Professional Documents
Culture Documents
ECONOMICS PAPER 1
Time allowed: 1 hour
INSTRUCTIONS
1. When told to open this book, you should check that all the questions are there. Look for
the words ‘END OF PAPER’ after the last question.
4. You should mark only ONE answer for each question. If you mark more than one answer,
you will receive NO MARKS for that question.
2. There is a presidential election in the United Space. The following is John’s order of
preference for the candidates:
10. Which of the following is the closest example of oligopoly in Hong Kong?
A. Fashion retailing market
B. Water supply market
C. Supermarket industry
D. Stock market
11. More people are using glass noodles (粉絲) to replace shark fins at banquets. On the other
hand, the number of sharks has been decreasing sharply. Which of the following diagrams
can best represent the effect of the above situations?
D1
D
D2
0 Quantity 0 Quantity
D1
D
D2
0 Quantity 0 Quantity
13. If the price of Newspaper X increases from $5 to $6, daily sales of Newspaper X decrease
from 2,000 copies to 1,000 copies. Which of the following can best explain the above
phenomenon?
A. Many free newspapers are available in the region.
B. People in the region spend little of their income on Newspaper X.
C. Newspaper X has lots of interesting, exclusive news items.
D. Readers of Newspaper X get used to reading it every day.
14. Which of the following would increase the price elasticity of supply of Good X?
A. Workers need a licence before working in the industry that produces Good X.
B. Legislation on maximum working hours takes effect.
C. Producers of Good X purchase new machines to increase their production capacity.
D. Producers of Good X have reached their production limits.
16. Which of the following would most likely increase the producer surplus of soft drink
producers?
A. More people decide to reduce their consumption of soft drinks in order to stay
healthy.
B. The government regulates the maximum quantity of soft drinks to be produced.
C. The prices of coffee and tea decrease.
D. The price of tin cans for soft drinks decreases greatly.
20. Which of the following can reduce income inequality by equalising opportunities?
A. Providing 12-year free education
B. Providing unemployment benefits
C. Removing the competition policy
D. Removing the minimum wage policy
TV Sets China’s
Electronic Electronic ($8,000) households
circuits circuits
US ($1,000) China’s ($3,000) China’s
exporter importer factory
TV Sets
TV Sets ($15,000)
China’s US
($9,000)
exporter importer
23. Country A’s per capita nominal GDP, per capita real GDP, and population increase by 5%,
3%, and 7%, respectively. We can conclude that the real GDP ____________, while the
price level _____________.
A. increases; increases
B. increases; decreases
C. decreases; increases
D. decreases; decreases
25. Which of the following would a producer most likely do now if he thinks inflation will
occur?
27. Country A has had an increase in aggregate output and a decrease in the price level in the
short run. Which of the following can account for this?
A. The required reserve ratio has been lowered.
B. The income tax rate has been increased.
C. Oil prices have increased.
D. There has been technological advances.
28. Both real GDP growth rates and price levels have been increasing. The country is most
likely in the ______________ phase of the business cycle.
A. trough
B. recovery
C. peak
D. recession
29. Massive tax evasion has taken place in Greece for several years because of its poor tax
collection system. The government needs to put great effort into collecting taxes. Which
of the following principles of taxation is the Greek tax system most likely violating?
A. Equity principle
B. Certainty principle
C. Convenience principle
D. Economy principle
30. Which of the following about the linked exchange rate system in Hong Kong is correct?
A. The market exchange rate is fixed at US$1 to HK$7.8.
B. All licensed banks can buy Certificates of Indebtedness from the Exchange Fund.
C. Hong Kong dollars are fully backed by US dollars.
D. Market exchange rates for the Hong Kong dollar against currencies other than the US
dollar are fixed.
The banking system has an excess reserve of $200. Suppose a client withdraws $150 from
the banking system and remits the money overseas, after which the banking system loans
out all its excess reserves. If the public does not hold any cash, money supply will
___________.
A. increase by $50
B. increase by $250
C. decrease by $50
D. decrease by $250
32. Increasing taxes and government expenditure by the same amount is __________,
because_______________.
A. expansionary; government expenditure has a greater effect on GDP than private
consumption
B. expansionary; people save some of their income
C. contractionary; both measures will discourage people from working
D. contractionary; the contractionary effect of increasing taxes is greater than the
expansionary effect of increasing government expenditure
33. Which of the following problems will NOT exist in a barter economy?
A. Difficult to find a trading partner
B. Difficult to set a uniform exchange ratio between two types of goods
C. Inflation
D. High transport costs for transactions
34. Ms Wong withdraws HK$500,000 from her deposit account at a restricted licence bank.
She converts half of the amount into Euros and remits it overseas, and keeps the
remaining amount at home.
What is the immediate effect of the above actions?
A. M1 remains unchanged.
B. M2 increases by $250,000.
C. M3 remains unchanged.
D. M3 decreases by $500,000.
36. Which of the following statements about the quantity theory of money is correct?
A. It assumes that the price level is constant in the long run.
B. It is an identity.
C. It predicts that money is neutral in the long run.
D. It assumes that real GDP is constant in the short run.
37. The following table shows the amounts of Good X or Good Y that Country A and Country
B can produce with one unit of resources.
38. Which of the following CANNOT be an effect of imposing a quota on imported goods?
A. The consumption level increases.
B. The quality of imported goods improves.
C. Domestic production of goods increases.
D. The quantity of imported goods decreases
40. Which of the following will be recorded in the current transfers account?
A. Service fees that a local broker receives from a foreigner for a stock transaction
B. The value of imported food
C. The value of local stocks that foreigners purchase
D. Donations to a foreign country to aid the victims of a natural disaster
END OF PAPER