price level, business cycle, unemplyment, tax

Question 1

what is tax base

Answer 1

more/less ppl fall into the tax net

Question 2

why indirect tax stable than income tax

Answer 2

fluctuation in consumption is smaller than that of income

indirect revenue would fall less

Question 3

is tips earned subject to taxation

Answer 3

yes

for salaries tax

Question 4

causes of inflation

Answer 4

continuous increase in aggregate demand
continuous increase in the money supply
continuous increase in costs of production
price of imports of an importing-country continuously increase

Question 5

why the increase in CPI would likely overstate the increase in the cost of living?

Answer 5

Quality of goods may increase due to technological advancements
people can find lower-price substitutes which also fulfill their needs

Question 6

effect of recession

Answer 6

Falling or even negative real GDP growth
falling inflation or even deflation
falling business confidence, level of investment, consumption

Question 7

why real income may fall even when nominal income increases

Answer 7

the real income of workers would fall if the percentage increases in price level are greater than the percentage increase in nominal wage.

Question 8

what is the opportunity cost of holding cash instead of ibonds

Answer 8

the nominal return of the ibonds

Question 9

how ibonds would relieve the effect of inflation

Answer 9

the ibonds help preserve the purchasing power of the invested sum of money because the interest return of ibonds will increase at the same rate as actual inflation

Question 10

quantity theory of money

standard answer

Answer 10

QTM: MV=PY
where 
M= money stock
V= velocity of circulation of money
P= general price level
Y= real output
assuming V constant
An increase in M leads to an increase in P by the same percentage when Y is constant

Question 11

Evaluate thorugh increasing salary tax to reduce budget deficit

Answer 11

+ve
If the increase in tax revenue due to the rise in tax rate outweigh the reduction in tax payment due to the reduction in the tax base( a fall in the number of tax payers as a result of disincentive effects to labour.

-ve
if the increase in tax revenue due to the rise in tax rate falls short of the reduction in tax payment due to the reduction in the tax base( a fall taxable income as a result of reduction in aggregate output)

Question 12

is progressive tax consistent with the equity/equality prinicple

Answer 12

No (2018q6b!!!!!)
‘The new tax is no longer proportional, meaning that it is inconsistent with the equality principle’.

Dont fucking trust james
除非講緊standard tax rate of salary tax

Question 13

why can the introduction of a general sales tax stabilise government revenue in times if economic downturn

Answer 13

Fluctuation in consumption is smaller than that of income.
Sales revenue generated from consumption would fall less than income tax revenue generated from income, thus stabilizing total government revenue, during economic downturn

Question 14

explain the difference between using CPI and GDP deflator to measure the change in the price level

Answer 14

Coverage of goods
CPI includes products generally purchased by domestic households while GDP deflator includes products related to GDP

weights
CPI has fixed weight and need to be adjusted regularly while GDP deflator has variable weight.

Question 15

effect of recovery

Answer 15

rising real GDP growth rate
rising inflation
rising levels of investment/consumption
reduction in unemployment rate

Question 16

how can the tax base be widened

Answer 16

more people or commodities fall into the tax bracket

Question 17

why the unemployment rate can still remain unchanged despite an increase in the employed population

Answer 17

both the labour force and the unemployed population increased at the same percentage

Question 18

how a depreciation of Hong Kong dollar might lead to a higher inflation rate in Hong Kong

Answer 18

import price increase
hong Kong relies a lot on imported goods
cost of production materials increase
price of locally produced goods thus increased
and
price of imported consumer goods increase
so general price level increase contiunously

Question 19

give one example of government revenue other than tax

Answer 19

land premium

investment income

Question 20

why the government revenue from direct taxes is unstable

Answer 20

Direct tax vary with income

When economic conditions change, income will change and thus direct tax revenue will change also

Question 21

why general sales tax can widen the tax base

Answer 21

most goods and services are untaxed before the introduction of the general sales tax but will be subjected to tax under the general sales tax

Question 22

give two economic reasons for the government to levy tax on gasoline

Answer 22

reallocate resources so that the public can use more public transport but less private transport

a source of tax revenue

Question 23

how the economic depression will affect the ratio of direct to indirect tax revenue in this economy

Answer 23

the effect is uncertain
direct tax revenue decrease when employment, wages, profits, transactions of property decrease

indirect tax revenue decrease as revenue from the stamp duties and rate will decrease

Question 24

why the government should not adopt the capital gain tax

資產增值稅

Answer 24

high administrative cost
against the freedom to buy and sell
not fair if only apply to the property market
against simple taxation principle

Question 25

explain the effect of general sales tax on income distribution

Answer 25

Same amount of tax for the same good paid by people with different income the low income group pay a larger portion of their income than the high income group on the general sales tax so it will lead to a more uneven income distribution

Question 26

why total salaries tax revenue will increase when there is inflation

Answer 26

nominal income increase | more people are put into the tax net

Question 27

how a refund of salaries tax affect the wealth gap

Answer 27

there will be a widen wealth gap High income taxpayers were rebated a larger amount of money than low income tax payers The government rebated money to the taxpayers but no money to the poor who were non taxpayers

Question 28

suggest some government measures to obtain enough capital to build a new infrastructure and state the disadvantage of each of them

Answer 28

raise direct tax it will decrease work incentive raise indirect tax more uneven distribution of real income issue government bond the economy has to bear interest cost invite private sector participation reduce government say in the related service cut other government expenditures less public services in other aspects

Question 29

aims of fiscal policy

Answer 29

high level of employment raising living standard or per capita GDP more even distribution of income control of inflation

Question 30

gasoline consumption is subject to tax?

Answer 30

yes | for duty rate

Question 31

is the estimated rental value of owner-occupied residential flats subject to property tax

Answer 31

no as its owner-occupied property tax is about renting the flat to others

Question 32

if the nominal wage was reduced, explain whether their real wage rate must also have decreased

Answer 32

not necessary decreased, as the real wage rate will increase if the percentage decrease in general price level is greater than the percentage decrease in the nominal wage rate

Question 33

characteristics of peak/prosperity

Answer 33

real gdp growth rate reaches the highest value general price level reaches the highest value unemployment rate reaches the lowest value

Question 34

why the government should adopt the capital gain tax | 資產增值稅

Answer 34

increase government revenue widen the tax base discourage speculation in the property market

Question 35

what does increase progressivity in salaries tax means

Answer 35

the tax burden of taxpayers with higher salary income increases at a faster rate than the low-income group

Question 36

how will the general sales tax affect the income distribution

Answer 36

the low-income group pay a larger proportion of their income than high-income group on the general sales tax more uneven income distribution

Question 37

characteristics of trough

Answer 37

Unemployment is at a high level Inflation is at a low level Business confidence is at a low level real GDP growth rate is at a low level

Question 38

side effect of the contactionary fiscal policy

Answer 38

negative output effect (fall in gdp) due to a reduction in government expenditure and thus AD/ due to a rise in income tax which would lower consumption/investment demand and thus aggregate demand negative effect on labour supply and thus on employment as a result of high income tax

Question 39

advantage of using monetary policy to finance the fiscal deficits than using fiscal policy

Answer 39

an increase in money supply would lower the interest rate and raise investment, leading to an increase inr eal output in the short run. Given idle resources in the economy, more labour would be used to produce the bigger output, implying an increase in employment or decrease in umemployment.

Question 40

disadvantage of using monetary policy to finance the fiscal deficits than using fiscal policy

Answer 40

in the long run, an increase in money supply would not create any effect on output and employment. But if the fiscal deficits grow so fast that the money supply has to be increase at a higher rate that of real output, high inflation would even arise.

Question 41

why direct tax revenue fluctuates more than GDP when there is a change in macroeconomic condition

Answer 41

progressive taxation

Question 42

what is the effect of increasing the progressivity of salaries tax?

Answer 42

high-income taxpayers pay more low-income taxpayers pay less aftertax income inequality would thus be reduced

Question 43

is loss of skills a loss to the society by unemployed

Answer 43

yes | mock

Question 44

is increase in government expenditure on public assistance a loss to the society by unemployed

Answer 44

no | mock

Question 45

what is the effect of providing government subsidies on income equality

Answer 45

it will worsen the fiscal balance and so it may result in a tax increase in the future. Future taxpayers mainly young people may have to pay more taxes and income inequality between generation may worsen

Question 46

what will be observed in the labour market after the imposition of minimum wage

Answer 46

low-skilled workers may be unemployed

Question 47

綜援english

Answer 47

Comprehensive Social Security Assistance