中六 試卷 (F6 Economics Past Paper)

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SUBJECT: Economics
DATE: 18th February, 2020
Instructions:
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.
TSUEN WAN PUBLIC HO CHUEN YIU MEMORIAL COLLEGE
MOCK EXAMINATION 2019-2020
TIME DURATION: 1 hour
Question Paper
All questions carry equal marks.
Answer ALL questions. You are advised to use an HB pencil mark all the answers on the
Answer Sheet so that wrong answers can be completely erased with a clean rubber. You must
mark the answers clearly; otherwise you will lose marks if the answers cannot be captured.
You should mark only ONE answer for each question. If you mark more than one answer, you will
receive NO MARKS for that question.
No marks will be deducted for wrong answers.
Write all the answers on the multiple choices answer sheet provided. Answers written on the
question paper will not be marked.
(32) The following table shows the balance sheet of an economy's banking system. The initial money
supply in the economy is $3,850 and the required reserve ratio is 20%.
Liabilities ($)
Suppose the public withdraw $200 cash from the banking system and all banks no longer hold any
excess reserves. Which of the following statements about the banking system is correct?
A. Loans would increase by $700.
B. The monetary base would decrease by $200.
C. The money supply would increase by $500.
Reserves would decrease by $300.
B. -2%... 3%
C. 0%... 3%
(33) Which of the following statements are INCORRECT?
(1) One of the major functions of a commercial bank is to accept deposits and make loans.
(2) One of the major functions of a merchant bank is to provide investment services.
(3) A commercial bank does not provide investment services.
(4) A merchant bank does not accept deposits and make loans.
A. (1) and (3) only
B. (2) and (4) only
C. (3) and (4) only
D. (1), (2), (3) and (4)
(34) Suppose the expected real interest rate is 2% and the expected inflation rate is 3%. If the actual
inflation rate turns out to be 2%, the nominal return of holding money is _______________ and the actual real
interest rate is
(35) Which of the following statements is INCORRECT?
A. Suppose there is an increase in the salaries tax rate. Other things being constant, the salaries tax
revenue will increase if the percentage fall in total salaries is smaller than the percentage rise in the
B. Suppose the salaries tax is a progressive tax. Other things being constant, if there is inflation, salaries
tax revenue will increase.
C. A salaries tax can be either a direct tax or an indirect tax.
D. A salaries tax can be regressive.
(36) Suppose an economy was in a state of long run equilibrium. Due to a continuous increase in wood
prices, the economy experiences cost-push inflation. Which of the following policies can help stabilise
prices in the short run?
(1) Raising direct taxes
(2) Cutting government expenditure
(3) Cutting indirect taxes
A. (1) and (2) only
B. (1) and (3) only
C. (2) and (3) only
D. All of the above
(37) Which of the following violates the prediction of the quantity theory of money?
A. A contractionary monetary policy can restore an overheated economy back to long run equilibrium.
B. An expansionary monetary policy is effective in raising employment when there is a deflationary gap.
C. If the central bank keeps increasing the monetary base, the general price level remains unchanged in
the long run.
D. The real output level grows in the long run due to an increase in factor endowment.
(38) Suppose an economy faces the problem of unemployment. If the central bank purchases government
bonds from the market, what are the possible effects of this measure?
(1) The asset demand for money will decrease.
(2) The money supply will increase.
(3) The nominal GDP will increase.
A. (1) and (2) only
B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3)
(39) The following shows an AS-AD diagram of an economy. The economy is now at short run
equilibrium Es.
At Es, the economy faces
A. an inflationary gap ... reducing the quota of imported workers
B. an inflationary gap ... raising the discount rate offered by the central bank
C. a deflationary gap ... reducing transfer payments
D. a deflationary gap... raising the required reserve ratio
(40) Which of the following statements about monetary policy is correct?
A. Monetary policy refers to the measure that is used to stabilise the general price level by adjusting the
monetary base.
B. Monetary policy affects aggregate demand as well as short run aggregate supply.
C. Monetary policy cannot change real GDP in the long run.
D. None of the above
(41) The following diagram shows the imposition of an import tariff on a good in a small open economy.
helps restore long run equilibrium EL.
Referring to the diagram, which of the following statements is correct after the imposition of an
import tariff (t)?
If Q3 = 100, total tariff that the government receives is $150.
B. The volume of imports drops by (Q4 - Q3) units.
The total revenue that domestic producers receive rises from ($12 x Q₁) to ($15 × Q₂).
D. The world price rises by $3.
(42) Which of the following descriptions about the balance of payments is correct?
A. If the balance of visible trade and the balance of invisible trade are greater than zero, there will be a
surplus in the current account.
B. If there is a deficit in the current account, the official reserves will increase.
C. A decrease in the official reserves implies a surplus in the balance of payments.
D. A deficit in the current account implies a surplus in the capital and financial account.
(43) Due to the political unrest in Hong Kong, several countries have issued travel alerts to warn their
citizens who intend to visit Hong Kong. Local firms also lack confidence about investing. Which of the
following statements about Hong Kong is correct?
(1) The invisible trade balance would decrease.
(2) Future productivity growth might decrease.
(3) Nominal GDP would decrease in the short run.
A. (1) and (2) only
(1) and (3) only
(2) and (3) only
(1), (2) and (3)
(44) The following table shows the amount of goods that can be produced with 1 unit of resources in
Australia and Thailand.
Suppose the original terms of trade is 1 unit of mangoes : 0.18 units of abalone. Now, the terms of trade
changes to 1 unit of mangoes : 0.13 units of abalone. The total gains from trading 10 units of mangoes for
the two countries will
A. increase by 0.5 units of abalone.
B. decrease by 0.5 units of abalone.
C. remain unchanged.
D. None of the above
(45) The following table shows the exchange rates of the renminbi (RMB) against the US dollar (USD) in
2015 and 2016.
USD 1= RMB 6
The change in the exchange rate between USD and RMB leads to
Exchange rate
USD 1= RMB 6.2
(1) an improvement in the US visible trade balance against China.
(2) an increase in the prices (in terms of Hong Kong dollars) of Hong Kong's imports from the
(3) an increase in the volume of Hong Kong's exports of services to the mainland.
A. (1) and (2) only
B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3)
End of Paper.
There are 45 questions in this paper. Choose the BEST answer for each question.
(1) Which of the following statements about a market-oriented economy is correct?
A. All resources are allocated by the price mechanism.
B. Most economic decisions are made by private individuals.
All public utilities are privately owned.
D. Income distribution is more uneven than that in a planned economy.
(2) Both Alex's father and grandfather are teachers. After Alex graduates from university, he decides to
follow his father and grandfather in his choice of career. What economic problem(s) is (are) involved in
A. What to produce
B. How to produce
C. For whom to produce
D. What and how to produce
(3) Susan is considering studying overseas. She has received offers from several universities and her
order of preference is as follows:
First preference
Second preference
Third preference
Which of the following MAY increase her opportunity cost of studying at a British university?
The British pound depreciates against the Hong Kong dollar..
Studying at a British university
Studying at an Australian university
Studying at a Swedish unive
B. The Swedish university grants Susan a scholarship if she studies at the university.
C. Some courses that Susan wants to take are not available at the Australian university.
The teaching quality at the British university is poorer than what Susan expects.
(4) Which of the following is/are (a) positive statement(s)?
(1) The imposition of a minimum wage (I) will widen the income gap (E).
(2) Labour unions (I) are important for workers in bargaining for better pay.
(3) It is unfair to low-skilled workers if a minimum wage is imposed in Hong Kong.
(4) More unskilled workers will lose their jobs if a minimum wage is imposed in Hong Kong.
(1) and (4)
B. (2) and (3)
C. (1), (2) and (3)
(1), (2) and (4)
(5) Stephy has dinner with her boyfriend and pays the bill. This is an example of
A. an externality because Stephy's boyfriend does not pay for his dinner.
B. a free good because Stephy's boyfriend can have his dinner for free.
C. a public good because Stephy shares her money with her boyfriend.
distributing output by prices because Stephy enjoys her dinner and pays the bill.
(6) Study the following table.
Units of output Total revenue ($) Marginal cost ($)
What is the profit-maximising output if the government imposes a unit tax of $2?
(7) Study the following information about Firm A and Firm B.
Number of owners
Based on the above table, we can conclude that
the maximum number of owners in Firm A must be smaller than that in Firm B.
B. Firm A pays a smaller amount of profits tax than Firm B.
C. Firm B may be a private limited company but Firm A must not be.
D. Firm B is required to disclose its financial accounts to the public but Firm A is not.
(8) Suppose a department store integrates with a logistics company. Which of the following is the main
motive of the department store?
A. To increase its market share
B. To gather consumers' information more easily
C. To reduce expenses in transactions
D. To ensure adequate market outlets
(9) Which of the following statements is correct?
A. Entrepreneurs must participate in all of the decision-making and management in their firms.
B. Labour productivity is affected by the method of wage payment.
C. Human resources such as labour and entrepreneurship can be accumulated.
D. Entrepreneurs may bear no risk.
(10) The following table shows the input and output information for Firm X. Assume that Firm X only
employs the following two factors of production.
Amount of machines
If the law of diminishing marginal returns applies to Firm X after the 14th worker is employed, the
average product of the 15th worker could be
D. indeterminate as information is insufficient.
(11) The following diagram shows the percentage share of total employment in two countries.
No. of workers
Percentage share of total employment
Primary production Secondary Tertiary production
production.
Total product (units)
Which of the following statements is correct?
A. More people are employed in secondary production in Country A than in Country B.
B. The value of production from tertiary production in Country A is smaller than that in Country B.
C. In Country A, most people are employed in primary production.
D. Both countries employ the same number of people.
(12) Eddie runs a fish ball shop. During the 'National Day Golden Week', the sales of Eddie's shop
increase sharply. To meet the increase in demand, Eddie employs more labour. Suppose the shop's
objective is to maximise profits, which of the following descriptions is correct?
A. The shop will eventually face economies of scale.
B. The shop will eventually face diseconomies of scale.
C. The shop is in the long run production period.
D. The shop's total cost will increase.
(13) DD' is the demand curve of flour. Which of the following reasons can best explain the change in the
equilibrium position of the flour market from A to B?
A. People have shifted their dietary habits from eating bread to eating salad.
B. Consumers expected the price of flour to increase.
C. The government has granted a per-unit subsidy to flour producers.
D. The wheat harvest has decreased due to bad weather.
A. more elastic than
B. as elastic as
C. less elastic than
D. Uncertain
(14) The supply of poems written by Shakespeare (tt) is
Works of Shakespeare' (AN).
the supply of the Complete
(15) Which of the following is correct?
A. Relative price will not exist when there is only one good in the world.
B. If the nominal price of Good A increases by $5, the relative price of Good B (in terms of Good A) will
decrease by $5.
C. Nominal price can still exist when money does not exist.
D. If the nominal prices of all goods increase by 100%, the relative prices of all goods will also increase
(16) The following diagram shows the market for private housing units. The initial equilibrium point is at
Suppose the market rent for private housing has been decreasing and the government has completed a
land reclamation project. The new equilibrium is most likely at
(17) Which of the following is INCORRECT?
A. Quantity transacted must be equal to quantity sold.
B. Quantity transacted must be equal to equilibrium quantity.
C. Quantity transacted must be equal to quantity bought.
D. Quantity transacted must be equal to either quantity supplied or quantity demanded or both.
(18) Refer to the following supply and demand schedules of Good X.
Unit price ($)
Quantity demanded (units)
Quantity supplied (units)
240 220 200 180
180 200 220 240 260 280 300
If the government wants to use a per-unit tax to fix the quantity transacted of Good X at 200 units, the
per-unit tax imposed on Good X will be
(19) In 2012, the government launched the Public Transport Fare Concession Scheme (
) for the elderly. They can travel on the MTR or a bus at a fixed fare of $2 per trip. Which of the
following statements are consistent with the prediction of the law of demand?
(1) The elderly will travel more frequently on public transport.
(2) More students and workers will travel on public transport.
(3) The average distance the elderly travel will increase.
A. (1) and (2) only
B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3)
(20) Kevin owns a restaurant which has a fixed production capacity and a long queue every day. However,
his restaurant has become less popular after mice were found there. Which of the following is correct?
A. Kevin should lower food prices to maximise his profits.
B. The employees of the restaurant suffer from negative externality.
C. The total sales revenue of the restaurant may remain the same if Kevin does not change the food
D. There must be excess supply for the food the restaurant provides.
(21) Although consumers know clearly that the unit price of Brand X batteries is higher than that of Brand
Y, some of them still buy Brand X batteries. Which of the following CANNOT explain this phenomenon?
A. Brand X batteries and Brand Y batteries are heterogeneous.
B. Consumers' information about prices is imperfect.
C. Some of the consumers believe that Brand X batteries are longer lasting.
D. Consumers buying Brand X batteries can participate in a lucky draw.
(22) Suppose the government lowers an effective price floor. Which of the following is true?
A. Total social surplus will decrease.
B. Sellers' total revenue will increase if the demand is elastic.
C. There will be excess demand.
D. Consumer surplus will decrease.
(23) The problem of externality can be solved by combining separate firms into one under the same
ownership because
A. the combined firm will enjoy economies of scale.
B. private costs become external costs.
C. the combined firm must be under public ownership and so it will be concerned about society.
D. the new firm will try to maximise the total gain from all activities under its control.
(24) The following table shows the data about an economy.
Growth rate
Population size
According to the information above,
A. real GDP increased in Period 2.
B. per capita real GDP increased in Period 1.
Nominal GDP
Price level
per capita nominal GDP decreased in Period 2.
deflation occurred in Period 2.
(25) Referring to the following data of a country:
Private consumption expenditure
Government consumption expenditure
Gross domestic fixed capital formation
Change in inventories
Exports of goods and services
Imports of goods and services
Net factor income from abroad
The GDP at market prices is
A. $5,600 million.
B. $5,900 million.
C. $6,000 million.
D. $6,400 million.
(26) If a government policy has no effect on the full employment output level,
A. it will shift the short run aggregate supply curve.
B. it will not shift the short run aggregate supply curve.
C. it will shift the long run aggregate supply curve.
D. it will not shift the long run aggregate supply curve.
(27) Which of the following is a demand-side factor but not a supply-side factor affecting real GDP?
A. The government introduces a general sales tax.
B. The government provides more employment services.
C. The government increases the old age allowance.
D. The government provides more sites for building container terminals.
(28) Refer to the following diagram.
Price level
If the equilibrium moves from Point X to Point Y, which of the following policies may have been adopted
by the government?
A. Cutting salaries tax and raising sales taxes
Aggregate output
B. Cutting profits tax and reducing the progressivity of the salaries tax
C. Cutting property taxes and indirect taxes imposed on sellers
D. Cutting sales taxes and raising the progressivity of the salaries tax
(29) Recently, the government of Country H has subsidised the electricity fee. As a result, the general
price level experiences a one-time-only decrease. Which of the following statements is correct?
A. There is deflation in Country H.
B. The transaction demand for money curve in Country H will shift rightwards.
C. The purchasing power of money increases.
D. None of the above
(30) Which of the following statements about the monetary base is INCORRECT?
A. The monetary base will not change during the money creation process.
B. An increase in the monetary base will increase the maximum possible amount of money supply in the
C. Cash leakage will not affect the value of the monetary base.
D. When there is no cash leakage, the monetary base is the same as reserves held by the banking system.
(31) Mary receives HK$100,000 in remuneration from a firm. She wants to save the entire amount as a
three-month time deposit at a financial institution in Hong Kong. Which of the following financial
institutions can accept her deposit?
(1) A licensed bank
(2) A restricted licence bank
(3) A deposit-taking company
A. (1) and (2) only
B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3)