. Preference shares are issued to the creditors of the company. B. C. D. Preference shares carry a fixed rate of dividend. Preference shares are not allowed to be traded on the stock market. Preference shareholders have to bear unlimited liability.
10. 2001/II/21 From the viewpoint of the existing shareholders of a company, which of the following is an advantage of issuing preference shares over ordinary shares to raise funds for future development? A. They need not bear the burden of interest on the funds raised. B. C. D. Their power of controlling the company remains unchanged. They can avoid paying dividends to the new shareholders. They can have a prior right to receive their capital invested in the company if it closes down.
11. 2001/II/22 Mr Lee is a private medical doctor. He wants to expand his business. He can raise funds by (1) borrowing from banks. (2) inviting partners to form a general partnership. (3) forming a private limited company and issuing shares. A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. (1), (2) and (3)
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P.3
12. 2003/II/22 From the viewpoint of investors, which of the following is an advantage of buying debentures over the purchase of preference shares? A. The return of debentures is higher B. Debentures can be sold on the stock exchange while preference shares cannot C. The market price of debentures is fixed D. Debenture holders have a prior right to get their money back from the company if it liquidates 13. 2004/II/23 The debentures issued by a listed company _____ be traded on the securities market. The company has to pay the interest to debenture holders ________ the dividends to shareholders. A. can before B. can after C. cannot before D. cannot after 14. 2005/II/21 Which of the following descriptions about shareholders and bondholders of a company is correct? A. Ordinary shareholders have a higher return than the bondholders B. Preference shareholders are entitled to a fixed dividend rate whether or not the company earns a profit C. Ordinary shareholders and preference shareholders are the creditors of the company D. When the company winds up, the bondholders have a right to get the money back from the company in advance of its shareholders 15. 2006/II/22 From the viewpoint of the company, which of the following is an advantage of issuing ordinary shares over bonds to raise capital? A. The company can raise more capital B. The company has the obligation to redeem the bonds but not the ordinary shares C. The ordinary shares can freely transferable on the stock market D. The liability of the shareholders is confined to the amount they have invested in the company 16. 2007/II/21 From the viewpoint of the existing shareholders of a listed company, which of the following is an advantage of issuing bonds over ordinary shares to raise funds for future development? A. Their power of control over the company will not be diluted B. The interest paid to the debenture holders is lower than the dividend C. The company need not pay interest to the debenture holders when it incurs a loss D. The debenture holders have no right to sue the company, whereas the shareholders do have the right
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P.4
17. 2008/II/20 In 2006, the Banks of Communications quoted its shares on the Hong Kong Stock Exchange. As a result of this was that A. the Bank became a legal entity in Hong Kong B. the Bank can raise capital more easily in Hong Kong C. owners of the Bank enjoy limited liability D. ownership and management of the Bank can be separated 18. 2008/II/21 Which of the following methods of raising capital will dilute the controlling power of existing shareholders in a listed company? A. borrowing from a deposit-taking company B. issuing debentures C. issuing preference shares D. issuing ordinary shares
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5.5 Public enterprise |
P.1
1. 1991/II/13 Which of the following statements is true about the public utilities in Hong Kong? A. All public utilities are government-owned. B. The setting up of public utilities requires government franchises. C. The government has imposed a maximum limit on profits on all public utilities. D. In return for a franchise, a public utility is regulated by the government.
2. 1991/II/14 Which of the following is a possible consequence when government-run car parks become privately run? In these car parks, there will be A. greater efficiency in management. C. less frequent changes in parking fees. B. more car theft. D. shorter business hours.
3. 1991/II/17 Which of the following is a public corporation in Hong Kong? A. The Kowloon-Canton Railway Corporation** B. The Hong Kong and Shanghai banking Corporation C. The Water Supplies Department D. The China Light and Power Company Limited ** The KCRC and the MTR have merged since Dec, 2007 4. 1992/II/16 Which of the following are the characteristic of a public corporation in Hong Kong? (1) It is owned by the government (2) It has limited liability (3) Its employees are civil servants (4) Its stocks are quoted on the Stock Exchange A. (1) and (2) B. (1) and (3) C. (2) and (4) D. (3) and (4) 5. 1992/II/19 Which of the following is an advantage of Tates Cairn Tunnel being run by private sector rather than by the government? A. The private firm has more freedom in staff management B. Management by the private firm helps to ease traffic congestion. C. The private firm charges users a lower price than the government would charge D. The private firm pays a lower interest rate on its loans than the government would have to pay 6. 1993/II/12 Which of the following is true about the post office in Hong Kong? A. It is a kind of social capital B. It is granted a franchise by the government C. If faces no competition in providing its services D. It pays dividends to its employees whenever there is a profit
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6.1 Types of integration |
P.1
1. 1990/II/18 Which of the following is an example of lateral integration? A. A flour mill combines with a bakery B. A jeans factory combines with a swimwear factory C. A jewelry manufacturer combines with a noodle factory D. A furniture factory combines with a lumbering plant
2. 1991/II/21 Cathay Pacific Airways Ltd. took over Hong Kong Dragon Airlines Ltd. This is an example of A. horizontal integration. C. forward vertical integration. B. lateral integration. D. backward vertical integration.
3. 1993/II/24 Which of the following is an example of lateral integration of a firm? A. A telephone company combines with a telegraph company B. A restaurant combines with a supermarket C. A hospital sets up a school to student nurses D. A furniture company combines with another furniture company 4. 1994/II/27 A travel agent takes over a real estate firm. What kind of integration is this? A. conglomerate integration B. lateral integration C. vertical integration D. horizontal integration 5. 1995/II/27 A publisher takes over a bookstore. To the publisher, this is a ______ integration. A. conglomerate B. forward C. backward D. lateral 6. 1998/II/19 A famous singer expands his show business by producing stationery with his picture on it. This type of expansion is A. horizontal B. forward C. backward D. conglomerate
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6.1 Types of integration |
P.2
7. 2004/II/24 A shirt-making factory has expanded its business follows: Trousers-making factory X Shirt-making factory Y Shirt-retailing shop
To the shirt-making factory, the types of expansion shown by X and Y are _______expansion and _____ expansion respectively. A. backward lateral B. lateral lateral C. backward backward D. lateral forward 8. 2005/II/24 Which methods of integration can be used by firms to ensure the supply of raw materials? A. backward integration. B. forward integration. C. conglomerate integration. D. horizontal vertical integration.
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6.2 Motives of integration |
P.1
1. 1993/II/23 A movie-producing firm acquired a number of theaters to present its own films and films produced by other films. What are the advantages of this type of integration to the firm? (1) The firm can enjoy economies of scale (2) The firm can reduce the risks by diversifying its investment (3) It is easier for the firm to obtain contracts with movie stars A. (1) and (2) only B. (1) and (2) only C. (2) and (3) only D. (1),(2) and (3)
2. 1994/II/28 In Hong Kong, when a commercial bank takes over another commercial bank, A. it has greater influence on deposit rates. B. it is able to diversify risk in its business. C. its market share is enlarged. D. it will suffer from diseconomies of scale. 3. 1995/II/28 Which of the following is the greatest benefit from conglomerate integration? A. diversification of product B. economies of scale C. ensuring the markets for its output D. larger market share
4. 1997/II/20 When a cake shop takes over a coffee shop, which of the following are correct? (1) (2) (3) (4) A. This can provide an outlet for its product The resources can be better utilized The risk of the business is reduced through diversification The profit will increase B. (1), (2) and (4) only C. (1), (3) and (4) only D. (2),(3) and (4) only
(1), (2) and (3) only
5. 2000/II/24 A mobile phone company joins hands with a commercial bank. A customer of the bank can handle matters concerning his accounts by using the mobile phones produced by the mobile phone company. Which of the following is least likely a motive of the mobile phone company in this joint venture ? A. to ensure a steady supply of raw materials B. to benefit from more efficient use of resources C. to benefit from economies of scale D. to promote goodwill 6. 2001/II/23 A bus company expands its business and starts to provide ferry services to the outlying islands. This enables the bus company to A. diversify the risk of its business. B. diversify the markets for its product. C. enjoy a larger market share. D. enjoy technical economies of scale.
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P.2
7. 2002/II/22 Mrs. Chan, a large supplier of frozen beef, opens a chain of beef steak houses. To this supplier, (1) the expansion is a vertical forward expansion. (2) the risk of running a loss for her whole business will be lower. (3) this can ensure a steady market outlet for her frozen beef. A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. (1), (2) and (3)
Refer to the following report to answer Question 8 and 9. Towngas Avenue is the largest customer service centre for Towngas. Towngas Avenue also sells tableware and glassware and operates an in-store caf. 8. 2003/II/23 The extension of the business of Towngas to Towngas Avenue is an example of A. horizontal expansion C. vertical forward expansion B. vertical backward expansion D. conglomerate expansion
9. 2003/II/24 To Towngas, the extension of the business of Towngas to Towngas Avenue has the advantage of A. enjoying technical economies of scale B. ensuring a steady supply of raw materials C. ensuring adequate market outlets D. diversifying production and separating risk 10. 2006/II/23 When an international airline company takes over a local airline company, the former has the advantage of A. ensuring a steady supply of raw materials B. ensuring a better quality of its service C. enjoying management economies of scale D. avoiding the existence of diseconomies of scale
The MTR Corporation launched the Octopus Card. It is a smart card system facilitating transactions of small amounts. Answer questions 11 and 12 below: 11. 2007/II/23 To the MTR Corporation, this type of integration is __________ A. horizontal B. forward C. backward
D.
conglomerate
12. 2007/II/24 Such a type of integration has the advantage of A. technical economies of scale B. increasing the market share of business C. increasing the profit of the company D. diversifying the risk of business
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P.3
A catering company owns many restaurants selling different Chinese foods. Recently, it has opened a new bakery. Which of the following descriptions in questions 13 and 14 concerning the expansion of the catering company are correct? 13. 2008/II/22 The expansion is an example of A. lateral expansion B. C. horizontal expansion D.
vertical forward expansion conglomerate expansion
14. 2008/II/23 The expansion enables the catering company to A. spread the business risk by diversifying the product B. have a greater influence on the market price C. raise the productivity of its workers D. have a more steady supply of raw materials
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7.1 Market and competition |
P.1
1. 1993/II/30 In economies , which of the following statements about market is correct ? A. All buyers and sellers must meet at a physical location for transactions to take place B. Under monopolistic competition, the entry of firm is restricted C. Firms in an obligopolistic market compete in price only D. A perfectly competitive firm cannot influence the market price by itself 2. 1994/II/29 Competition in the market will tend to be imperfect when (1) (2) (3) (4) A. customers favor brand names. there are differentiated products there is free entry into the market. there are numerous sellers. B. (1) and (3) only C. (2) and (4) only D. (3) and (4) only
(1) and (2) only
3. 1996/II/25 Newspapers in Hong Kong competed among themselves by cutting prices in 1995. This implies that A. the total revenue of a newspaper will increase if its demand is inelastic. B. The profit of a newspaper will increase if its demand is elastic. C. Total revenue in the magazine industry will increase because newspapers and magazines are in competitive D. demand. The market structure of newspapers is not perfect competition.
4. 1997/II/59 With a number of new firms entering the market of mobile phone services, which of the following would LEAST likely occur? A. The price of mobile phone services would decrease B. The market share occupied by existing firms would decrease C. Firms would engage more in non-price competition D. The market would become a perfectly competitive one
5. 2002/II/23 Which of the following is a general feature of a perfectly competitive market? A. Market information is imperfect. B. There is non-price competition. C. There is only one price prevailing in the market. D. None of the above is a correct answer.
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7.1 Market and competition |
P.2
6. 2008/II/24 Which of the following is a feature/ are features of a perfectly competitive market? A. There is a freedom of entry and exit of firms B. The market price of the product is stable C. Sellers use non-price competitions to attract consumers D. All of the above is correct.
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7.2 Types of market structure |
P.1
1. 1990/II/16 China Light and Power Co. Ltd. Is a __________ under __________. A. public enterprise, monopoly B public company, monopoly C. public corporation, oligopoly D. public utility, oligopoly 2. 1991/II/27 The reasons for classifying the video-renting industry in Hong Kong as monopolistic competition are: (1) The entry and exit of firms are restricted. (2) The firms engage in non-price competition. (3) The services of the firms are not homogeneous. (4) The firms charge the same price. A. (1) and (2) only B. (1) and (4) only C. (2) and (3) only . 3. 1992/II/29 The market structure of gasoline supply in Hong Kong is best classified as A. perfect competition B. monopolistic competition C.
D.
(3) and (4) only
oligopoly
D.
monopoly
4. 1992/II/56 Which of the following is NOT a reason why there is only one firm supplying coal gas in Hong Kong? A. The firm is granted a franchise by the Hong Kong B. The firm enjoys economies of scale in production C. It is costly for a new firm to construct a new underground pipeline network D. It is difficult for a new firm to capture a sufficient share of market 5. 1993/II/22 Which of the following statements about a monopolist is true? A. It has a high set-up cost B. It sells only one type of product C. It is regulated by the government D. There is no close substitutes for its product 6. 1994/II/23 The Kowloon -Canton Railway Corporation (KCRC)** is a (1) public limited company (2) public corporation (3) public enterprise (4) monopolist A. (1) and (2) only B. (1) and (3) only C. (2) and (4) only ** The KCRC and the MTR have merged since Dec, 2007
D.
(3) and (4) only
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P.2
7. 1994/II/30 Which of the following statements about the China Light and power Company Limited is correct? A. It is an oligopoly because there are two competing electricity companies in Hong Kong. B. It is an oligopoly because there will be a new nuclear power station in Daya Bay. C. It is a natural monopoly because it enjoys economies of scale. D. It is a franchised monopoly because the government grants an exclusive right for its running.
8. 1995/II/29 Which of the following is a general feature of oligopoly? A. B. C. D. There is perfect information. There is price competition only. There is free entry. There are only a few sellers who can dominate the market.
9. 1996/II/58 Which of the following is NOT a difference between monopoly and perfect competition? A. Advertisements are found in monopoly but not in perfect competition. B. Firms are free to enter a perfectly competitive market but not a monopoly. C. A monopolist can influence the market price while a competitive firm cannot. D. Monopolists make greater profits than perfectly competitive firms. 10. 1998/II/22 The market structure of the newspaper publishers in Hong Kong is A. perfect competition because a particular newspaper is sold at the same price at different places. B. C. D. monopolistic competition because there are many newspaper stalls. oligopoly because only a few newspapers have leading market shares. monopoly because there is no close substitute when the consumer has formed the habit of reading a particular newspaper.
11. 1999/II/23 Before 1999, the international direct dialing service (IDD) in Hong Kong was solely provided by Hong Kong Telecom. Now several other companies also provide this service. As a result, the market structure for IDD has changed from _________ to _________. A. monopoly perfect competition. B. monopoly oligopoly C. oligopoly monopolistic competition D. monopolistic competition perfect competition
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P.3
12. 2000/II/25 Which of the following about a monopoly is correct? A. Its product has no substitutes as it is the only seller of the product of the kind. B. A monopolist still faces non-price competition. C. A monopolist can increase the price without losing any customers. D. Any business granted a franchise by the government is a monopoly.
13. 2001/II/24 Many people say that the MTR Corporation Limited is a monopolist. Which of the following about the company is correct? A. The demand for its product is perfectly inelastic. B. It still has to face competition. C. It does not need to advertise its product. D. It is sure to make profits as it is the only supplier.
14. 2003/II/49 In Hong Kong, free television broadcasting is provided by Television Broadcasts Limited and Asian Television Limited. Which of the following is NOT correct? These two companies A. are oligopolists B. operate under franchise C. broadcast television programmes which are economic goods D. engage in non-price competition only 15. 2004/II/25 The market structure of petroleum companies (e.g. Esso, Caltex) in Hong Kong could be regarded as oligopolistic because A. in making decisions these companies have to consider the reactions of other dominant companies in the industry.
B. the total sales revenue of the market is equally shared by these companies. C. these companies are selling homogenous products. D. the information about their products can be obtained at zero cost. 16. 2005/II/25 Which of the following descriptions about monopoly is correct? A. A monopolist must process a franchise to run the business B. A monopolist faces no competition C. A monopolist may incur losses D. A monopolist sells only one product
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P.4
17. 2006/II/24 A market can be regarded as an oligopoly when A. information in the market is not perfect B. a few sellers have a significantly larger market share than the others C. the products sold in the market are daily necessities D. the government controls the entry of sellers into the market
18. 2007/II/25 The Airport Express is the only railway service carrying passengers to the airport in Hong Kong. Which of the following statements about Airport Express is correct ? A. It would surely make a profit since it is the sole supplier of airport railway services B. It dose not need to promote its business through advertising C. It can increase its price without losing any customers D. It has to face competition in the market from other transport services to the airport
19. 2008/II/25 The market structure of the electricity supply on Hong Kong Island is regarded as a/an A. monopoly because the government controls the entry of suppliers in the market B. oligopoly because there are two electricity companies in Hong Kong C. monopoly because there is only one supplier D. oligopoly because the supplier is a price searcher
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8.1 Circular flow of income |
P.1
1. 1990/II/35 Real flow Money flow

Firms
(X)
Households
(Y) X and Y in the above circular flow of economic activities should be labeled respectively as A. B. C. D. sales revenue, factor services. sales revenue, goods and services. factor income, goods and services. factor income, factor services.
2. 1991/II/5
The above diagram shows the interdependence among the three stages of production. The flows of X and Y should be labeled respectively as A. natural resources and consumer goods. B. natural resources and capital goods. C. services and consumer goods. D. services and capital goods. 3. 1991/II/47
When economist calculate a countrys national income by the income approach, they measure _____ in the above chart. A. Flow A B. Flow B C. Flow C D. Flow D
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8.1 Circular flow of economic activities
P.2
4.1993/II/37
The diagram above shows the circular flow of economic activities. The economys expenditure and income are show in Flow _______ and Flow _______ respectively. A. (1);(2) B. (1);(4) C. (2);(3) D. (3);(4) 5. 1994/II/31
What does the above diagram show? A. Economic activities take place in an open economy. B. There is government intervention in the economy. C. National income equals national expenditure. D. Households conduct transactions in the goods market only.
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8.1 Circular flow of economic activities
P.3
6. 2002/II/24
Refer to the above circular flows. Which of the following statements is correct ? A. Flows A and D are flows of households expenditure and firms payment to factor owners respectively. B. All value-added totals contributed by the firms equal the market value of all final goods and services. C. The market value of Flow B equals the market value of all final goods and services plus the market value of unsold goods. D. The flow of final goods and services includes self-provided services. 7. 2003/II/25
Which of the following is included in Flow X? A. household expenditure on final goods and services B. factor income such as rent and wages C. value of intermediate goods D. market value of all final goods and services.
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8.2 GDP - Production (Value-added) approach |
P.1
1. 1990/II/39 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 Real GDP value-added per employee 1982 1992 $41 000 $165 000 $103 000 $280 000
Manufacturing sector Services sector
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
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P.2
6. 2000/II/35 The following diagram shows a production chain involving the import of $100 worth of gasoline into Hong Kong:
$100 Local importers $300 Gasoline stations $1 000 ($500 tax inclusive) Consumers
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.
$45 000 $20 000 Overseas Consumers $30 000 ($5 000 sales tax inclusive) Local Consumers
Garment Factory
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 Amys 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
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P.3
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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8.3 GDP Expenditure approach |
P.1
1. 1990/II/33 A Hong Kong citizen switches his fight from a local airline to Japan Airlines. What is the effect on Hong Kongs 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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P.2
6. 2001/II/28 The following table shows the gross domestic product (GDP) data of a country. $ Million Components 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 Private consumption expenditure Government consumption expenditure Gross domestic fixed capital formation Reduction in inventories Domestic exports of goods Re-exports of goods Imports of goods Exports of services Imports of services Depreciation The GDP at market price is A. $620 million B. $660 million C. $680 million D.
$ Million 400 100 200 20 330 170 550 400 350 60
$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 9. 2004/II/30 Components GDP Net exports of goods Depreciation Indirect Business Taxes $ Million 640 200 50 10
C.
depreciation
D.
gross profit of firms
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
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P.3
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: Components Private consumption expenditure Government consumption expenditure Gross domestic fixed capital formation Decrease in inventories Total export of goods Total import of goods Export of services Import of services The GDP at market price is $________ million. A. 3100 B. 3150 C. 3200 D. 3250
$Million 800 250 600 50 1 700 450 850 550
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8.4 GDP - Income approach |
P.1
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 boutiques financial statement for a given period of time. $ 000 Sales revenue of fashions 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 Nancys boutique to Hong Kongs GDP in thousand dollars? A. 7 000 B. 11 000 C. 14 000 D. 16 000 $ 000 16 000
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8.5 Whether an item is included in GDP |
P.1
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 Kongs 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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P.2
6. 1994/II/32 Which of the following items should be included in Hong Kongs 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. D. A students sells some used textbooks to his friend A manufacturer sells last years unsold stocks
7. 1995/II/60 Which of the following will NOT be included in Hong Kongs 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 Kongs 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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P.3
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 Kongs GDP? A. B. C. D. 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. A father transfers $1 million worth of company shares to his daughter. A victim in a traffic accident receives a sum of $1 million from the government as compensation for injury. 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 Kongs 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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P.4
16. 2002/II/49 Which of the following items should NOT be included in the calculation of Hong Kongs 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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8.6 GNP |
P.1
1. 1991/II/43 Which of the following is included in a countrys 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 Kongs Gross National Product (2) Hong Kongs Gross Domestic Product (3) Canadas Gross National Product (4) Canadas Gross Domestic Product A. (1) and (3) only B. (1) and (4) only 3. 1993/II/44 If GNP is greater than GDP, A. depreciation is greater than zero C. transfer payments are greater than zero
C.
(2) and (3) only
D.
(2) and (4) only
B. D.
net income from aboard is greater than zero exports are greater than imports
4. 1994/II/33 Consider the following data of an economy producing only bread and shirts: Price in 1992 ($) Price in 1993 ($) Output in 1993 Bread 10 12 50 Shirts 20 25 20 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 C. the net income from abroad is negative B. the net export is positive D. the net income from abroad is positive
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8.6 GNP |
P.2
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. C. the value of newly issued shares sold stamp duty paid for buying shares B. the value of shares transacted in the stock market 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 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. D. GDP does not consider the value of depreciation Net income from abroad cannot be negative
D.
(3) and (4) only
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8.6 GNP |
P.3
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 Kongs 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. D. the salary earned by a native English teacher employed on a two- year contract in a secondary school in Hong Kong 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 Kongs 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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8.7 GDP at factor cost |
P.1
1. 1995/II/30 Study the following information about a country $ million National income Depreciation Rent Interest Wages Indirect taxes 400 50 88 46 220 12 D. $816 million
The gross national product (GNP) at factor cost is A. $412 million B. $450 million C. $462 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 Net income from abroad Indirect taxes Subsidies Depreciation The GDP at factor cost is: A. $95 B. $105 C. 30 -5 25 35 5 $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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P.2
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 Interest Profit Subsidies 120 70 180 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 Private consumption expenditure Government consumption expenditure Net domestic fixed capital formation Decrease in stock Subsidies Depreciation Net exports Net income from abroad Direct tax The GDP at factor cost (in $mn) is A. 950 B. 970 C. 1050 D. 1190
$Million 200 150 300 70 120 50 300 80 100
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P.3
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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8.8 GDP at current and constant market prices |
P.1
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 countrys 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. D. the nominal GNP has a greater percentage increase than the real GNP the nominal GNP will remain constant
3. 1997/II/23 The following are data of Country X. Year 1992 GDP $500 billion Price Index (1990=100) 120 The growth rate of real GDP from 1992 to 1997 is: A. 24.4% B. 28.6% C. 40.0% D. 57.5%
1997 $700 billion 135
4. 1998/II/23 Suppose a closed economy produces food and clothing only. The outputs of Years 1 and 2 are as follows: Year Quantity of food (unit) Unit price of food ($) Quantity of clothing Unit price of clothing (unit) ($) 1 20 4 40 12 2 15 10 35 30 From Year 1 to Year 2, the real gross national product (real GNP) of this country has A. worsened because the price level increases B. worsened because the output of both goods decreases C. improved because the nominal GNP increases D. improved because the technology advances
5. 1998/II/29 Suppose a country experiences a 2% increase in the production volume of goods and services as well as a 3% rise in the general price level in a year. We can conclude that (1) the real GNP will increase by 2% (2) the nominal GNP will increase by 2% (3) the nominal GNP will increase by 3% (4) the nominal GNP will increase more than the real GNP by 1% A. (1) only B. (2) only C. (1) and (2) only D. (1), (3) and (4) only
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P.2
6. 1999/II/25 Suppose the nominal GNP and the price level increase by 10% and 5% respectively, but the population decreases by 10%. Then the per capita nominal GNP will _______ and the per capita real GNP will ________ . A. increase increase B. decrease decrease C. increase remain unchanged D. remain unchanged increase 7. 2000/II/36 Year GNP at current market price ($ billion) GNP deflator 1997 2100 105 1998 2800 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. C. D. the real output level is rising in this period. the current price level is always higher than the price level of 1990. 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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P.3
10. 2004/II/34 Composite Consumer Price Index GDP deflator Nominal GDP According to the above data on an economy, A. the real GDP has increased. C. the inflation rate has increased. -3.0% -2.7% -0.6% B. the unemployment 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 75 000 90 2004 100 000 100 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 economys 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. GDP at current market prices GDP at constant market prices Change +5.1% +8.1%
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
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8.9 Factors affecting GDP |
P.1
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 governments productivity-enhancement projects B. the governments promotion of tourism C. a buying local products campaign D. a firework show sponsored by private firms
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8.9 Factors affecting GDP |
P.2
7. 2005/II/30 Which of the following will result in an increase in Hong Kongs 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 economys 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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8.10 Limitations of GDP statistics
P.1
1. 1990/II/56 When both the price level and the money income level of a society rise, A. B. C. D. the living standard will drop because the value of money decreases. the living standard will rise because the citizens have more money to spend. the living standard will not change because the rise in income is offset by the rise in price. 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) (2) (3) (4) A. doses not reflect the improvement in the quality of the goods and services produced in the country doses not reflect the effect of a rise in the price level excludes the undesirable effects of production excludes the goods not transacted in the market B. (1) and (4) only C. (2) and (3) only D. (3) and (4) only
(1) and (2) 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. 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
Which of the following is a
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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9.1 Business cycle |
P.1
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) (2) (3) (4) A. The total demand for goods and services will decrease. The budget deficit will decrease. The unemployment rate will increase. The balance of payments deficit will increase. B. (1) and (4) only C. (2) and (3) only D. (2) and (4) only
(1) and (3) 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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P.2
7. 1999/II/27 Average growth rate
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. C. The real GNP has a zero growth rate. The investment expenditure of the economy is zero. B. D. The nominal GNP is higher than the real GNP. 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) (2) (3) (4) industrial output on an upward trend increasing imports and exports growth of retail receipts 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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P.3
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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P.4
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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9.2 Unemployment
P.1
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 % share in total employment 1982 Manufacturing sector Services sector Others Total 45% 50% 5% 100% 1992 19% 78% 3% 100%
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 governments 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.
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9.2 Unemployment
P.2
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 The unemployment rate is A. 2.27% B. 2.30% 69 000 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 Kongs 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. C. The unemployment rate will increase. The unemployment rate will remain constant. B. The unemployment rate will decrease. D. The effect cannot be determined.
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9.2 Unemployment
P.3
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. governments 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. B. C. D. The government introduces a minimum wage law. The profits tax rate is raised. Many domestic firms try to use more labour-saving machines. The demand for the countrys exports increases.
13. 2002/II/29 Population aged 15 or above Employed population Number of Persons 10 000 000 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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9.2 Unemployment
P.4
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 The unemployment rate is A. 7.4% B. 7.6% 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) 267 000 C. 8.2% D. 10.2%
18. 2005/II/32 Aged 15 or above Employed Unemployed Underemployed According to the above data, A. the total labour force is 9 600 000 C. the unemployment rate is 12.5% Population 10 000 000 6 800 000 1 200 000 1 600 000 B. the underemployment rate is 20% D. the unemployment rate is 16%
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9.2 Unemployment
P.4
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 C. the real output of the economy will fall
B. the potential GDP 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 Underemployed Employed 20 000 60 000 480 000
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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9.3 Changes in the general price level
P.1
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. B. C. D. The interest rate in Hong Kong has increased relative to other countries. There is a widespread belief that the Hong Kong dollar is overvalued. The local political development is favourable. The value of Hong Kongs 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) 1985 150 1982 120 What is the GDP deflator in 1985? A. 100 B. 120 C. 150 D.
Nominal GDP ($Mn) 180 120 180
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. D. the living standard will not change because the rise in income is offset by the rise in price. the effect on the living standard is not certain because the extent of both changes is unknown.
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P.2
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. C. The living standard will improve.
B. D.
The budget deficit will decrease. 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 Year Consumer price index
1990 100
1991 125
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
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P.3
12. 1993/II/42 November 1991 Consumer price index Hang Seng Consumer price index 117.7 118.7 November 1992 128.5 129.9
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 Bread Shirts Price in 1992 ($) 10 20 Price in 1993 ($) 12 25 Output in 1993 50 20
The rate of inflation from 1992 to 1993 calculated by using the GNP deflator is: A. 18.2% B. 22.2% C. 33.3% D. 122.2% 16. 1994/II/38 Who will lose during an unanticipated inflation? A. Mrs. Lee, who has hired a Filipino maid B. Mr. Chan, who has bought ten coupons which can be exchanged for cakes at a bakery C. D. Mr. Fu, who runs a restaurant Mr. Wong, who has put all his money in his time deposit account
144
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P.4
17. 1995/II/33 Year GDP deflator A. C. nominal GDP increased by 12%. rate of deflation was 12%. 1994 120 1995 132
Based on the above data, we may conclude that from 1994 to 1995, the economys B. real GDP increased by 10%. D. general price level increased by 10%.
18. 1995/II/36 Which of the following people will gain in times of unexpected inflation? (1) holders of long-term government bonds (2) holders of certificates of deposits (3) those who have used credit cards to buy goods (4) shareholders of companies which have issued long-term fixed-interest debentures. A. (1) and (2) only B. (1) and (4) only C. (2) and (3) only D. (3) and (4) only 19. 1996/II/32 Study the following information about Country X: Year Nominal national income ($mn) 1988 8000 1989 10000 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.
Price index 100 120
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P.5
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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P.6
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. As wage income has been falling. C. D. the bank can sell the house if Mr. A fails to repay the loan. 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. B. C. D. Before that period of time he had already borrowed a sum of money from a bank at a fixed interest rate. His salary remained unchanged during that period of time. He adjusted the rental charge to his tenant in a rental property according to the change in price level. He had a collection of antique vases.
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P.7
26. 2001/II/32 Refer to the following data about an economy. Year 1 GDP deflator 150 We can conclude that from Year 1 to Year 2, A. the purchasing power of money has decreased. C. the average standard of living has gone down.
Year 2 180
B. D.
the real national income has decreased. 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. C. D. more people would fall into the tax net. the real income of people before tax would generally increase. the ratio of peoples 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. peoples real income increases by 10 %. D. peoples 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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P.8
30. 2005/II/34
Based on the above diagram, we can conclude that during this period, A. the nominal GDP was decreasing C. the cost of living was increasing B. the real GDP was decreasing 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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P.9
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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10.1 Nature and functions of money |
P.1
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.
owners 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. D. Money performs less satisfactorily as a store of value when inflation is serious. 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 C. unit of account B. store of value 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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P.2
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 11. 1993/II/58 Money will NOT exist if A. there is no banking system C. there is only one man on earth B. only credit cards are accepted for payment D. trade is totally banned among countries
D.
(3) and (4) only
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. C. D. It must be backed up by law to be the medium of exchange. It must be convertible into some precious metal. 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 A. (1), (3), (4), (2) B. (3), (4), (1), (2) C. (3), (4), (2), (1)
(4) demand deposits D. (4), (3), (2), (1)
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P.3
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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P.4
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 C. medium of exchange is generally acceptable B. store of value ... bears interest income 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 C. the time for searching trading partners B. the need for exchange 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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P.6
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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10.2 Three-tier banking system |
P.1
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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10.2 Three-tier banking system |
P.2
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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10.3 Functions of central bank
P.1
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 Kongs note-issuing system is correct? 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 D. exchange market. 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. A.
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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10.3 Functions of central bank
P.2
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 governments 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. C. to act as the lender of last resort B. to carry out monetary policy 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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10.4 Money supply
P.1
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 Kongs 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 Kongs money supply M1 will _______ and M2 will ________. A. increase; increase C. decrease; remain unchanged B. remain unchanged; increase D. remain unchanged; remain unchanged
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10.4 Money supply
P.2
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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10.4 Money supply
P.3
11. 1997/II/37 $billion Total issue of legal tender Legal tender in circulation Demand deposits Deposits with licensed banks AND negotiable certificates of deposits issued by licensed banks (other than those held by authorized institutions) 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) The money supply M2 is A. $9 billion B. $12 billion C. $13 billion D. $92 billion 3 2 7 10 80
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. B. C. D. You receive $500 cash from your father and deposit it in your current account. You pay $4 000 cash to the landlord, who puts the money in his safe. A fire burnt most of the banknotes kept in a bank. 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$3 000 from her savings account and changes it for US dollars in cash. Which of the following statements about the Hong Kong dollar money supply is correct? A. B. C. D. HK$ M1 will increase while HK$ M2 will remain unchanged. HK$ M1 will remain unchanged while HK$ M3 will decrease. Both HK$ M1 and HK$ M3 will remain unchanged. Both HK$ M1 and HK$ M2 will decrease.
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10.4 Money supply
P.4
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: Legal tender in circulation Legal tender held by all deposit-taking institutions Demand deposits with licensed banks Savings and time deposits with licensed banks Negotiable certificates of deposits issued by licensed banks and held by the public Deposits with restricted license banks and negotiable certificates of deposits issued by restricted licence banks held by the public The money supply M2 (in $ billion) was A. 85 B. 110 C. 112 D. 144 $billion 10 2 15 60 25 32
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 buyers bank account to the sellers. In response to an increase in EPSs 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 Kongs 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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10.4 Money supply
P.5
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. Mr. Ding withdraws HK$40 000 from his time deposit in a restricted license bank in Hong Kong and remits the money overseas.
D.
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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10.4 Money supply
P.6
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. decreasedecrease B. decreaseremain 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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10.5 Deposit creation |
P.1
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 Deposits 500 Loans 300 From the table, we can say that A. the legal minimum reserves are $200 C. the actual banking multiplier is 4 B. the bank holds excess reserves of $100 D. the actual reserve ratio is 40%
5. 1993/II/32 The following is a balance sheet of a banking system. The required reserve ratio is 20% Assets($) Liabilities($) Reserves 150 Deposits 1 000 Loans 850 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 $250 D. The deposit multiplier is 4
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P.2
6. 1994/II/40 If the required reserve ratio for banks is 100%, which of the following is correct? A. The money supply will not change if banks accept deposits from the public. B. The total amount of bank loans must be equal to the total amount of deposits. C. D. Banks have no chance to make profits. The banking multiplier is zero.
7. 1994/II/42 Suppose the required minimum reserve ratio for banks is 25%. The table below shows the balance sheet of a certain bank. Assets($) Liabilities($) Reserves 600 Deposits 1500 Loans 900 A. The actual reserve ratio of the bank is 45 %. B. The excess reserves of the bank is $300. C. D. The banking multiplier is 5. 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 Deposits 1000 Loans 750 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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P.3
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($) Reserves 1 000 Deposits 3 000 Loans 2 000 Suppose the required reserve ratio for banks is raised from 20% to 25%, what will be the decrease in Bank Bs excess reserves? A. 150 B. 250 C. 400 D. 600 14. 1998/II/34 Suppose the required reserve ratio for banks is 20%. The table below shows the balance sheet of the banking system. Assets($) Liabilities($) Reserves 500 Deposits 1 000 Loans 500 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 $2 000. 15. 1998/II/52 An amount cash deposited into a bank will NOT lead to A. an increase in bank loan made to the public. B. an increase in the total deposits of the banks. C. an increase in the value of the maximum banking multiplier. D. an increase in the cash reserves held by banks.
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P.4
16. 1999/II/36 Refer to the following balance sheet of a banking system: Assets($) Liabilities($) Reserves 100 Deposits 400 Loans 300 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. C. less than $100 more than $100 equal to $100 more than $100 B. D. equal to $100 $100 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. C. D. banks do not keep excess reserves. the total money supply has increased by at least $4 000. there is a cash leakage in the credit creation process.
19. 2000/II/30 As the use of the Octopus card for public transport becomes much more popular, A. the money supply will increase because the card can perform the functions of money. B. the volume of the legal tender in circulation will drop. C. the value of money will drop because the demand for cash will be smaller. D. the maximum amount of deposits created by the banking system will decrease.
20. 2001/II/26 Assets($) Liabilities($) Reserves 200 Deposits 600 Loans 400 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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P.5
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 Deposits 1 200 Loans 700 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. possible amount of bank deposits be ? A. $200 B. $600 C. $800 D. $1 000
As a result, what would the maximum
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 $80.
25. 2003/II/34 If the actual reserve is larger than the required reserve in a banking system, it follows that A. there is cash leakage in the banking system B. some banks decide to hold excess reserves C. the demand for loans is insufficient D. the banking system can create more deposits
171
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P.6
26. 2003/II/35 Answer Questions 26 and 27 by referring to the following balance sheet of banking system. Suppose the required reserve ratio is 20% Assets($) Liabilities($) Reserves 500 Deposits 2 000 Loans 1 500 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 Deposits 1250 Loans and investments 750 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 Deposits 1500 Loans and investments 1000 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. $6 000
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P.7
30. 2005/II/37 Below is the balance sheet of a banking system. Assets($) Liabilities($) Cash reserves 500 Deposits 2 000 Loans 1 500 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 Deposits 2 000 Loans 1 000 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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P.8
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 Deposits 1 000 Loans 750 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 Deposits 3 000 Loans 2 400 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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10.6 Classification of financial market
P.1
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 A. (1) and (2) only B. (1) and (4) only C. (2) and (3) only D. 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. (4) the commodity market (3) and (4) only
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11.1 Type and nature of tax |
P.1
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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11.1 Type and nature of tax |
P.2
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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11.2 Principles of taxation |
P.1
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 ________ A. source principle of taxation. 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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11.2 Principles of taxation |
P.2
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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11.3 Classification of tax system
P.1
1. 1990/II/47 Which of the following diagrams approximates the structure of salaries tax in Hong Kong?
2. 1990/II/55 Mei Lings 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 C. a direct and proportional B. an indirect and regressive D. an indirect and progressive
4. 1992/II/36 Suppose the government asks everybody to pay a tax of $100 a year. This is an example of A. regressive tax B. proportional tax C. income tax D. indirect tax 5. 1994/II/47 If the amount of tax increases as income increases, the tax may be considered a ______ tax. (1) progressive (2) proportional (3) regressive A. (1) only B. (1) or (2) C. (2) or (3) D. (1) or (2) or (3)
6. 1995/II/44 In July 1994, Mr Chan bought a new house in Shatin and moved in immediately. In this case, the taxes that Mr Chan has to pay for the financial year 94-95 are: (1) stamp duty (2) property tax (3) rates A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. (1), (2) and (3)
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P.2
7. 1995/II/46 Study the following information carefully: Taxable income ($) 10 000 20 000 30 000 If the tax is progressive, X must be larger than A. 3 000 B. 3 500 C. 4 000
Total tax payment ($) 1 000 3 000 X D. 4 500
8. 1995/II/48 The following diagram shows the tax structure of Tax X:
Tax X is __________ within the income range OY1, and ________ within the income range Y1Y2. A. proportional progressive B. proportional regressive C. progressive proportional D. progressive regressive
9. 1996/II/41 Which two of the following diagrams describe a progressive tax?
A.
(1) and (3) only
B.
(1) and (4) only
C.
(2) and (3) only
D.
(2) and (4) only
10. 1996/II/44 Suppose that inflation occurs and that money income increase at the same rate as inflation. A taxpayer under a proportional tax system will pay (1) (2) (3) (4) A. a larger amount of tax. the same amount of tax. more tax in terms of purchasing power. the same amount of tax in terms of purchasing power. B. (1) and (4) only C. (2) and (3) only D. (2) and (4) only
(1) and (3) only
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P.3
11. 1997/II/40 Taxable income ($) 10 000 20 000 30 000 40 000 The above tax is a A. progressive tax B. proportional tax Tax payment ($) 4000 7000 9000 10 000 C. regressive tax D. lump-sum tax
12. 1997/II/41 The following are the annual income of Peter in Hong Kong in 1996. Type of income Amount ($) Salaries as a teacher in a secondary school 600 000 Interest from local deposits 4000 Rental income from letting a flat to a Japanese 300 000 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. B. C. D. Progressive tax has a higher tax rate than regressive tax. Progressive tax is a tax on income while regressive tax is a tax on goods. The tax payment of a regressive tax decreases as the taxable income increases. 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
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P.4
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 22 000 250 000 25 000 300 000 27 000 From the above information, we can conclude that A. B. C. D. the tax is a progressive tax as the tax payment increases with taxable income. the tax payment takes a decreasing portion of taxable income as taxable income increases. the taxation system helps to reduce the income gap. 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. C. results in a less even income distribution has a larger tax allowance. B. D. has a lower tax rate for the same level of income. has no effect on working incentive.
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P.5
18. 2001/II/36 Taxable income ($) 10 000 20 000
Tax payment Under Tax A ($) 1 500 3 800
Tax payment Under Tax B ($) 2 000 3 800 5 400
30 000 6 600 From the above data, we can conclude that A. Tax A is a direct tax and Tax B is an indirect tax. B. there would be a more even income distribution under Tax A. C. the tax rate of Tax A is lower than that of Tax B for all levels of income. D.
The fluctuations of government tax revenue would be smaller under Tax A than under Tax B when income fluctuates.
19. 2001/II/40 The following table shows the different sources of income earned by John in Hong Kong in the year 1999. Source of income Amount ($) Salary as a manager in a hotel 650 000 Net rental income from letting his house to a foreigner 250 000 Money left to him by his deceased father 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 $7,500,000 for 1998/99. 20. 2002/II/40 If a general sales tax is introduced in Hong Kong, A. B. C. D. the tax base would be widened. the wealth gap would be reduced. less Hong Kong people would shop in Shenzhen. the proportion of direct tax in the government tax revenue would increase.
21. 2002/II/43 Tobacco duty in Hong Kong is a kind of A. direct and proportional tax. B. C. indirect and proportional tax. D.
direct and regressive tax. indirect and regressive tax.
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P.6
22. 2003/II/38 Which of the following taxes are progressive?
A.
(1) and (2) only
B.
(1) and (3) only
C.
(2) and (4) only
D.
(3) and (4) only
23. 2003/II/44 Which of the following statements about tax system of Hong Kong is correct? A. The rental income derived from properties overseas is subject to the property tax of Hong Kong B. All the business organizations in Hong Kong have to pay at the same profits tax rate, as it is a proportional C. D. tax Interest income from deposits denominated in Hong Kong dollars is subjects to interest tax in Hong Kong The estate duty in Hong Kong is a progressive tax
24. 2004/II/41 Taxable income ($) Tax A 10 000 20 000 30 000 500 1 000 1 500 Tax payment ($) Tax B 800 1 700 2 700 Tax C 1 000 1 000 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.
185
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P.7
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: Marginal Tax Band First $30 000 taxable income Next $30 000 Next $30 000 Remainder Marginal Tax Rate (%) Old System New System 2.0 2.0 7.5 8.0 13.0 14.0 18.5 20.0
Under the new system, A. the ratio of direct tax revenue to indirect tax revenue will decrease. B. the government will have a budget surplus. C. more people will fall into the tax net. D. the income gap will be reduced.
27. 2004/II/44 Mr. Wong has the following expenses in Hong Kong: (1) three nights room charge for a local hotel (2) bets on football at the Hong Kong Jockey Club (3) spending on cosmetics for his wife Which of the above expenses are subject to an indirect tax in Hong Kong? A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. (1), (2) and (3)
186
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P.8
28. 2005/II/39 Study the following data: Taxable income ($) 0 10 000 20 000 Tax amount ($) 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 $130 per share on the Hong Kong stock market. In this case, which of the following taxes should Mr Chan pay to the government of the HKSAR in the financial year 2005-06? A. stamp duty B. capital gains tax C. profits tax D. All of the above
187
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P.9
31. 2007/II/42 Refer to the above data. When the tax system changes from A to B, Tax Payment ($) Taxable Income ($) 100 000 200 000 300 000 A. Tax System A 6 000 12 000 18 000 Tax System B 5 000 12 000 21 000
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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HKCEE ECONOMICS |
P.10
34. 2008/II/44 Suppose the salaries tax system of Hong Kong changes as follows: Old System Marginal Tax Band First $30 000 taxable income Next $30 000 Next $30 000 Remainder Standard Rate Tax Rate (%) 2.0 7.0 13.0 19.0 16.0 New System Marginal Tax Band First $40 000 taxable income Next $40 000 Next $40 000 Remainder Standard Rate Tax Rate (%) 2.0 7.0 13.0 19.0 16.0
Under the new system, with the salaries of all taxpayers unchanged A. fewer people will fall into the tax net B. fewer people will have to pay at the standard rate C. the income gap will not be affected D. the government will run into a budget deficit
189
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11.4 Economic effect on taxation |
P.1
1. 1990/II/52 Which of the following government measures would lead to more equal distribution of income within a country? (1) an increase in subsidies on basic foodstuffs (2) an increase in the progressivity of the tax system (3) a decrease in estate duty A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. (1), (2) and (3)
2. 1990/II/59 Which of the following is INCORRECT if a general sales tax is imposed in Hong Kong? A. B. C. D. The fluctuations of government tax revenue will be reduced. The proportion of direct tax in the government tax revenue will increase. There will be a redistribution of income. The general price level will increase.
Tax Amount ($) Policy A Policy B 10 000 1 000 1 000 50 000 5 000 4 000 100 000 10 000 7 000 500 000 50 000 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
3. 1991/II/39 Income ($)
4. 1992/II/37 The introduction of a sales tax on rice in Hong Kong would A. decrease the revenue of the government C. raise the consumer price index \ 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 B. encourage more imports of rice D. lead to a more even distribution of income
190
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P.2
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: Total net chargeable income $ 10 000 20 000 30 000 40 000 50 000 60 000 70 000 80 000 Total tax payment ($) for the fiscal year of 1990/91 1991/92 200 200 600 400 1500 1300 2700 2200 4200 3900 6000 5600 8100 8100 10600 10600
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.
191
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P.3
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
192
HKCEE ECONOMICS |
P.4
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. B. C. D. the income distribution will be more uneven. less people will fall into the tax net. the working incentive of those paying at the standard tax rate will increase. the tax bands will be widened.
193
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P.5
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. C. D. It would lead to an uneven distribution of income. It would encourage the working incentive of workers. 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. B. C. D. lowering the tax rates of regressive taxes imposing more indirect taxes on necessities increasing the depreciation allowance of the profits tax 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.
194
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P.6
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 ($) 10 000 20 000 30 000 40 000 50 000 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 Tax Payment ($) 2 000 3 800 5 400 6 800 8 000
195
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P.7
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 C. higher consumption expenditure B. lower output 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 Taxable income First $20 000 Next $20 000 Next $20 000 Remainder 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 Marginal tax rate 3% 6% 10% 15% System B Marginal tax rate 2% 5% 8% 12%
196
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P.8
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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11.5 Public expenditure |
P.1
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. C. increase the ratio of public expenditure to GDP. B. increase the size of the public sector. 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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11.6 Public expenditure as a proportion of GDP |
P.1
1. 1994/II/49 Year Public Expenditure GDP 1987-88 536 3600 1988-89 648 4 336 1989-90 819 4 990 1990-91 950 6 588
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. B. C. D. Both the GDP and the government expenditure have not change in this period. The GDP increase at the same rate as the government expenditure. The ratio of government expenditure to GDP decreases over this period. 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
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11.7 Fiscal policy |
P.1
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 C. a balance of payment surplus
B. a fiscal 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 7. 1995/II/49 In general, a deficit budget will A. reduce a countrys 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 governments debt. D. (2) and (4) only
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. C. the incentive of investment will increase. B. D. the government expenditure will decrease. 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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P.3
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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12.1 Absolute and comparative advantage |
P.1
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) Country X Country Y 10 2 OR OR toys (units) 5 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. Country A 1 unit of X 1 unit of Y 1 man-hour 3 man-hours Country B 2 man-hours 4 man-hours
According to the principle of comparative advantage, A. Country A will export X and import Y. B. C. Country A will import X and Y from Country B. D.
Country A will export Y and import X. Country A will export Y and import Y to Country B.
4. 1992/II/51 Refer to the following table: Toys HKs output per man-hour USAs output per man-hour (1) (2) (3) (4) A. 30 50 (units) OR OR Machinery (units) 20 40
The USA has an absolute advantage in producing both goods The USA has an absolute advantage in producing machinery only Hong Kong has a comparative advantage in producing toys Hong Kong has a comparative advantage in producing machinery B. (1) and (4) only C. (2) and (3) only D. (2) and (4) only
(1) and (3) only
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P.2
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) Country X Country Y 2 1 OR OR Cotton (units) 4 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 C. higher; wheat; wheat B. lower; wheat; cotton 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. C. D. have a comparative disadvantage in some other good(s). specialize in producing X and export all its output of X to other countries. completely specialize in the production of X.
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P.3
9. 1996/II/46 Given a unit of input, the amount of output produced by Countries A and B are shown below: Garment (units) Country A Country B 2 4 OR OR Shoes (units) 6 8
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. A. (3) If trading opportunities were opened up, Country B would export garment and import shoes. (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)
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P.4
13. 1997/II/53 Suppose the production of cars and shirts in Mainland China an in the USA is as follows: One unit of resources can produce Cars (units) Mainland China USA 1 2 OR OR Shirts (units) 4 3
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: Banana (units) Country A Country B 4 2 OR OR Shoes (units) 12 4
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. D. Country B will import bananas. 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. D. The production of bananas will increase but the production of shoes will decrease. The production of both bananas and shoes will increase.
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P.5
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. D. this country uses less resources than other countries for producing the same amount of good X. 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: DVD (units) China Japan US 10 20 30 OR OR OR VCD (units) 30 20 50
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. D. China has a comparative advantage in producing DVDs only. 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. Good X Country A Country B 1 3 Good Y 2 4
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
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P.6
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.
1Y
21. 2001/II/43 Questions 21 and 22 refer to the following table which shows the data about country A. Good X (units) Total output with no international trade Total output with specialization and international trade Total consumption with international trade 40 0 50 OR OR OR Good Y (units) 60 110 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.
C. 1 X 2
20 ... 10 ... 1Y =
B. D.
20 ... 10 ... 1Y = 2 X 5 30 ... 50 ... 1Y = X 3
3 30 ... 50 ... 1Y = X 5
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. B. C. D. produces more garments per unit of resources than country Y. produces better quality garments than country Y. gives up a smaller amount of computers in order to produce a unit of garments than country Y. gains more from their trade than country Y.
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P.7
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. D. The opportunity cost of producing X in country A is smaller than that of Y in country B. 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 With ONE unit of resources, (1) (2) (3) (4) A. 6 10
AND AND
9 8
country A can produce either 6 units of rice or 9 units of wine. country A can produce either 12 units of rice or 18 units of wine. country B can produce either 5 units of rice or 4 units of wine. country B can produce either 10 units of rice or 8 units of wine. (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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P.8
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 Country A Country B 1 man-hour 2 man-hours 1 unit of Watches 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. B. C. D. toys ... watches ... 0.4 units of watches toys ... watches ... 2.5 units of watches watches ... toys ... 0.4 units of watches 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. C. D. has an absolute advantage in producing computers has a comparative disadvantage in producing cars 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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P.9
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. C. D. Country A has a comparative advantage in producing good Y Country A may benefit from exporting good X if the international exchange ratio is 1X = 1Y 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. C. D. The net gains from the trade of the trading partners will remain unchanged as long as trade countries Comparative advantages will disappear if the transportation costs are higher than the total gains from trade 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 2 AND 4 AND 1 Country B 3 According to the above table, Country A has a comparative advantage in producing Good __ because ___. A. B. C. D. Y ... with the same amount of resources, Country A can produce more Y than Country B Y ... Country A has a lower opportunity cost in producing 1 unit of Y than in producing 1 unit of X Y ... Country A's opportunity cost of producing 1 unit of Y is lower than Country B X ... Country A's opportunity cost of producing 1 unit of X is lower than that of Country B
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12.2 Terms of trade |
P.1
1. 1994/II/53 The following table shows the production of two goods in two countries: One unit of resources can produce Clocks (units) Toys (units) Country A 2 or 4 6 or 8 Country B 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. D. trade can still take place based on absolute advantage. 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 Xs 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. 1X=2Y B. 1X=3Y C. 2X=5Y D. All of the above are correct.
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12.2 Terms of trade |
P.2
6. 2003/II/45 Answer questions 6 and 7 by referring to the following table. Good X (units) Country A Country B 100 100 AND AND Good Y (units) 250 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 10 OR 30 Country B 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 Country A Country B 20 units 10 units 1 unit of Good Y 25 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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12.3 Balance of payments
P.1
1. 1990/II/36 Which of the following will have favorable effects on the current account of Hong Kongs 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 Kongs balance of payments B. pressure on Hong Kongs social services C. a slower increase in the real wage rate of Hong Kongs construction workers D. a favourable effect on Hong Kongs 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 Kongs balance of visible trade. C. has a favorable effect on Hong Kongs balance of payment. D. is taxable in Hong Kong. 5. 1991/II/50 The following table shows the balance of payments of a country: Exports $billion 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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P.2
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 C. Hong Kong s GDP
B. D.
Hong Kong s balance of payments 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 Londons stock market D. A Hong Kong citizen buying a house in the USA
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P.3
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 Kongs 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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P.4
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. Chans income is included in Hong Kongs GNP. B. The remittance has an unfavorable effect on Hong Kongs balance of visible trade . C. The remittance has a favorable effect on Hong Kongs balance of invisible trade. D. The remittance has favorable effect on Chinas balance of payments. 16. 1995/II/54 Consider the following balance of payments account of an economy : $million Export of good & services Import of good & services 2 800 3 200
Capital inflows Z Capital outflows 700 Increase in foreign exchange & gold reserves Z is A. 260 B. 340 C. 1 060 D.
40 1 140
17. 1995/II/56 If an American tourist gives money to local beggars, Hong Kongs 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 Kongs GDP. (3) Hong Kongs 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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P.5
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 Kongs balance of payments? A. B. C. D. An American firm buys some certificates of deposit issued by a bank in Hong Kong. An American firm donates money to a charitable organization in Hong Kong. A Hong Kong firm buys a hotel in Canada. 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. Visible exports Visible imports Invisible exports Invisible imports Inflow of capital $billion 15 13 8 11 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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P.6
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 Kongs balance of payments accounts? A. B. C. D. A Japanese firm buys shares on the Hong Kong Stock Exchange. A Hong Kong citizen buys tickets from Japanese airlines. A Hong Kong citizen remits money to his son in Japan. 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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P.7
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 Re-exports Import of goods Export of services Import of services 30 40 50 60 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. C. D. He remits a sum of money as the betrothal gifts through a bank to Mei-lings parents. He pays for the honeymoon trip to Thailand. 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 Kongs current account? A. The investment of a U.S. company in a Hong Kong computer firm B. C. D. Japanese cars sold in Hong Kong A drama performance attended by the tourists in Hong Kong The exports of China handled in the container port of Hong Kong
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P.8
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 Export of services Import of goods Import of services Capital inflows +28 +7 +35 +13 +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. D. in Year 2, the balance of payments deficit has increased. 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 Kongs 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. D. A U.S. investor purchases 5000 units of the Tracker Fund of Hong Kong. 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 Kongs current account? A. A foreigner buys shares issued by a local property developer. B. C. D. A foreigner receives rental income from his property in Hong Kong. A company in Hong Kong donates medical equipment to a hospital in Mainland China. A US manufacturer sets up a factory in Hong Kong.
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P.9
35. 2001/II/45 Hong Kongs Balance of Payments Account $ million Current Account Goods Service Factor income Current transfers Capital and Financial Account Net errors and omissions 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) 72000 -25 000 81 000 27 000 -11 000 -76 000 4 000 Total sum = 0
36. 2002/II/48 Which of the following should be included in the calculation of the balance of Hong Kongs 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. D. A Hong Kong resident purchases a house in the US. 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 Imports of goods Visible trade balance The re-exports (in $ billion) are A. 15 B. 25 20 50 -5 C. 30 D. 35
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P.10
38. 2003/II/48
According to the above diagram, from Year 4 to Year 6, A. the economy has suffered from visible trade deficit C. the value of total export of goods has decreased
B. the value of import of goods has increased 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 Kongs 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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HKCEE ECONOMICS |
P.11
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 C. export of services B. re-export of goods 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.
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P.12
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 C. invisible trade surplus 40 B. visible trade deficit 10 D. invisible trade deficit 15
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HKCEE ECONOMICS |
P.13
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 Kongs 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
226
HKCEE ECONOMICS |
12.4 Protectionism
P.1
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.
227
HKCEE ECONOMICS |
12.4 Protectionism
P.2
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 Kongs garment exports in the U.S. market as described above? A. D1 D2 D2 B. C. D1 D D2 10. 1999/II/49 Consider the trade between two countries, A and B. D1 S2 S1 D. S
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.
228
HKCEE ECONOMICS |
12.4 Protectionism
P.3
11. 2000/II/49 Suppose the US government decreases the quota for HK garments exported to the USA. 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.
This will lead to
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 C. fall increase B. rise be indeterminate D. fall be indeterminate
229
HKCEE ECONOMICS |
12.4 Protectionism
P.4
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
230
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12.5 Exchange rate |
P.1
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. B. C. D. It is determined by market forces If has been change several times by the government The linked rate system is used to stabilize the exchange rate of the Hong Kong dollar 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 Year 1990 1991 Exchange rates HK$576 = 10 000 Japanese yen HK$622 = 10 000 Japanese yen
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 Kongs 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.
231
HKCEE ECONOMICS |
P.2
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 Kongs trade with Canada if the exchange rate changes from C$1 = HK$5.7 to C$1 = HK$5? A. The volume of Hong Kongs exports to Canada will increase. B. The volume of Hong Kongs imports from Canada will increase. C. Hong Kongs imports from Canada will be more expensive. D. Hong Kongs expenditure in Hong Kong dollars on imports from Canada will increase. 10. 1998/II/49 Under the linked exchange rate system of Hong Kong, which of the following statements is true? A. The exchange rate of the HK dollar relative to Renminbi is fixed. B. The market exchange rate of the HK dollar relative to the US$ is fixed at US$1 = HK$7.8. C. The competitiveness of Hong Kong exports decreases when the US dollar appreciates against other currencies. D. Hong Kong will not have a balance of payments problem.
232
HKCEE ECONOMICS |
P.3
11. 1999/II/34 Banks in Hong Kong offered a high interest rate for HK$ 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 D. Australian dollar. 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 th 15 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)
233
HKCEE ECONOMICS |
P.4
15. 2005/II/49 Year X January May Exchange rates US$1 = 120 Japanese yen US$1 = 105 Japanese yen
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 Date 11 July 2007 14th November 2007
th
Exchange rates US$1 = 122 US$1 = 111
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)
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HKCEE ECONOMICS |
12.6 HKs international trade and its financial centres |
P.1
1. 1995/II/58
The above graph shows that in recent years, A. the value of Hong Kongs 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 Kongs 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
235
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 11. C 21. C 1.3 Goods 11. D 21. B 01. C 01. A 12. A 22. C 02. A 13. A 23. C 03. A
14. D 24. C
04. D
15. C
05. D 25. C
06. C
16. D
26. D
17. D
07. C
18. A
08. C
19. A
09. C
20. C
10. D
22. D
12. C
02. C
23. B
13. C
03. D
24. B
14. D
04. C
25. C
15. B
05. B
26. D
16. C
06. C
27. D
17. C
07. D
28. B
18. B
08. A
29. C
19. C
09. D
30. A
20. C
10. D
1.4 Three basic economic problems 11. D 01. B 02. D 12. B 13. C 03. C
14. B
04. D
15. C
05. C
16. A
06. C
17. C
07. D
08. C
18. D
19. D
09. D
20. B
10. C
2.1 Demand and Supply 11. A 21. A 31. B 41. B 01. B 02. D 12. C 22. C
03. D 13. A 23. A
04. C
14. A
05. A 25. A 15. B
06. C
51. C 71. C
42. D 62. C 52. B
32. D
43. D
33. C
61. D
53. D 73. B
44. C 64. B
34. C
24. D
16. A
07. C 27. B
72. D
63. D
54. C 74. D
45. D 65. D 75. A 55. B
35. B
46. A
36. D
26. D
17. D
08. A 28. A 18. B
19. C 39. A 59. C 29. B
09. D
10. C 30. A 20. B
37. C
66. A 76. B
56. C
47. C
38. C
77. B
67. C
57. D
58. D 68. B
48. A
49. D
69. C
60. B
50. A
40. B
70. A
2.2 Price elasticity of demand and supply 11. D 21. D 01. C 12. C 22. B 02. D 03. B 13. B 04. C 14. A
05. A
23. D
15. D
16. C
06. C
17. C
07. B
08. B
18. D
09. C
19. C
10. C
20. A
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
236
3.3 Quota 01. B
02. D
03. A
04. B
04. B
05. C
3.4 Unit tax 11. D 01. A
12. A
02. B
03. C
13. C
04. C 14. B
15. B
05. A
16. C
06. B
17. B
07. B
18. D
08. C
19. C
09. B
20. C
10. B
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 11. D 21. A 31. A 41. A 51. B 71. B 61. A 01. C 12. D 22. A 02. D
13. B
03. D 23. D
14. C 34. B
04. D 24. C 44. C
15. C
05. D 25. A
06. B
16. A
07. D 17. B 27. B
08. D 18. C 28. C
09. C 29. B
32. D 52. D 72. C 42. A
33. A 53. B
43. A
35. D 55. A 75. B
62. D
73. A
63. D
54. D 64. C 74. B
45. D
36. D 56. D 76. C 46. B
26. A
19. C
10. B
20. B
37. B
65. C
66. D
57. D 67. C
47. A
38. C 48. B
39. D 59. A
58. D 68. A
49. D 69. C
40. D 60. B 50. B
30. B
70. B
4.4 Short run and long run 11. D 21. A 01. C 12. B 02. B 13. B 03. D 23. B
22. D
14. C
04. C
24. A
15. C
05. C
25. D
16. C
06. B
26. D
27. D
17. C
07. D
08. B
18. D
09. A 19. B
10. A
20. C
5.1 Definition of a firm 01. B
5.2 Types of private enterprise 11. B 01. C 12. C 02. B 13. D 23. C 03. B
04. D 14. C 24. A
05. C
21. C
22. C
15. C
06. D 16. C 26. A
07. C
25. C
17. C
08. B
18. D
09. C
19. D
10. B
20. A
237
5.3 Comparing different types of private enterprise 11. B 01. C 12. D 22. B 02. C 13. A 03. B 14. D 24. B 04. D 15. D 05. A
21. A
23. D
25. C
16. B
06. C
17. C
07. C
18. C
08. C
19. C
09. B
20. D
10. C
5.4 Methods of raising capital and different types of shareholders 11. A 01. D 02. B 12. D 03. C 13. A 04. B 14. D 05. D 15. B 06. C 16. A
07. A 17. B
18. D
08. A
09. B
10. B
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 11. D 01. D 12. D 02. C
13. A
03. A
14. A
04. A
05. A
06. A
07. B
08. D
09. D
10. C
7.1 Market and competition 01. D 02. A 03. D
04. D
05. C
06. A
7.2 Types of market structure 11. B 01. B 12. B 02. C 13. B 03. C
14. D
04. A
15. A
05. D
16. C
06. C
17. B
07. C
18. D
08. D
19. C
09. D
10. 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 11. A 01. A 02. D 03. D 04. D
05. A
06. A
07. B
08. C
09. C
10. B
8.3 GDP Expenditure approach 11. B 01. A 12. D 02. A 13. B 03. C
04. D
05. C
06. C
07. C
08. C
09. B
10. B
8.4 GDP - Income approach 01. A 02. A 03. B
238
8.5 Whether an item is included in GDP 11. A 8.6 GNP 11. A 01. D 01. B 02. C 12. C 03. D 13. A 04. A 14. A
05. A
15. A
06. B
16. B
07. A 17. B
08. B
18. A
09. A
19. D
10. B
02. B
12. A
03. B
13. D
04. A
14. C
05. C
15. C
06. D
07. D
08. C
09. D
10. B
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 11. B 01. D 12. A 02. C 13. A 03. A 04. B 05. A
06. A
07. A
08. C
09. D
10. 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 11. A 01. A 12. A 02. D
03. A
13. A
04. D 14. A
05. A
15. D
06. D 16. A
07. D
08. D
09. D
10. C
9.2 Unemployment 11. C 21. C 01. A 12. D 02. D
13. B
03. C
14. A
04. A
15. B
05. D
16. A
06. B
17. B
07. B
18. B
08. A
19. C
09. A
20. C
10. A
9.3 Changes in the general price level 11. A 01. A 12. C 02. B 03. D 13. D 04. B 14. B
05. D 25. B 15. B
06. A
21. D 31. D
22. B
32. A
23. C
33. C
24. D 34. C
35. C
26. A
16. D
07. B
17. D 27. B
08. D 28. B
18. D
09. B
29. D
19. A
10. B
30. D
20. C
239
10.1 Nature and functions of money 11. C 01. A 12. B 02. C 13. D 03. D
21. D 31. A
22. D 32. B
23. D 33. C
24. C 34. B
14. A
04. C
25. C
15. B
05. A
16. C
06. A
35. D
26. A
17. C 27. B
07. B
28. B
18. C
08. D
29. C
19. B
09. C
30. B
20. D
10. C
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 11. B 01. C 12. A 02. C
21. A
22. D
13. D 23. A
03. A
14. B
04. C
24. A
15. C
05. A
16. B
06. C
17. B
07. A
18. D
08. A
19. A
09. A
20. A
10. B
10.5 Deposit creation 11. B 01. B 12. A 02. B
03. B
21. C 31. B
32. D
22. D
13. A
04. D 24. A
33. B
23. C
14. D
05. C
15. C
06. A 16. B 26. B
07. D 17. A 27. C
08. B
34. C
35. D
25. D
18. C
09. C 19. B 29. B
10. B
36. B
37. D
28. A
20. C
30. A
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 11. C 31. A 01. D 02. B 12. C 32. A 03. B 13. D 33. D
04. A 24. D 34. B 14. B
05. D 25. D 15. A
06. B
21. D
22. A
23. D
26. D
16. B
07. D 27. A 17. A
08. B
28. C
18. B
09. A 29. B
19. C
10. B
30. A
20. A
240
11.4 Economic effect on taxation 11. C 21. C 31. B 01. A 12. D 22. D 02. B 03. B 13. A 23. C
04. C 14. B 24. B
05. B
15. C 25. A
06. A 26. B
16. C
07. B
27. B
17. B
08. C 28. B 18. B
09. B
29. A
19. D
10. C 30. B
20. A
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 11. C 01. C 12. C 02. B
03. D 13. A
04. A
05. B
06. A
07. B
08. D
09. C
10. B
12.1 Absolute and comparative advantage 11. B 01. A 12. C 02. D 13. B 03. A 14. B 04. A
21. A 31. A
22. D 32. C
23. A
33. D
24. C
15. A 25. B
05. C
16. A
06. A
34. C
26. D
17. D 27. C
07. A
18. D 28. B
08. B
19. A
09. D
29. A
20. B
10. D
30. 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 11. D 21. B 31. A 41. A 01. B 02. B 12. B
03. A 13. B 23. C
22. D 32. C 42. C
14. A 34. B
04. C 24. D 44. C
15. D 25. C
05. D
16. D 36. A
06. C
33. A
43. D
35. D
26. D 46. C
17. C 37. B
07. C
27. C 47. B
18. D 28. C 38. C
08. A
19. C 39. B
09. B
29. A 49. C
20. A
10. B
45. D
48. A
40. D 50. B
30. A
12.4 Protectionism 11. B 01. D 12. B 02. A
13. C
03. B
14. C
04. B
05. B
15. D
06. B
16. B
07. D
08. D
09. A
10. D
12.5 Exchange rate 11. B 01. B 12. A 02. C
13. D
03. D
14. B
04. A
15. C
05. D
16. C
06. B
07. D 17. A
08. B
09. B
10. C
241
12.6 HKs international trade and its financial centres 01. D 02. D
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HKCEE Economics Multiple Choice

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HKCEE Economics Multiple Choice

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CONTENTS

HKCEE Economics Multiple Choices

SECTION 8 NATIONAL INCOME 8.1 Circular flow of income P.107-109

1.2 Choice and opportunity cost

(2) and (4)

(3) and (4)

1.2 Choice and opportunity cost

1.2 Choice and opportunity cost

1.2 Choice and opportunity cost

(2) and (3) only

1.2 Choice and opportunity cost

1. 1990/II/2 A free good is a good which A. nobody wants. C. is not scarce.

is provided by the government free of charge. is plentiful in supply.

B. is not an economic good D. cannot be used for further production

B. its price will increase. D. more of it is preferred.

B. more of it is preferred. D. it is limited in supply.

1.4 Three basic economic problems

(3) and (4) only

1.4 Three basic economic problems

(3) and (4) only

1.4 Three basic economic problems

1.4 Three basic economic problems

2.1 Demand and Supply

2.1 Demand and Supply

2.1 Demand and Supply

(1),(2) and (3)

2.1 Demand and Supply

2.1 Demand and Supply

(2) and (3) only

(3) and (4) only

(1), (2) and (3)

2.1 Demand and Supply

2.1 Demand and Supply

2.1 Demand and Supply

2.1 Demand and Supply

2.1 Demand and Supply

2.1 Demand and Supply

Quantity supplied (units)

49. 2002/II/7 Refer to the following diagram :

2.1 Demand and Supply

2.1 Demand and Supply

2.1 Demand and Supply

2.1 Demand and Supply

2.1 Demand and Supply

2.1 Demand and Supply

2.1 Demand and Supply

2.2 Price elasticity of demand and supply |

The elasticity of demand is unitary over the price range from A. $2 to $6 B. $2 to $8 C. $4 to $8 D.

(2) and (4) only

(3) and (4) only

2.2 Price elasticity of demand and supply |

The demand for good X is A. elastic B. unitary elastic

2.2 Price elasticity of demand and supply |

2.2 Price elasticity of demand and supply |

2.2 Price elasticity of demand and supply |

3.1 Price ceiling |

B. an effective price ceiling is imposed. D. the demand increase sharply.

(3) and (4) only

3.2 Price floor

Quantity Demanded (units) 8 12 16 20 24

Quantity Supplied (units) 20 18 16 14 12

3.2 Price floor

(1), (3) and (4) only