Module 1: Hong Kong Economic Development Flashcards
What are some key indicators of economic performance?
Gross Domestic Product (GDP), Unemployment rate
What is GDP?
GDP measures the total monetary value (in $) of all finished goods and services produced within an economy in a year. It is a broad measurement of a nation’s overall economic activity, commonly used as an indicator of the economic health and standard of living of a country.
What are the main sectors that determine the increase and decrease of GDP?
Consumption demand from households, investment demand from firms for infrastructure, government demand for military or other government services, and foreign demand from tourist spendings.
Why is there per capita GDP and what is it?
Per capita GDP is calculated by dividing GDP by the number of people as to get a fairer comparison of relative performance of different countries with different population.
What is the use of unemployment rate, and how are people being classified to calculate it?
Unemployment rate can indirectly reflect the economic situation of a country. To calculate the unemployment rate, people who belong to the labour force are classified into employed population and unemployed population.
What are the characteristics of the labour force, employed population, and unemployed population?
Labour force of an economy is not equal to the whole population of that place. It includes those aged 15 or above and are available for work. Therefore, some groups of people aged 15 or above are still not a member of the labour force because they are considered unavailable for work (being full time students, housewives, retired persons etc). Anyone in the labour force must either be employed or unemployed; so employed population+unemployed population = labour force.
How do we classify someone as employed or unemployed, and thus how do we calculate the unemployment rate?
The employed population includes those who are aged 15 or above and are performing some work for wages or profit (employed or self-employed). The unemployed population includes all persons aged 15 or above who are available for and seeking work, but do not have a job or do not perform any work for payment of profit. The unemployment rate measures the percentage of labour force that is unemployed: unemployed population/labour force * 100%
How is employment rate related to unemployment rate?
Employment rate = 1- unemployment rate. If unemployment rate increases, employment rate decreases, which means they are negatively related.
What is business cycle?
Business cycle refers to the short term cyclical fluctuation of economic activities, which is basically defined in terms of period of recovery or recession. Recovery is evidenced by indicators like increasing GDP growth rate and decreasing unemployment rate, while recession if evidenced by indicators like decreasing GDP growth rate and increasing unemployment rate.
How can Hong Kong’s economic success be attributed to the maintenance of a free market economy?
Hong Kong is regarded as a free market economy with little government intervention, which promotes the free market and free trade. For example, sellers should be free to set the prices of their goods. People can also exchange goods and services freely at any quantity in the market.
How is Hong Kong’s economic and business relationship with the mainland?
Because of the proximity to the mainland, Hong Kong has a close relationship with the mainland. In recent years, the signing of the Closer Economic Partnership Agreement (CEPA) has further encouraged the economic integration of Hong Kong into the mainland. Mainland China is Hong Kong’s largest trading partner.
What do mainland China and Hong Kong have close contact in in terms of trading?
Flow of goods and services: Hong Kong imports a lot of food and consumer goods from the mainland. It also provides a wide range of financial services to firms from the mainland.
The flow of investment: Hong Kong is a major source of foreign direct investment in the mainland. In the past, Hong Kong mainly invested on the manufacturing sector, but it has more investment on real estate and infrastructure development recently. Hong Kong also serves as a major funding centre for the mainland; Chinese enterprises have participated actively in the finance development of Hong Kong.
The flow of people: the flow of people between Hong Kong and the mainland has increased sharply after 1997; the number of mainland visitors increased sharply with the introduction and extension of the Individual visit Scheme.
