Secondary 6 Economics

The total value of domestic output the whole economy is willing to buy at each price level; the sum of private consumption, investment, government spending and net exports.

The total output all firms are willing to produce at each price level; distinguished into short-run and long-run aggregate supply.

Household spending on goods and services, affected by disposable income, the desire to save, wealth and interest rates.

Spending by firms on capital goods such as machinery and premises, affected by business outlook and interest rates.

Exports minus imports, affected by trading partners' economic conditions and exchange rates.

Aggregate supply while input and output prices do not fully adjust; its curve slopes upward.

Aggregate supply once all prices fully adjust; its curve is vertical, with output determined by resources, technology and institutions.

The output level determined at the intersection of aggregate demand and aggregate supply, together with the equilibrium price level.

A rise in the price level lowers the real value of assets such as deposits, reducing consumption — one reason the AD curve slopes downward.

The output level corresponding to the long-run aggregate supply curve, where resources are fully employed regardless of the price level.

Anything generally accepted in payment for goods, services and debts.

Trading goods directly for goods without money as an intermediary.

Under barter, both parties must each hold what the other wants for a trade to happen — the greatest obstacle to exchange.

Money's first function: being accepted by all, so exchange no longer requires the double coincidence of wants.

Money's second function: all goods are priced in the same unit, easing comparison, record-keeping and contracting.

Money's third function: carrying today's purchasing power into the future, which depends on a stable value of money.

Money's fourth function: loans and contracts are set in money units and repaid in money.

Money's most crucial quality: acceptance by all. For modern money it rests on legal status and public trust.

Money with intrinsic value or use of its own, such as shells, salt or precious metals.

Money given status by law with little intrinsic value of its own; modern banknotes and deposit money are examples.

The highest tier of Hong Kong's authorised institutions, offering full banking services including current, savings and time deposits.

Authorised institutions mainly engaged in merchant banking and capital-market activities, with restricted deposit-taking.

The smallest tier of authorised institutions, facing stricter limits on deposit size and maturity.

Issuing currency, banker to the government and to the banks (lender of last resort), managing official reserves, and supervising the banking system.

The body performing Hong Kong's central banking functions such as monetary management, banking supervision and managing the Exchange Fund.

The total stock of money in the economy, defined in tiers of liquidity as M1, M2 and M3.

The proportion of deposits banks must keep as reserves and cannot lend — the key parameter in credit creation.

One over the required reserve ratio, showing the multiple by which an initial deposit can ultimately support total deposits.

The process by which the banking system expands total deposits by a multiple through the deposit–reserve–loan cycle.

The amount of money people wish to hold: transactionary demand (rising with income) and asset demand (moving inversely with the nominal interest rate).

The recurring short-term fluctuation of real GDP around its long-run trend.

A sustained rise in the general price level; 'general' and 'sustained' are the key words.

A sustained fall in the general price level, usually signalling weak aggregate demand.

The interest rate in money terms, before adjusting for inflation.

The rate measuring the true growth of purchasing power; roughly the nominal rate minus the inflation rate.

Inflation's reallocation of wealth between creditors and debtors, and between fixed- and flexible-income earners.

Money supply times velocity equals the price level times real output; with velocity unchanged, money-supply growth raises prices.

Government policy managing aggregate demand through spending and taxes; expansionary or contractionary.

A budget with revenue above spending is a surplus budget; spending above revenue is a deficit budget; equal amounts make a balanced budget.

Policy by the monetary authority managing aggregate demand through the money supply and interest rates.

An absolute advantage exists when one can produce the same good with fewer resources or with higher output.

A comparative advantage exists when one's opportunity cost of producing a good is lower than others'; it is the basis for specialisation and trade.

The extra consumption all parties enjoy after specialising by comparative advantage and trading, compared with self-sufficiency.

A tax on imports that raises domestic prices, cuts import volume and yields government revenue.

A barrier capping import quantities; prices rise but the government collects no revenue — the price gap accrues to quota holders.

The statement recording an economy's transactions with the rest of the world, split into the current account and the capital and financial account.

The part of the balance of payments recording goods, services, income and current transfers.

The part of the balance of payments recording flows of investment funds.

The price of one currency in terms of another; its changes affect import and export prices.

Hong Kong's exchange rate regime since 1983, pegging the Hong Kong dollar to the US dollar around 7.8, with convertibility undertakings keeping the market rate within 7.75–7.85.

Paper 1 of the public examination, all multiple-choice, worth 30% in one hour.

Paper 2, worth 70%, two hours 30 minutes since 2019, with a compulsory part and an elective part.

The topics all candidates must study and sit, ten in all, examined in Part I of Paper 2.

Module 1 (monopoly pricing, anti-competitive behaviour and competition policy) or Module 2 (extension of trade theory, economic growth and development); choose one.

Questions providing tables, charts or news extracts, testing knowledge applied to realistic situations.

Long questions requiring organised argument, testing synthesis and evaluation.

Reporting grades (1 to 5) by comparing performance against set standards; the best at level 5 are marked 5**.

The official document listing awardable points — key for correcting answering patterns after past-paper practice.

Words like 'explain', 'calculate', 'compare' and 'evaluate' that determine the form and depth of the answer.

Allocating answering time in proportion to marks, with minutes reserved for checking.