2023-DSE Please stick the barcode label here.

ECON
PAPER 2

W. Leung Candidate Number

Mock Examination 2023 (Macro Part)

ECONOMICS PAPER 2
Question-Answer Book

This paper must be answered in English

(1 hour 15 minutes)

INSTRUCTIONS

(1) After the announcement of the start of the examination, you

should first write your Candidate Number in the space
provided on Page 1 and stick barcode labels in the spaces
provided in Pages 1, 3, 5 and 7.

(2) Write your answers in the spaces provided in this Question-

Answer Book. Do not write in the margins. Answers
written in the margins will not be marked.

(3) Supplementary answer sheets will be supplied on request.

Write your candidate number, mark the question number box
and stick a barcode label on each sheet, and fasten them with
string INSIDE this book.

(4) No extra time will be given to candidates for sticking on the

barcode labels or filling in the question number boxes after the
‘Time is up’ announcement.

W. Leung-2022-DSE-ECON 2-1 1
 Section A (52 marks)

1.
Racial Diversity Employment Programme (RDEP), launched by the Labour Department, aims at engaging
unemployed ethnic minority job seekers in full-time or part-time long-term positions. This Programme enables job
seekers to enter the mainstream labour market and acquire essential job-specific skills to enhance their employability.

Explain how the RDEP can improve equity in Hong Kong. (4 marks)
Answers written in the margins will not be marked.

Answers written in the margins will not be marked.

2. Give TWO reasons to explain why the private consumption expenditure in GDP is usually smaller than the total spending
of consumers of the economy in the same year. (4 marks)

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W. Leung-2022-DSE-ECON 2-2 2
 Please stick the barcode label here.

3. Country X faces the problem of unemployment.

Figure 1
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Answers written in the margins will not be marked.

(a) How is employment level related to aggregate output? Explain. (2 marks)

(b) Country Y is a trading partner of Country X. Suppose asset prices fell drastically in Country Y. How would
this affect the unemployment in Country X? Explain with the aid of Figure 1. (7 marks)

Answers written in the margins will not be marked.

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 4. Study Table 1 and answer the following question.

Table 1: Change in composite consumer price index (CCPI)

Year 2021 Year 2022
+4% +2%

On 1 January 2022, Siu Keung lent a sum of money to Kitman at 5% interest rate per annum. On 31 December 2022,
Kitman repaid the sum plus the interest to him. With reference to Table 1, explain under what condition would Siu
Keung gain. (3 marks)
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5. Under what condition would an increase in salaries tax allowance increase salaries tax revenue? Explain. (4 marks)

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W. Leung-2022-DSE-ECON 2-4 4
 Please stick the barcode label here.

6. Suppose the government in country F decides to reduce unemployment by lowering the discount rate.

(a) How would the adjustment of discount rate affect

(i) the monetary base? (2 marks)

(ii) the money supply ? (4 marks)

(c) Suggest ONE fiscal policy that could lower the interest rate. Briefly explain how it works. (2 marks)
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Answers written in the margins will not be marked.

Answers written in the margins will not be marked.

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 7. While Country A uses half of its resources in producing food and half in producing cars, Country B uses one-third of its
resources in producing food and two-thirds in producing cars. Their total output in a year is shown below.

Food (units) Cars (units)

Country A 100 50
Country B 100 100

(a) Explain whether we can conclude from the above table that Country A has

(i) an absolute advantage in producing cars.

(ii) a comparative advantage in producing cars. (5 marks)

(b) “Trade may take place between country A and country B as long as the transportation cost is low enough.” Do
you agree? Explain. (2 marks)
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 Please stick the barcode label here.

8. A country’s currency depreciates against its trading partners’ currencies. As a result, the total export value of this
country (in terms of domestic currency) increases. Can we therefore conclude that the demand for the country’s export
is elastic? Explain with the aid of Figure 2. (7 marks)

Price (in terms of Figure 2

domestic currency)
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Answers written in the margins will not be marked.

D
Quantity of export

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 9. The following is a news extract about the relaxation of border restrictions in Hong Kong.

Inbound travellers from overseas places or Taiwan arriving at the Hong Kong International Airport are no longer
required to be vaccinated or undergo hotel quarantine. Hong Kong has also relaxed its vaccination rules to allow
visitors to get the mRNA Covid-19 vaccine free-of-charge.

Based on the above news extract, anlayze the effect of the relaxation of border restrctions on the following:

 Hong Kong’s balance of payments

 The budget position of Hong Kong government (6 marks)
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Answers written in the margins will not be marked.

END OF PAPER

W. Leung-2022-DSE-ECON 2-8 8