Professional Documents
Culture Documents
1993 Macro
1993 Macro
Which of the following items should be excluded from GNP at market prices
in order to calculate disposable income?
[93.1]
(1)
indirect business taxes
(2)
income tax
(3)
retained earnings
(4)
transfer payments
(5)
subsidies
A.
(1), (2) and (3) only
B.
(1), (2) and (4) only
C.
(1), (3) and (5) only
D.
(2), (4) and (5) only
[93.2]
C
consumption
o
45
0
Y1
Y0 Y2
Disposable income
decreases.
5
There are three hypothetical economies. They have different sets of IS and LM
functions.
IS Function
LM Function
Economy A : Y = $1000 - 500r
Y = $400 + 500r
Economy B : Y = $1800 - 200r
Y = $500 + 500r
Economy C : y = $2400
y = $700 + 500R
Suppose the central banks of the three economies reduce the money supply by
the same amount. The national income will decrease most in
and least
in
.
[93.5]
A.
Economy A, Economy B
B.
Economy A, Economy C
C.
Economy B, Economy C
D.
Economy C, Economy A
=
=
=
=
=
$100 + 0.75Yd
$150 - 30r
$30
$0.2Y
$20
+ 0.1Y
C
I
G
T
M
:
:
:
:
:
consumption expenditure
investment expenditure
government expenditure
taxation
expenditure on imports
[93.6]
[93.7]
When the opportunity cost of two goods are equal between two countries, then
(1)
an absolute advantage may exist.
(2)
the absolute advantage will be the basis for trade.
(3)
no comparative advantage will exist.
(4)
the two countries will have equal gains from trade.
[93.8]
A.
(1) and (2) only
B.
(1) and (3) only
C.
(2) and (4) only
2
D.
9
AE=Y
AE
S
AE2
T
45
AE1
[93.9]
10
11
12
Suppose the value of imports of an open economy increases by ten cents for
every one dollar increase in income. If its marginal propensity to consume is
0.8 and the tax rate is 10% of income, an increase in national income of $100
will result in increase in consumption spending on domestic goods. [93.12]
A.
$62
B.
$64
C.
$72
D.
$91
13
Saving + imports
consumption + investmen
investment + exports
45 O
Income
[93.13]
AE
AE
C C = consumption
AE = aggregate expenditu
Y = national income
0
(1)
(2)
(3)
(4)
A.
B.
C.
D.
15
45O
Y1
Y2
Y3
[93.15]
16
17
18
Initially a bank has no excess reserves and the legal reserve ratio is 25%.
Now a customer adds to his demand deposit by depositing $100 in cash from
his pocket. The bank grants a loan equal to the resulting excess reserves.
What is the possible maximum amount of loans created by the whole banking
system?
[93.18]
A.
$75
B.
$100
C.
$300
D.
$400
19
20
If the timing, rate and duration of an inflation can be fully anticipated, which
of the following will occur?
[93.20]
A.
There will be no wealth redistributive effect.
B.
The inflation can be avoided.
C.
Transaction costs will increase.
D.
The real interest rate will equal the nominal interest rate.
21
If the assets and liabilities of four persons are listed as follows, who will gain
most from an unanticipated inflation?
[93.21]
Monetary Assets
Monetary Liabilities
Real Assets
Real Liabilities
A.
B.
C.
D.
Mr. A
$100
100
200
400
Mr. B
$100
50
250
300
Mr. C
$100
150
250
200
Mr. D
$100
200
220
100
Mr. A
Mr. B
Mr. C
Mr. D
22
23
24
Which of the following is an explanation for the shift in demand for the HK$
from DD to D1D1?
[93.24]
Price of HK$
(in terms of US$)
D1
A.
B.
C.
D.
D1
Quantity of HK$
25
26
27
The following are the items in the balance of payments account of a country.
Items
Imports
Exports
Interest receipt
Overseas investment by domestic companies
Foreign investment in the country
Fall in reserves
$ billion
500
300
30
65
30
50
The amount that the country has to borrow to balance the account is
A.
$85 billion.
B.
$155 billion.
C.
$185 billion.
D.
$255 billion.
[93.27]
28
[93.28]
29
If the sum of the real interest rate and the anticipated inflation rate is greater
than the nominal interest rate, which of the following will be FALSE? [93.29]
A.
Nobody likes to lend money to others.
B.
People want to borrow money for consumption.
C.
People want to make investments themselves.
D.
The anticipated inflation rate will fall.
30
[93.30]
SECTION B
93.1. The GDP figures (in HK$m.) for the last three years are as follows:
1989
499 157
254 434
1990
555 856
262 189
1991
633 023
272480
(a)
What are the GDP implicit price deflators for all three years? (1980 = 100).
Show your working.
(b)
What are the inflation rate as measured by the GDP deflators for 1990 and
1991? Show your working.
(8 marks)
93.2
Is the rate of unemployment necessarily equal to zero when GNP is at its full
employment level? Give two reasons to support your answer.
(8 marks)
93.3
Under the linked exchange rate system of Hong Kong, explain the exchange
rate arbitrage which keeps the market exchange rate of the Hong Kong dollar
approximately equal to the linked exchange rate.
(8 marks)
93.4
If the national income and the money supply of a country grow at 5% and 10%
a year respectively, what is the rate of inflation predicted by the Quantity
Theory of Money? Explain.
(8 marks)
93.5
93.6
Suppose that the linked rate of exchange is altered from US$1 = HK$7.02.
Assume also that the elasticities of demand for Hong Kongs exports and
imports are both greater than one. What will be the effect of this revaluation in
the near future on the inflation rate in Hong Kong?
(10 marks)
93.7
If the new airport project costs HK$170 billion over the next four years, and
the government decides to finance this expenditure entirely by taxation
without borrowing, will such a fiscal policy be expansionary, contractionary,
or neutral? Explain.
(10 markets)
93.8
Briefly explain three general methods whereby a Central Bank can control the
money supply. Can such methods be used in Hong Kong?
(10 marks)
93.9
Solution
SECTION A
1A
16 A
2B
17 B
18 C
3B
4B
5B
6C
7C
8B
9A
10 A
11 D
12 A
13 C
14 B
15 C
19 C
20 A
21 D
22 C
23 D
24 D
25 D
26 D
27 B
28 A
29 D
30 D
10