HKCEE ECON 2002 RRAMB FOR TEACHERS’ USE ONLY E Alternative answers are acceptable so long as they are well reasoned. Section A 1, Not free goods because 1 the resources used to produce them have alternative uses / there is @ cost to society of producing them / the quantity available is insufficient to satisfy all our wants for them / any appropriate explanation 2 Unit Price Quantity Indicate in the graph = supply curve shifts to the left 1 ~ demand curve shifts to the left 1 + correct indication of the increase in equilibrium price with the leftward shift ofthe supply curve > the leftward shift ofthe demand curve 1 ‘Verbal explanation ~ decrease in the supply of gasoline.” gasoline is an ol product) ~ gasoline and automobiles are complementary goods ~ .° decrease in the demand for gasoline the change in supply is greater than the change in demand 3 cin a, 100.000 100%500 144 000 120*800, = 2 units of output per man-hour 1 Firm B = 1.5 units of output per man-hour + different education / training + different capital + different technology + different management + different working conditions += any other relevant point [Mark the FIRST TWO points only,} 1@, max:2 4, The liability of an owner of a firm is confined to the amount of his investment in the firm. 2 2002-C1 CON 1-8a FRAEFER FOR TEACHERS’ USE ONLY | Alternative answers are acceptable so long as they are well reasoned. Marks ‘S. + many sellers / many buyers + differentiated products > easy entry / exit ~ imperfect information 1@, max :3 ~ price competition = non-price competition «any other relevant point (Mark the FIRST THREE points only.) 6 MI increased 1 by $90 000, 1 “the legal tender notes and coins held by the public increased. I M3 decreased 1 by $60 000, 1 this amount was no longer included in the cash in public circulation in HK or in the deposits with the monetary sector of HK. 1 (Remark: Mere mentioning of the definition of MI and/or M3 — NO marks] 7. = to issue currency + to act as the banker of the government ~ toact as an advisor to the government ~ to supervise / monitor the monetary sector, e.g. private banks ~ to act as the lender of last resort ' . = toadminister the clearing house @, mm = to carry out the monetary policy ~ to manage the country’s foreign exchange reserve + any other relevant point (Mark the FIRST TWO points only.] 8. (Equality -) The tax payments should be in proportion to the taxpayers” income. (Certainty -) The tax obligation (e.g, the time of payment, the manner of payment and the tax amount) of the taxpayers should be stated with certainty and not be arbitrarily interpreted or changed by the government. 2@, max: 4 (Convenience -) The time and methods of the tax payment should be convenient tothe taxpayers. (Economy -) The administrative costs of tax collection should be as small as possible relative to its yield [Mark the FIRST TWO points only.] 9. (a) We cannot because 1 the amount of resources of both countries are not given. (b)_ Yes, we can because 1 In Country A, the cost of 1 unit of toys is 5/15 = 1/3 units of computers 1 In Country B, the cost of 1 unit of toys is 5/10 = 1/2 units of computers. 1 Country A has a lower cost in producing toys. Il Effective communication for Section A max: 2 Total : 40 2002-CE-ECON 1-9 ORR 2h 6m 30 AG FOR TEACHEDO Hier AMVRRAGE FOR TEACHERS’ USE ONLY ‘Alternative answers are acceptable so long as they are well reasoned. Section B Marks 10. (a) (i) The required reserve ratio= (20/100) = 1/5 or multiplier = 5 1 ‘max. amount of deposits created = $10 m x § = $50 m 1 ‘max. amount of money supply created = max. amount of deposits created - decrease in cash in public circulation 4 ($50m- $10m) = $40 m 2 i) ~ there is cash leakage - the banks decide to hold excess reserves 2@, max 4 = insufficient demand for loans [Mark the FIRST TWO points only.] Md Unit Price Indicate in the graph + demand curve shifts to the right 1 > price t and quantity transacted 1 + change in total expenditure Verbal explanation ~ increase in demand (°." lower cost) ' = price f and quantity transacted { 1 + total expenditure increases ' (©) The cost of depositing money with one bank is the deposit interest that can be eared from other banks. A to deposit money into those large (small) banks has a higher (lower) cost, 1 ". there will be a flow of deposits from those large banks to those small banks. ' [Remark : Mere mentioning of the definition of cost without other elaboration - NO marks] (@) Included in HK’s GDP 1 Bank A is a resident producing unit of HK. 1 Excluded from HK's GNP" 1 Tom is not a resident of HK / Tom's salary is an income to abroad I Effective communication max :2 2002-CE-BCON 1-10ARRAS FOR TEACHERS’ USE ONLY z Alternative answers are acceptable so long as they are well reasoned. Marks 11. @ (i) $(400+ 180+ 150+ 250 +500 ~ 650) m 2 =$830m 1 (i) Possible reasons for consumers spending greater than $400m : consumers spend money on secondhand goods : e.g, secondhand cars = there are unreported transactions : €g,, illegal goods = consumers spend money on goods which are classified as items of investment | | — ‘expenditure, but not items included in that $400m, in the calculation of GDP : eg, | 2@ max:6 ‘consumers buy new houses for their own consumption use = consumers’ down payments for goods produced in future years any other relevant point [Mark the FIRST THREE points only.) ) Unit Price s Quantity tuition fee level P> equilibrium price 1 = rightward shift of the demand curve 1 =D, Dy shifts toD, D, oF to the right of D,D, 1 = increase in total revenue = 1 ‘Verbal explanation > demand increases i ~ quantity transacted f (and total revenue increases) 1 excess supply decreases fiom Q,Q,_to zero 1 (©) No because 1 they are not generally accepted as a medium of exchange. 1 Not generally accepted because they cannot be used to buy other goods and services. 1 (@) ~ tomake use of brand name - to diversify the business + to promote its goodwill 1@, max :4 + to better utilize its resources / to enjoy economies of scale + any other relevant point [Mark the FIRST FOUR points only.) Effective communication max :2 Total : 25 2002-CE-ECON 1-11 NS th om ta ne EAD TEARUEDE Her nanRRABE FOR TEACHERS’ USE ONLY Alternative answers are acceptable so long as they are well reasoned. Marks 12. (@) () The HKS depreciates against the British Pound because 1 the USS depreciates against the British Pound. 1 () Unit Price Indicate inthe graph : + selling price t and quantity demanded } 1 = gain > loss 2 ‘erbal explanation : ~ selling price increases (due to the depreciation of the HK$ against the British Pound) = quantity demanded decreases. = Yo change in Q< % change in P (due to inelastic demand) =<, total revenue increases (©) (Advantage : = to maintain ateam of staff + lower cost of measuring the contribution of the workers any other relevant point 2G max [Mark the FIRST point only: Disadvantage : = lower working incentive = hhigher supervising cost 2@, max + any other relevant point [Mark the FIRST point only.] Gil) Not necessary because 1 if the general price level falls at a higher rate than (at the same rate as) the wage cut, 4 their real income would increase instead (remain unchanged). [Remark : Mere mentioning of ‘general price level / purchasing power of money * max. I mark] (©) @ Rates is an indirect tax because 1 the tax burden can be shifted by the landlord onto the tenants 1 (i) The profits tax isa proportional tax because 1 its effective tax rate is constant / the tax amount isa fixed portion ofthe taxable income. 2 Effective communication __mx:2 ‘Total: 25 2002-CE-ECON 1-12 RRAMASH FOR TEACHERS’ USE ONLY