Final Examination (2022-23) 4.

4. The following shows a job advertisement from a home for the elderly for recruiting local care
Economics II workers.
Form 5A-E Name: ___________________( ) Care Workers Wanted!
Time Allowed: 1 hour 30 mins Class: F. 5____
48 hours per week Requirements:
Paper Total: 90
High salary: Over $20,000 per month Primary education
Instructions Training provided Cantonese proficiency

This paper consists of TWO sections, A and B. Section A contains six questions. The whole section (a) From the viewpoint of the employer, state TWO reasons why it is common to use the
carries 40 marks. Section B contains three questions. The whole section carries 50 marks. above wage payment arrangements for care workers. (2 marks)
Answer ALL questions in the answer book provided. Do not write in the margins. Answers written (b) Based on the above information, explain with TWO reasons why the supply of care
in the margins will not be marked. Supplementary answer sheets will be supplied on request. workers is elastic. (4 marks)
Write your name, class and class number on each sheet and insert them INSIDE the answer book.
5. Suppose an economy is now in recession.
Section A (40 marks)
(a) List THREE phenomena that can be observed during a recession. (3 marks)
1. Refer to the following information on the government website:
(b) To boost the economy, the government plans to decrease the profit tax.
Community Vaccination Centres will offer free seasonal influenza vaccination to Discuss its effect on the aggregate output in the short run. (3 marks)
Hong Kong residents aged 50 or above when they are there for Covid-19 vaccinations
starting from October 2022. 6. Study the following data.

(a) Explain whether the above vaccination service is a free good. (3 marks) 2017 2018 2019
GDP Deflator 109 123 135
(b) Provide ONE economic reason for the government of allowing residents to receive
both vaccinations at the same time. Explain. (2 marks) (a) Assume the price index at the base year is 100. Refer to the above information, calculate
the inflation rate in 2018 and 2019 respectively. How did the general price level change
2. Mong Kok Flower Market comprises a large number of flower shops that offer blossoms, house in 2019? Show your workings. (3 marks)
plants, fresh flowers and garden supplies.

(a) A ready-made bouquet with same size, types of flowers and packing have slightly (b) (i) Suppose the change in general price level is unexpected. If Mr Fung deposits
different prices in different stores at the Flower Market. Explain with TWO reasons $100,000 into the bank for half a year and receives fixed interest, will he gain or
why there is such a price difference. (4 marks) lose? Explain. (3 marks)

(b) Using the concepts of opportunity cost and labour mobility, explain why the (ii) Which financial institutions in Hong Kong can accept his deposit? (2 marks)
turnover rate of flower shop salespersons is higher than that of doctors. (3 marks)

3. Suppose the Chinese government imposes a unit tax on luxury cars. It is given that the supply (c) An increase in the Consumer Price Index would likely overstate the increase in the cost of
of luxury cars is inelastic. living. Explain with ONE reason. (1 mark)

With the aid of a well-labelled diagram, explain which party, consumers or producers, will END OF SECTION A
suffer more from the imposition of tax. (7 marks)

Final Examination 2022-23 F.5 Economics II Page 1 of 5 Final Examination 2022-23 F.5 Economics II Page 2 of 5
Section B (50 marks) (ii) Give ONE example of a fixed cost and ONE example of a variable cost for a
restaurant. (2 marks)
7. ‘Scheme $6,000’ of the Hong Kong government gives $6,000 to every person aged 18 or above
who hold a Hong Kong Permanent Identity Card.
(iii) Suppose a tourist spent $2,000 on seafood in a restaurant in Hong Kong. Explain
(a) (i) What is fiscal policy? (2 marks) whether the $2,000 would be in Hong Kong’s income inflow from abroad and
Hong Kong’s GDP. (4 marks)

(ii) Explain whether this measure is an expansionary or contractionary fiscal policy.

(c) Statutory Minimum Wage (SMW) has come into force since 1 May 2011. With effect
(3 marks)
from 1 May 2023, the SMW rate is raised to $40 per hour.
Suppose the cash subsidy is transferred through their savings accounts at licensed banks.
(i) Which type of wage payment method does the law refer to? (1 mark)
(b) What will be the immediate effects on M1 and M2? (4 marks)
(ii) State ONE advantage and ONE disadvantage to use this type of payment method
(c) With the aid of a well-labelled AD-AS diagram, explain how the cash subsidy will affect from the viewpoint of employees. (2 marks)
the price level and the output level of the economy in the short run. (6 marks)
9. The financial situation of the Hong Kong SAR Government is an important topic that is often a
(d) Suppose the output effect is not as large as what the government expected. Give TWO matter of discussion.
possible reasons to explain this phenomenon. (2 marks)
Source A: An extract of the news reports on the 2021-22 Budget
(e) Some people argue that such a subsidy will lead to inflation in Hong Kong. The Financial Secretary announced the 2021-22 Budget on 24 February 2021.
Do you agree? (3 marks) The budget stated that the estimated total government revenue is $626.2 billion, while
the estimated total expenditure is $727.8 billion.
(f) The Public Transport Fare Concession Scheme for the Elderly (the $2 Scheme) allows
Hong Kong residents aged above 60 who use the JoyYou Card to ride for $2 per journey Source B: Hong Kong’s gross domestic product and government direct tax revenue
for public transport, including MTR services.
HK$ billion HK$ billion
(i) Explain ONE function of money that the JoyYou Cards does not perform. 250 3,000
(2 marks) Direct tax revenue
(left axis)
(ii) Explain how the $2 Scheme would affect the average length of MTR journeys of 2,500
200 Nominal GDP
eligible passengers. (4 marks) (right axis)
2,000
150
8. The tourism industry in Hong Kong has gone through several difficult years due to the outbreak 1,500
of Covid-19. Both inbound and outbound tourism has decreased.
100
1,000
(a) Explain, with ONE example, how outbound tourism might contribute to Hong Kong’s
GDP. (2 marks) 50
500

(b) Many retail shops and restaurants have suffered losses because of the decline in the
number of tourists as well as local customers.

(i) In 2021, the value of total retail sales in Hong Kong was more than HK$300,000
million. Explain, with TWO possible reasons, why the contribution of the retail
sector to Hong Kong’s GDP may be less than HK$300,000 million. (4 marks)

Final Examination 2022-23 F.5 Economics II Page 3 of 5 Final Examination 2022-23 F.5 Economics II Page 4 of 5
 Source C: The measures announced by the government under the fifth round of the
Anti-epidemic Fund
In response to the epidemic, the government has decided to launch the fifth round of
the Anti-epidemic Fund by providing subsidies to premises and individuals directly
affected by the tightening of social distancing measures and industries which have not
seen any business revival since the onset of the pandemic. A total subsidy amount of
$3,570 million is involved.

Suppose there are TWO policy proposals to lessen the Hong Kong government’s fiscal deficit
problem:
Proposal I Raising the standard rate of salaries tax
Reducing the amount of allowance under the Comprehensive
Proposal II
Security Assistance Scheme (CSSA)

For answering this question, students are required to present their answers in essay form.
Criteria for marking will include the use of sources and economic theories, relevant content,
logical presentation and clarity of expression.

With reference to the above sources and your own knowledge in Economics, discuss which
proposal, proposal I or II, the following stakeholders would prefer:

 Councillors who are concerned about the labour supply in Hong Kong
 Merchants whose customer base consists mainly of households receiving a social
security allowance
 Government economists who are concerned about government revenue and/or
expenditure

(Hint: You may discuss the reasons why a stakeholder would prefer a certain proposal OR why
that stakeholder would not prefer the other proposal.) (9 marks)

END OF SECTION B
END OF PAPER

Final Examination 2022-23 F.5 Economics II Page 5 of 5