Economic Project
Names: Jessica Ho (11) Joyce Ip (13)
Class: F.5B
Source: Oriental Daily News
Date 29/11
Summary:
At this moment, the economic growth in Hong Kong is getting better. The third term of
Gross Domestic Product reports a growth of 4%. Furthermore, consumption
expenditure has increased by 2% since 2001. These reflect that the citizens in Hong
Kong are become more confident and are more willing to consume.
Besides, the deflation rates get smaller and the Financial secretary believed that within
one or one and a half year inflation may occurr.
GDP definition:
Gross Domestic Product is the total market value of all finial goods and services
produced by the resident producing units of a territory over a period of time, usually on
year.
Implicit GDP deflator definition:
Implicit GDP deflator = Nominal GDP
--------------------X 100
Real GDP
Deflation definition:
Deflation means continuous decrease in the general price.
Explanation:
During the outbreak of the SARS, fewer foreigners would like to come to Hong Kong for
trading and traveling. Therefore, the demand for goods and services has decreased
rapidly. Export and import are also affected by the disease. The decrease in the rate of
export is larger than the rate of import so it will lead to decrease in GDP. Hence the
recession will continue. Under the condition of recession, the consumption by the citizen
and visitors has fallen and so the companies need fewer workers. This leads to an
increase in unemployment rate and negative real GDP growth rate. Also the prices are
decreasing.
GDP= C+I+G+X-M
Nevertheless, this situation did not last for a very long time. As the central government
has provided numerous policies to solve the problem of recession like individual visit
scheme and the madness period of SARS has passed already, citizens and the tourists
are willing to spend more money on goods and services than before. Hence there is a
decrease in unemployment rate as well as an increase in consumption, Hong Kong is
turning into recovery. This brings about an increase in real GDP growth rate.
As there is deflation, the general price level decreases. This will affect the revenue of the
business. The employers earn less than before so they decided to reduce the salary of
employee. Provided that the percentage decrease in money wage is equal to the
percentage decrease in price level, the purchasing power of money would be unchanged.
Source: Oriental Daily News
Date: 09-09-2003
Summary:
Two years before, Hong Kong economy has faced two recessions it lead to the
contraction of retailing. Especially during the outbreak of SARS, the average
decrease in each month is 4.4% on retailing. However, this situation has not been
lasted too long, after the SARS has gone away, Hong Kong tourism has totally
changed, it has recovered, it made the retailing starting to growth.
When compared with last year in July, the percentage of sold goods has only
decrease 0.5%. On the other hand, all retailing that is related to tourism has
significant recovery, especially the electrically appliance, the camera, it has
increased 17.4%.
At present, as the individual visit scheme has practiced, in the following months
retailing will have a large growth, and confidence of citizens will have a great
improvement for consumption too.
Explanation:
During the outbreak of SARS, there are only a few foreigner would like to come
to Hong Kong for trading or traveling, so the demand for goods and services has
decreased rapidly, but the supply has no change. Therefore, the demand for
consumer goods will decrease (D1 to D2), the equilibrium price of consumer
goods will fall (P1 to P2). The equilibrium quantity of consumer goods will
decrease (Q1 to Q2). A decrease in quantity transacted for consumer goods is
resulted. (Refer to fig 1). Deflation will take place and there is a trough. Besides,
the consumption level will decrease hence GDP will decrease and Consumption
price index (CPI) will decrease.
In July, the outbreak of SARS has over; Hong Kong’ s tourism has recovery. In
addition, due to the practice of individual visit scheme, and it was supported by
the government with many promotions is given. More people want to come to
Hong Kong. These have improved our economic growth.
At the same time, the demand for retailing has significant increased. The
consumption level has increased a lot too, thus the CPI has increased.
When the individual visit scheme is practiced during hot summer, so the airconditioner attracts the Hong Kong and mainland’s buyers because all new
models can be find in Hong Kong and it has the guarantee, as a result, the
consumption(C) and export (X) will increase hence GDP will increase further.
Additionally, as there is an increase in demand for air-conditioner (D1 to D2),
the equilibrium price will increase (P1 to P2) and the equilibrium quantity will
increase (Q1 to Q2), so there is an increase in the quantity demand. (Refer to
fig.2)
And the total revenue for the seller of air-conditioner will increase.
( TR= P x Q)
When there is increase in general price level, the fall of deflation rate slow down.
Finally, because of the sale of fake good in mainland with poor quality and
without guarantee, the mainland people are not satisfied with those goods. So
when individual visit scheme practice, a good chance has come, Hong Kong real
goods become the fake goods substitutes. As a result, people will bring more
money come to Hong Kong, their consumption level increase and the CPI will
increase.
Beside, real goods will cause an increase in demand (fig 3) while the fake goods
will cause a decrease in demand (fig 4).
Fig (1)
Fig (2)
Fig (3)
Fig (4)