Topic 13International finance (CE 1990 –DSE 2013)

Topic 13 International finance

Balance of payments: Current account .............................................................................. 1

Balance of payments: Capital account ............................................................................... 7

Balance of payments: Table ............................................................................................... 9

Balance of payments: Integration .................................................................................... 18

Change in exchange rate .................................................................................................. 21

Factors affecting exchange rate ....................................................................................... 28

Linked exchange rate system ........................................................................................... 29

National saving ................................................................................................................. 35

Answer ............................................................................................................................. 40

題目分布表 ...................................................................................................................... 41

Balance of payments: Current account

1. CE 90-36
Which of the following will have favourable effects on the current account of
Hong Kong’s balance of payments?

(1) A Japanese tourist spends a day in the Ocean Park.

(2) An American bank sets up a representative office in Hong Kong.
(3) The Hong Kong government buys a computer system from the U.S.A.
(4) A Hong Kong resident receives dividends from his U.S. stocks.

A. (1) and (2) only

B. (1) and (4) only
C. (2) and (3) only
D. (3) and (4) only

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2. CE 90-46
There will be a worsening of both the balance of payments and the balance of
trade if

A. exports increase.
B. re-exports decrease.
C. investment in foreign countries decreases.
D. the government gives more aid to foreign countries.

3. CE 91-49
The rental income earned from a property in Canada and remitted to Hong Kong
by a Hong Kong citizen

A. is included in the GDP of Hong Kong.

B. has a favourable effect on Hong Kong’s balance of visible trade.
C. has a favourable effect on Hong Kong’s balance of payment.
D. is taxable in Hong Kong

4. CE 94-55
Which of the following has a favorable effect on the current account on Hong
Kong’s balance of payments?

A. A Macau citizen leaves Hong Kong by using the service provided by a

Hong Kong hydrofoil company.
B. A businessman from Mainland China invests in the real estate market in
Hong Kong.
C. A local bank pays interest to an overseas depositor.
D. A company in mainland china issues shares in Hong Kong.

5. CE 95-56
If an American tourist gives money to local beggars, Hong Kong’s GDP will
_______ and its balance of payments will ________ .
A. increase … be improved
B. increase … remain unchanged
C. remain unchanged … be improved
D. remain unchanged … remain unchanged
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6. CE 98-46
Which of the following is an invisible export in Hong Kong’s balance of
payments accounts?
A. A Japanese firm buys shares on the Hong Kong Stock Exchange.
B. A Hong Kong citizen buys tickets from Japanese airlines.
C. A Hong Kong citizen remits money to his son in Japan.
D. A Japanese tourist consults a local doctor in Hong Kong.

7. CE 99-54
Which of the following is NOT included in the calculation of the balance of Hong
Kong’s current account?
A. the investment of a U.S. company in a Hong Kong computer firm
B. Japanese cars sold in Hong Kong
C. a drama performance attended by the tourists in Hong Kong
D. the exports of China handled in the container port of Hong Kong

8. CE 00-51
Which of the following should be included in the calculation of the balance of
Hong Kong’s current account?
A. A company in Hong Kong pays interests for loans from a bank inthe U.K.
B. A Hong Kong resident purchases a new flat in Shenzhen.
C. A U.S. investor purchases 5 000 units of the Tracker Fund ofHong Kong.
D. An author in Hong Kong sells the copyright for his new book to a publisher
in Taiwan.

9. CE 02-48
Which of the following should be included in the calculation of the balance of
Hong Kong’s current account?

A. A Hong Kong resident buys a life insurance policy from an insurance

company in the US.
B. A company in Hong Kong purchases the copyright of a firm from a British
film producer.
C. A Hong Kong resident purchases a house in the US.
D. A Hong Kong investor buys a number of shares of listed company in the US.

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10. CE 03-48

According to the above diagram, from Year 4 to Year 6,

A. the economy has suffered from visible trade deficit.

B. the value of import of goods has decreased.
C. the value of total export of goods has increased.
D. the visible trade deficit has improved.

11. CE 04-50
Mr. Wong, a Mainland resident, comes to visit Hong Kong for a week. Which of
the following should be included in Hong Kong’s current account?

A. the transport service he bought from a Mainland airline

B. the accommodation service he bought from a Hong Kong hotel
C. the residential flat in Tsim Sha Tsui he bought
D. the Bank of China (H.K.) Ltd shares he bought

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12. CE 05-47

According to the above diagram, from Year 2 to Year 5 , the value of domestic
exports of goods

A. was decreasing.
B. was increasing.
C. remained constant.
D. was indeterminate.

13. CE 06-48
An Indonesian maid who works for Hong Kong remits parts of her wage earnings
to Indonesia. In which component of the current account of Hong Kong’s balance
of payments should the above remittance be recorded?

A. goods
B. services
C. income
D. current transfers

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14. CE 08-49
A US engineer is working in Hong Kong. Which of the following amounts should
be included in the calculation of the balance of Hong Kong's current account?

A. the part of her salary earnings that she deposits with a bank in Hong Kong
B. the part of her salary earnings that she remits to her family in the US
C. the money she pays to buy shares in Chinese state-owned enterprises
quoted on the Hong Kong Stock Exchange
D. the money she spends on buying clothes and toys in Hong Kong which are
sent to her children in the US

15. CE EPA 10-42

The following table shows the visible trade of Hong Kong from 2006 to 2008:

Value of trade (HK$ million)

Year 2006 2007 2008
Imports 2600 2868 3025
Exports 135 109 91
Re-exports 2327 2578 3733

Which of the following statements are correct?

(1) Hong Kong experienced trade surplus over the three years
(2) There was an increase in value of re-exports over the three years
(3) There was an increase in value of imports over the three years

A. (1) and (2) only

B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3)

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16. DSE 12-40

Which of the following is an invisible import in the current account of Hong
Kong?

A. In Beijing, a Hong Kong tourist purchases tickets to visit a local museum.

B. A Mainland resident consults a doctor in a hospital in Hong Kong.
C. A Mainland billionaire donates money to a university in Hong Kong.
D. A Hong Kong manufacturer purchases raw materials from a Mainland firm.

Balance of payments: Capital account

17. CE 92-60
Which of the following items would NOT be entered in the capital account of
Hong Kong’s balance of payments?

A. A Hong Kong citizen buying a factory in Japan.

B. A Hong Kong citizen buying a computer made in the U.S.A.
C. A Hong Kong citizen buying securities in London’s stock market.
D. A Hong Kong citizen buying a house in the U.S.A.

18. CE 93-54
Which of the following will improve the capital account of Hong Kong’s balance
of payments?

A. A Hong Kong businessman sets up a computer firm in the U.S.A.

B. A British investor buys a commercial building in Hong Kong.
C. A Hong Kong shipping company receives rental income for providing
shipping services to a foreign merchant.
D. A Hong Kong investor receives a dividend from an overseas investment.

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19. CE 96-50
Which of the following is favorable to the capital account of Hong Kong’s
balance of payments?

A. An American firm buys some certificates of deposit issued by a bank in

Hong Kong.
B. An American firm donates money to a charitable organization in Hong
Kong.
C. A Hong Kong firm buys a hotel in Canada.
D. A Hong Kong firm receives interest and dividends from its investment in
the U.S.A.

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Balance of payments: Table

20. CE 91-50
The following table shows the balance of payments of a country:

$billion
Exports 30
Imports X
Capital inflow 50
Capital outflow 60
Foreign exchange and gold reserves decrease by $20 billion.

What is the value of X?

A. 10
B. 20
C. 30
D. 40

21. CE 92-52
Calculate the value of net exports from the following information:

Domestic exports of goods $300

Re-exports of goods $150
Import of goods $350

A. -$50
B. $100
C. $450
D. $800

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22. CE 93-40
$ million
Private consumption expenditure 40
Government consumption expenditure 10
Gross domestic fixed capital formation 10
Change in stocks 1
Total exports of goods 80
Domestic exports 70
Re-exports 10
Imports of goods 60
Exports of services 20
Imports of services 30
Inflow of capital 30
Outflow of capital 15

The balance of payments of the economy in that year is

A. $10 million.
B. $15 million.
C. $20 million.
D. $25 million.

23. CE 94-51
From the following information, find the value of re-exports:

Domestic exports $500

Trade balance $250
Imports $450

A. $50
B. $200
C. $250
D. $300

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24. CE 95-54
Consider the following balance of payments account of an economy :

$million
Export of good & services 2 800
Import of good & services 3 200
Capital inflows Z
Capital outflows 700 .
Increase in foreign exchange & gold reserves 40

Z is

A. 260
B. 340
C. 1 060
D. 1 140

25. CE 96-51
Refer to the following data in the balance of payments account of a country.

$billion
Visible exports 15
Visible imports 13
Invisible exports 8
Invisible imports 11
Inflow of capital 9
Outflow of capital 12

This country has a/an __________ balance of visible trade and a/an ________
balance of payments.

A. favorable ………… favorable

B. favorable ………… unfavorable
C. Unfavorable ………….. favorable
D. Unfavorable …………. Unfavorable

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26. CE 97-50
Answer Question 50 and 51 by referring to the data below of an economy in a certain
year:

$ Billion
Domestic exports of goods 15
Re-exports 8
Imports of goods 20
Exports of services 7
Imports of services 4
Net capital inflow -2

The balance of visible trade (in $ billion) is

A. -5
B. -2
C. 3
D. 6

27. CE 97-51
The balance of payments (in $ billion) is

A. -4
B. 0
C. 1
D. 4

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28. CE 99-47
The following information shows the trade statistics of an economy in a certain
year:

$ million
Domestic export of goods 30
Re-exports 40
Import of goods 50
Export of services 60
Import of services 80

According to the above data, the economy

A. has a visible trade surplus.

B. has a visible trade deficit.
C. has no visible trade surplus or visible trade deficit.
D. There is not enough information to obtain the answer.

29. CE 00-50
Suppose country A has a balance of payments deficit in Year 1. In Year 2, the
changes in the balance of payments are as shown below:
$ Billion
Export of goods +28
Export of services +7
Import of goods +35
Import of services +13
Capital inflows +5
Capital outflows +8

Based on the above information, we can conclude that

A. in Year 2, the visible trade deficit has increased.

B. in Year 2, the visible trade deficit has decreased.
C. in Year 2, the balance of payments deficit has increased.
D. in Year 2, the balance of payments deficit has decreased.

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30. CE 01-45
Hong Kong’s Balance of Payments Account
$ million
Current Account 72 000
Goods –25 000
Service 81 000
Factor income 27 000
Current transfers –11 000
Capital and Financial Account –76 000
Net errors and omissions 4 000
Total sum = 0

According to the above data,

(1) the visible trade deficit is $25 000 million.

(2) the invisible trade surplus is $81 000 million.
(3) the balance of payments account is in balance.

A. (1) and (2) only

B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3)

31. CE 03-43
Refer to the data of an economy in a certain year below:
$Billion
Domestic exports of goods 20
Imports of goods 50
Visible trade balance -5

The re-exports (in $ billion) are

A. 15
B. 25
C. 30
D. 35
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32. CE 07-48
Refer to the data of an economy in a certain year:

$ Billion
Domestic exports of goods 20
Re-export 25
Imports of goods 40
Exports of services 23
Imports of services 19

The visible trade balance is $__________ billion.

A. –20
B. –5
C. 5
D. 9

33. CE 08-47
Refer to the data of an economy in a certain year below:

$ Billion
Domestic exports of goods 50
Re-exports 35
Imports of goods 60
Exports of services 25
Imports of services 10

There is a/an_____ of $_____billion.

A. visible trade surplus ... 25

B. visible trade deficit... 10
C. invisible trade surplus ...40
D. invisible trade deficit... 15

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34. CE 10-48
Refer to the following trade figures of an economy in a certain year:

$billion
Total exports of goods 140
Re-exports 50
Exports of services 33
Import of goods 72
Import of services 20

The visible trade balance is $__________ billion

A. 68
B. 81
C. 118
D. 131

35. AL P2 93-27
The following are the items in the balance of payments account of a country.
Items $ billion
Imports 500
Exports 300
Interest receipt 30
Overseas investment by domestic companies 65
Foreign investment in the country 30
Fall in reserves 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.

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36. AL P2 06-30
The following table shows items in the balance of payments account of a
country:
Items $ billion
Exports 500
Imports 800
Net unilateral transfers 60
Investment abroad 685
Foreign investment in the country 700
Fall in official reserve assets 80

The amount that the country has to borrow to balance the overall account is
$ billion.

A. 145
B. 225
C. 305
D. 0

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Balance of payments: Integration

37. CE 91-60
The _____ of Hong Kong is NOT affected when some goods are imported to
Hong Kong.

A. visible trade balance

B. current account
C. capital account
D. foreign exchange and gold account

38. CE 94-56
Mr. Chan, who is an imported worker in Hong Kong, remits his income to his
family in China. Which of the following statements is correct?

A. Mr. Chan’s income is included in Hong Kong’s GNP.

B. The remittance has an unfavorable effect on Hong Kong’s balance of visible
trade.
C. The remittance has a favorable effect on Hong Kong’s balance of invisible
trade.
D. The remittance has favorable effect on China‘s balance of payments.

39. CE 96-48
Which of the following will worsen the balance of payments but not the balance
of trade of Hong Kong?

A. A Japanese pop singer cancelled his concerts in Hong Kong.

B. A charity organization in Hong Kong reduces its donations to Mainland
China.
C. U.S. businessmen reduced their investment in Hong Kong.
D. Re-export from Hong Kong to mainland China decreased.

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40. CE 97-52
Which of the following will produce a favourable effect on the balance of
payments of Country A?

A. The citizens of Country A increase their investment abroad.

B. The government of Country A abolishes the tariffs on imports.
C. The citizens of Country A receive interest from the US government bonds
they hold.
D. The government of Country A pays for the service of a foreign consultant
firm.

41. CE 99-53
Being a Hong Kong resident, Mr. Wong earns a living in Hong Kong. He gets
married to Mei-ling who lives in Mainland China. Which of the following
events will NOT affect the balance of payments of Hong Kong?

A. He buys a wedding ring in Hong Kong and takes it to her by himself.

B. He remits a sum of money as the betrothal gifts (聘禮) through a bank to
Mei-ling’s parents.
C. He pays for the honeymoon trip to Thailand.
D. He rents a residential apartment for her in Shenzhen.

42. CE 04-49
Many foreign tourists cancelled their holiday trips to Hong Kong during the SARS
infection. This would

A. worsen Hong Kong’s visible trade balance.

B. worsen Hong Kong’s invisible trade balance.
C. make Hong Kong’s balance of payments imbalanced.
D. All of the above are correct.

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43. AL P2 91-28
Suppose a Hong Kong investor buys a factory worth HK$1 million in China,
which of the following is NOT possible?

A. There will be a debit entry in the capital account of Hong Kong’s balance
of payments.
B. There will be a credit entry in the official reserves account of Hong Kong’s
balance of payments.
C. There will be a credit entry in the capital account of China’s balance of
payments.
D. There will be a debit entry in the current account of Hong Kong’s balance
of payments.

44. AL P2 02-07
Which of the following must be true for a country with a worsening trade balance?
A. Its capital account balance is positive.
B. Its value of imports exceeds that of exports.
C. Its foreign exchange reserves will decrease.
D. Its net exports have fallen.

45. AL P2 08-25
When the trade balance of a country deteriorates,

A. its value of imports exceeds that of exports.

B. the increase in value of imports outweighs the increase in value of exports.
C. its current account balance is negative.
D. Its foreign exchange reserves decrease.

46. AL P2 12-25
If the trade balance of a country deteriorates,
A. the value of its imports will be larger than the value of its exports.
B. its foreign exchange reserves will decrease.
C. its capital account balance will be positive.
D. None of the above

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47. DSE SP-38

If a country is running a current account deficit,

A. it must also be running a trade deficit.

B. its capital and financial account must be in surplus.
C. the foreign exchange reserves of the country must decrease.
D. all of the above are correct.

Change in exchange rate

48. CE 90-43
Suppose that the Japanese yen appreciates against the Hong Kong dollar and the
Italian lira depreciates against the Hong Kong dollar. The demand for Italian cars
in Hong Kong will

A. increase.
B. decrease.
C. remain unchanged because there is only a change in the quantity demanded.
D. either increase depending on the extent of price changes.

49. CE 91-51
The appreciation of the Japanese yen may cause
A. a decrease in the price of Japanese goods in Hong Kong.
B. a decrease in the number of Hong Kong tourists visiting Japan.
C. an increase in the quantity of goods exported by Japan.
D. a decrease in Japanese investment abroad.

50. CE 93-55
Year Exchange rates
1990 HK$576 = 10 000 Japanese yen
1991 HK$622 = 10 000 Japanese yen
The above change in the exchange rate of the Hong Kong dollar against the
Japanese yen would lead to

A. a slower growth rate of imports from Japan.

B. a smaller volume of Hong Kong garments exported to Japan.
C. less Japanese investments in Hong Kong’s real estates.
D. a trade surplus in Hong Kong against Japan.
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51. CE 94-57
If the Hong Kong dollar depreciates against the Japanese yen,
A. Fewer Japanese tourists will be willing to come to Hong Kong.
B. The price of imports from Japan will Fall.
C. The competitive power of Hong Kong products in Japan will fall.
D. Those who hold Japanese yen deposits will gain.

52. CE 95-55
Under the linked exchanged rate system, if the US dollar depreciates against the
Japanese yen sharply,

A. more US tourists will visit Japan.

B. more Japanese tourists will visit Hong Kong.
C. fewer Hong Kong products will be exported to the US.
D. fewer Hong Kong products will be exported to Japan.

53. CE 97-54
When the HK dollar appreciates against the British pound,

A. the volume of the exports of Hong Kong to the UK will increase.

B. the volume of the imports to Hong Kong from the UK will increase.
C. the volume of the imports to Hong Kong from the US will increase.
D. the capital inflow to Hong Kong from the UK will increase.

54. CE 98-48
What will be the effect on Hong Kong’s trade with Canada if the exchange rate
changes from C$1 = HK$5.7 to C$1 = HK$5?

A. The volume of Hong Kong’s exports to Canada will increase.

B. The volume of Hong Kong’s imports from Canada will increase.
C. Hong Kong’s imports from Canada will be more expensive.
D. Hong Kong’s expenditure in Hong Kong dollars on imports from Canada
will increase.

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55. CE 00-52
Suppose the Japanese Yen appreciates greatly against the US dollar. Due tothe
linked exchange rate system,

A. the HK dollar will depreciate greatly against the Japanese Yen.

B. the US dollar will depreciate greatly against the Japanese Yen.
C. the US dollar will depreciate greatly against the euro.
D. the HK dollar will depreciate greatly against the euro.

56. CE 03-47
What would result from the following change in the exchange rate between the
HK dollars and the Japanese yen?

15th February HK$6.4=100yen

15th March in the same year HK$6.1=100yen

(1) The volume of imported goods from Japan to Hong Kong would increase.
(2) The number of Japanese tourists to Hong Kong would increase.
(3) The prices of exported goods from Hong Kong to Japan in terms of
Japanese yen would increase.

A. (1) and (2) only

B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3)

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57. CE 05-49

Year X Exchange rate

January US$1 = 120 Japanese yen

May US$1 = 100 Japanese yen

Under the exchange rate system, the above change in the exchange rate between
the US dollar and the Japanese yen will lead to

A. a decrease in the number of Hong Kong people visiting the US.

B. an increase in the number of Hong Kong people visiting Japan.
C. a decrease in the quantity of Japanese electrical appliances exported to
Hong Kong.
D. a decrease in the quantity of Hong Kong made fashions exported to Japan.

58. CE 08-50
The table below shows a change in the exchange rate between the US dollar and
the Japanese Yen.

Date Exchange Rate

11 th July 2007 US$1 = ¥122
14th November 2007 US$1 = ¥111

Under the linked exchange rate system of Hong Kong, the above change in
exchange rate would lead to _____.

(1) an increase in the competitiveness of Hong Kong exports to Japan

(2) a decrease in the number of Hong Kong tourists to Japan
(3) a decrease in the total value of Hong Kong imports from Japan (in terms of
the Hong Kong dollar)

A. (1) and (2) only

B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3)

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59. CE 09-49
Date Exchange rate
1.12.2007 US$1 = 930 KRW
1.12.2008 US$1 = 1468 KRW

Under the linked exchange rate system of Hong Kong, the above change in the
exchange rate of the South Korean Won (KRW) with the US dollar would lead to

A. More Korean tourists visiting Hong Kong.

B. More Hong Kong tourists visiting Korea.
C. Fewer US tourists visiting Hong Kong.
D. Fewer US tourists visiting Korea.

60. CE 10-50
Under the linked exchange rate system, when British pound depreciates against
the US dollar, there would be

A. an increase in the quantity of Hong Kong electrical appliances exported to

Britain.
B. a decrease in the quantity of British souvenirs bought by Hong Kong
people.
C. an increase in the number of Hong Kong people visiting the US.
D. a decrease in the number of British people visiting Hong Kong.

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61. CE 11-49
Date Exchange Rate
26 June 2009 US$1=£0.605
26June 2010 US$1=£0.665

Under the linked exchange rate system of Hong Kong, the above change in the
exchange rate of the British pound (£) with the US dollar would lead to
___________.

A. an increase in the number of British tourists to Hong Kong

B. an increase in the competitiveness of British exports in Hong Kong
C. a decrease in the total value of British imports from Hong Kong (in terms
of the British Pound)
D. a decrease in the total value of British exports to Hong Kong (in terms of
Hong Kong dollar)

62. AL P2 99-24
Suppose a few countries in a certain region, except country X, revalue their
currencies against the US dollar. Then the volume of country X’s exports to the
countries whose currencies have been revalued will

A. increase.
B. decrease.
C. remain constant.
D. be indeterminate.

63. AL P2 03-28
Suppose the values of Asian currencies, other than the Hong Kong dollar, fall
against the US dollar while the values of non-Asian currencies remain unchanged
against the US dollar. Under the linked exchange rate system in Hong Kong, the
effective exchange rate index for the Hong Kong dollar will

A. rise.
B. fall.
C. remain constant.
D. be indeterminate.
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64. AL P2 07-27
A devaluation of a country’s currency will

A. improves its trade balance.

B. reduce the total value of its imports.
C. increase the volume of its exports.
D. reduces its domestic price level.

65. AL P2 13-29
此題目未能提供英文版本。

66. DSE SP-40

Year X Exchange rate
April €1 = US$1.12
July €1 = US$1.35

Under the linked exchange rate system, the above change in the exchange rate
between the Euro and the US dollar will lead to

A. a decrease in the number of Europeans visiting Hong Kong.

B. a decrease in the number of Hong Kong people visiting the US.
C. an increase in the quantity of European cars exported to Hong Kong.
D. an increase in the quantity of Hong Kong garments exported to Europe.

67. DSE 12-39

Date Exchange Rate
September 2010 HK$10 = 1 Euro
July 2011 HK$11.3 = 1 Euro

The above change in the exchange rate between HK$ and the Euro will result in

A. a drop in the number of tourists from Europe to Hong Kong.

B. a drop in the price (in terms of HK$) of imports from Europe.
C. a drop in the total value (in terms of the Euro) of imports from Europe.
D. a drop in the exchange rate of the US dollar against the Euro.

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68. DSE 13-37

A country’s currency appreciates against its trading partners' currencies. If the
country's demand for imports is _______, the appreciation of its currency will lead
to _______ in the total import value (in terms of domestic currency).

A. unitarily elastic … a rise

B. inelastic … a rise
C. elastic … a fall
D. inelastic … a fall

Factors affecting exchange rate

69. CE 93-36
Which of the following will lower the value of the Hong Kong dollar?

A. The US dollar appreciates against other currencies.

B. The government issues new $10 coins to replace $10 notes.
C. The money income increases.
D. The GDP deflator increases.

70. AL P2 97-20
Which of the following will lead to a depreciation of the currency of a country
under a flexible exchange rate system?

A. a lower domestic inflation rate than its trading partners

B. an increase in the money supply of that country ,
C. a rise in the national income of its trading partners
D. an increase of foreign investment in that country

71. AL P2 98-21
Which of the following will lead to a fall in the price of the British pound against
other currencies under a flexible exchange rate system?

A. a decrease in the income of people in U.K.

B. an increase in British demand for imports
C. an increase in foreign demand for British exports
D. a decrease in the inflation rate of the U.K.

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Topic 13International finance (CE 1990 –DSE 2013)

Linked exchange rate system

72. CE 93-33
Which of the following about the linked exchange rate (聯繫匯率) in Hong Kong
is correct?

A. It is determined by market forces.

B. It has been changed several times by the government.
C. The linked rate system is used to stabilize the exchange rate of the Hong
Kong dollar.
D. It is an exchange rate between the Hong Kong dollar and a basket of
foreign currencies.

73. CE 94-45
Which of the following statements about Hong Kong’s note-issuing system is
correct?

A. Any individual can exchange US dollars for Hong Kong dollars with the
Monetary Authority at the rate US$1 = HK$7.8.
B. Hong Kong dollar notes are issued by the Monetary Authority.
C. Hong Kong dollars will always be fixed against the US dollar at the rate US$1
= HK$7.8 in the foreign exchange market.
D. To issue Hong Kong dollar notes, the note-issuing banks have to surrender US
dollars to the Monetary Authority in exchange for certificates of indebtedness.

74. CE 96-52
Hong Kong practices a linked exchange rate system. In the foreign exchange market
the exchange rate of the Hong Kong dollar relative to the US dollar is ____________
and that relative to other currencies is ____________.

A. fixed at US$1 = HK$7.8 …………. Fixed

B. fixed at US$1 = HK$7.8 …………. Not fixed
C. not fixed …………. Fixed
D. not fixed …………. Not fixed

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75. CE 98-49
Under the linked exchange rate system of Hong Kong, which of the following
statements is true?
A. The exchange rate of the HK dollar relative to Renminbi is fixed.
B. The market exchange rate of the HK dollar relative to the US$ is fixed at
US$1 = HK$7.8.
C. The competitiveness of Hong Kong exports decreases when the US dollar
appreciates against other currencies.
D. Hong Kong will not have a balance of payments problem.

76. CE 01-46
Under the linked exchange rate system in Hong Kong,

A. the market exchange rate of the HK dollar relative to the US dollar is fixed.
B. the market exchange rates of the HK dollar relative to currencies other than
the US dollar are fixed.
C. the HK dollar will depreciate against the Australian dollar if the US dollar
appreciates against the Australian dollar.
D. the HK dollar will appreciate against the Japanese yen if the US dollar
appreciates against the Japanese yen.

77. CE 06-47
Under the linked exchange rate system of Hong Kong, which of the following
statements is correct?

A. The exchange rate of Hong Kong Dollar (HKD) relative to the US dollars
(USD) is fixed at USD1=HKD7.8 on the foreign exchange market.
B. If Mainland China has a visible trade surplus, Hong Kong will also have a
visible trade surplus.
C. When the USD depreciates against the Euro, the HK$ will also depreciate
against the Euro.
D. All of the above.

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78. CE 09-50
Under the linked exchange rate system of Hong Kong,

A. The exchange rate of the Hong Kong dollar with the US dollar in the foreign
exchange market is fixed.
B. The Hong Kong government need not hold a large amount of foreign
exchange reserves.
C. Hong Kong citizens can give the Hong Kong government Hong Kong
dollars in exchange for US dollars at the lined rate.
D. The Hong Kong dollar banknotes are fully backed by foreign exchange
reserves.

79. CE 11-50
Under the linked exchanged rate system in Hong Kong,
A. the market exchange rate of Hong Kong dollar relative to the US dollar is
fixed at US$1 = HK$7.8.
B. the three note-issuing banks in Hong Kong have the obligation to the
general public to exchange Hong Kong dollars for US dollars at the linked
rate.
C. the Hong Kong dollar banknotes do not have to be fully backed by foreign
exchanged reserves.
D. the market exchange rate of the Hong Kong dollar relative to the Euro will
move in the same direction as the market exchange rate of the US dollar
relative to the Euro.

80. AL P2 92-24
The Hong Kong dollar is linked to the US dollar. One result of this is that

A. the Hong Kong government has strengthened its control over the money
supply in Hong Kong.
B. the Hong Kong government can keep less foreign exchange reserves.
C. the Hong Kong public can exchange the HK dollar with the US dollar at the
linked rate form the Hong Kong government.
D. None of the above

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81. AL P2 00-30
Under the linked exchange rate system, the Hong Kong Dollar will depreciate
against the Australian Dollar when

A. the Hong Kong interest rate falls relative to the Australian interest rate.
B. the Australian demand for Hong Kong exports increases.
C. the income of Hong Kong increases.
D. None of the above.

82. AL P2 07-28
Under the linked exchange rate system, the HKD (Hong Kong dollar) will
depreciate against the RMB (Renminbi) if

A. Hong Kong imports more food from mainland China.

B. the Chinese government revalues RMB against the US dollar.
C. Hong Kong investors increase their investment in mainland China.
D. the inflation rate in Hong Kong is higher than that in mainland China.

83. AL P2 08-27
Under the linked exchange rate system, the Hong Kong Dollar will depreciate
against the Japanese Yen when

A. Hong Kong imports more Japanese-made good.

B. US investors increase their direct investment in Japan.
C. the inflation rate of the US is lower than that of Japan.
D. the interest rate in Hong Kong decreases relative to that in the US.

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84. AL P2 08-29
Which of the following about Hong Kong’s linked exchange rate system is
INCORRECT?

A. The Hong Kong Monetary Authority has to keep a great sum of foreign
reserves.
B. There is no independent monetary policy in Hong Kong.
C. There will be an adverse effect on the real estate market in Hong Kong
when the US keeps lowering the interest rate.
D. Hong Kong will experience imported inflation when the US Dollar
continuously depreciates against the Renminbi.

85. AL P2 09-30 (Out-syl)

According to the currency note arbitrage, if 1 US dollar (USD) can be exchanged
for more than 7.8 Hong Kong dollars in the foreign exchange market then

A. the Exchange Fund would sell USD in the market at the linked rate.
B. the note-issuing banks would buy USD from the Exchange Fund and sell it
in the market.
C. the Hong Kong Monetary Authority would reduce the money supply until
the exchange rate drops back to the linked rate.
D. the general public would buy USD at the linked rate from the Hong Kong
Monetary Authority and sell it in the market.

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86. DSE 13-40

Which of the following statements about the linked exchange rate system of Hong
Kong is correct?
(1) Hong Kong dollar banknotes are fully backed by Renminbi and the US
dollar.
(2) The Hong Kong Monetary Authority holds a considerable amount of
foreign exchange reserves.
(3) All note-issuing banks can exchange for US dollars at the linked rate with
the Hong Kong Monetary Authority.
(4) The exchange rate of the Hong Kong dollar to the US dollar in the foreign
exchange market is fixed.

A. (1) and (2) only

B. (1) and (4) only
C. (2) and (3) only
D. (3) and (4) only

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National saving
87. AL P2 99-22
In an economy, suppose the government budget is in balance while the trade
account is in deficit. We can conclude that

A. the sum of government spending and exports is greater than the sum of
taxation and imports
B. the sum of investment spending and exports is greater than the sum of
saving and imports
C. the sum of government spending and investment spending is greater than
the sum of taxation and savings.
D. None of the above

88. AL P2 03-10
Define private saving as Sp = Y - T -C, public saving as Sg = T - G and national
saving as the sum of private saving and public savings. Y, T, C and G are national
income, tax, consumption expenditure and government expenditure respectively.
It follows that in an open economy,

A. private saving is equal to domestic investment.

B. national saving is equal to domestic investment.
C. private saving is equal to the sum of domestic investment and net exports.
D. national saving is equal to the sum of domestic investment and net exports.

89. AL P2 05-01
In an open economy, national saving need not equal real investment. When
national saving exceeds real investment, it means that

A. there are net exports to the rest of the world.

B. there is foreign investment in the form of real investment in the rest of the
world.
C. there is foreign investment in the form of financial investment in the rest of
the world.
D. All of the above.

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90. AL P2 06-28
When a country has a trade surplus,

A. domestic product is higher than domestic spending.

B. national saving is higher than domestic investment.
C. the net capital flow is negative.
D. All of the above.

91. AL P2 07-05
Which of the following statement about real investment and financial investment
is correct?

A. Real investment is included in national income accounts but not

balance-of-payments accounts.
B. Financial investment is included in both national income accounts and
balance-of-payments accounts
C. In a closed economy, the sum of real investment and financial investment
must be equal to national saving when the goods market is in equilibrium,
D. In an open economy, when national saving exceeds real investment the net
foreign investment in the rest of the world may be real investment or
financial investment.

92. AL P2 07-29
When a country's private saving is insufficient to finance its investment, it

A. will have a current account deficit even if its government is running a fiscal
surplus.
B. will have a net capital inflow if its government is running a fiscal deficit.
C. will balance its current account if its government can achieve fiscal balance.
D. may have a current account surplus even if its government is running a
fiscal deficit.

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93. AL P2 08-02
Which of the following statements about saving and investment is correct?

A. Business saving must be equal to business investment if saving can be

channeled to investment through financial intermediaries.
B. Aggregate saving must be equal to aggregate investment in a closed
economy.
C. Government saving must be equal to government investment in order for a
balanced budget.
D. There is excess demand for goods whenever national saving exceeds
domestic investment in a closed economy.

94. AL P2 08-03
When a country has a trade deficit,

(1) there are net capital inflows to the country.

(2) national saving is not sufficient to finance domestic investment.
(3) domestic spending excess domestic output.

A. (1) and (2) only

B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3)

95. AL P2 08-26
A country will have a fiscal surplus when private saving __________ domestic
investment and the current account of the country is __________.

A. exceeds… balanced
B. exceeds… in surplus
C. equals… in deficit
D. falls short of… in surplus

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96. AL P2 10-03
Which of the following saving-investment pairs must be equal to one another in
an open economy?

(1) aggregate (or national) saving; aggregate investment

(2) government saving; government investment
(3) private saving; private investment

A. (1) only
B. (1) and (3) only
C. (2) and (3) only
D. None of the above

97. AL P2 11-28
Which of the following statements about net capital flow are correct?

(1) National saving is the sum of domestic investment and net capital flow.
(2) National saving is the difference between domestic investment and net
capital flow.
(3) When there is a trade surplus, the net capital flow will be positive.
(4) When there is a trade deficit, the net capital flow will be positive.

A. (1) and (3) only

B. (1) and (4) only
C. (2) and (3) only
D. (2) and (4) only

98. AL P2 11-30
When a country’s private saving is more than its domestic investment,

A. its government will have a fiscal surplus if its current account is in surplus.
B. its government will have a fiscal deficit if there is net capital outflow.
C. its government may have a fiscal deficit even if its current account is in
surplus.
D. its government may have a fiscal surplus even if its current account is
balanced.

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99. AL P2 12-29
In an economy, the government budget is in balance while the trade account is in
surplus. Which of the following statements is correct?

A. The sum of private consumption, investment expenditure and net exports is

larger than the sum of private saving and public saving.
B. Domestic spending is larger than domestic output.
C. The sum of government tax revenue and imports is larger than the sum of
government expenditure and exports.
D. The capital inflow is larger than net exports.

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Topic 13International finance (CE 1990 –DSE 2013)

Answer
Balance of payments: Current account 國際收支平衡：經濟帳
1. CE 1990 Q36 B 7. CE 1999 Q54 A 12. CE 2005 Q47 A
2. CE 1990 Q46 B 8. CE 2000 Q51 A 13. CE 2006 Q48 D
3. CE 1991 Q49 C 9. CE 2002 Q48 A 14. CE 2008 Q49 B
4. CE 1994 Q55 A 10. CE 2003 Q48 C 15. CE EPA 2010 Q42 C
5. CE 1995 Q56 C 11. CE 2004 Q50 B 16. DSE 2012 Q40 A
6. CE 1998 Q46 D

Balance of payments: Capital account 國際收支平衡：資本帳

17. CE 1992 Q60 B 18. CE 1993 Q54 B 19. CE 1996 Q50 A

Balance of payments: Table 國際收支平衡：表格

20. CE 1991 Q50 D 26. CE 1997 Q50 C 32. CE 2007 Q48 C
21. CE 1992 Q52 B 27. CE 1997 Q51 D 33. CE 2008 Q47 A
22. CE 1993 Q40 D 28. CE 1999 Q47 A 34. CE 2010 Q48 A
23. CE 1994 Q51 B 29. CE 2000 Q50 C 35. AL 1993 P2 Q27 B
24. CE 1995 Q54 D 30. CE 2001 Q45 D 36. AL 2006 P2 Q30 A
25. CE 1996 Q51 B 31. CE 2003 Q43 B

Balance of payments: Integration 國際收支平衡：綜合

37. CE 1991 Q60 C 41. CE 1999 Q53 A 45. AL 2008 P2 Q25 B
38. CE 1994 Q56 D 42. CE 2004 Q49 B 46. AL 2012 P2 Q25 D
39. CE 1996 Q48 C 43. AL 1991 P2 Q28 D 47. DSE SP Q38 B
40. CE 1997 Q52 C 44. AL 2002 P2 Q7 D

Change in exchange rate 匯率的變動

48. CE 1990 Q43 A 55. CE 2000 Q52 A 62. AL 1999 P2 Q24 A
49. CE 1991 Q51 B 56. CE 2003 Q47 B 63. AL 2003 P2 Q28 A
50. CE 1993 Q55 A 57. CE 2005 Q49 C 64. AL 2007 P2 Q27 C
51. CE 1994 Q57 D 58. CE 2008 Q50 A 65. AL 2013 P2 Q29 D
52. CE 1995 Q55 B 59. CE 2009 Q49 B 66. DSE SP Q40 D
53. CE 1997 Q54 B 60. CE 2010 Q50 D 67. DSE 2012 Q39 C
54. CE 1998 Q48 B 61. CE 2011 Q49 B 68. DSE 2013 Q37 D

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Factors affecting exchange rate 影響匯率的因素

69. CE 1993 Q36 D 70. AL 1997 P2 Q20 B 71. AL 1998 P2 Q21 B

Linked exchange rate system 聯繫匯率制度

72. CE 1993 Q33 C 77. CE 2006 Q47 C 82. AL 2007 P2 Q28 B
73. CE 1994 Q45 D 78. CE 2009 Q50 D 83. AL 2008 P2 Q27 B
74. CE 1996 Q52 D 79. CE 2011 Q50 D 84. AL 2008 P2 Q29 C
75. CE 1998 Q49 C 80. AL 1992 P2 Q24 D 85. AL 2009 P2 Q30 B
76. CE 2001 Q46 D 81. AL 2000 P2 Q30 D 86. DSE 2013 Q40 C

National saving 國民儲蓄

87. AL 1999 P2 Q22 C 92. AL 2007 P2 Q29 B 96. AL 2010 P2 Q3 D
88. AL 2003 P2 Q10 D 93. AL 2008 P2 Q2 B 97. AL 2011 P2 Q28 D
89. AL 2005 P2 Q1 A 94. AL 2008 P2 Q3 D 98. AL 2011 P2 Q30 C
90. AL 2006 P2 Q28 D 95. AL 2008 P2 Q26 D 99. AL 2012 P2 Q29 A
91. AL 2007 P2 Q5 D

題目分布表
SP PP 2012 2013
Balance of payments: Current account
Q40
國際收支平衡：經濟帳
Balance of payments: Integration
Q38
國際收支平衡：綜合
Change in exchange rate
Q40 Q39 Q37
匯率的變動
Linked exchange rate system
Q40
聯繫匯率制度

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