Secondary 5 Economics Practice Paper: GDP, Consumer Price Index, Unemployment, Money Supply, Trade Balance and Economic Growth

2026-11-13

Economics – Secondary 5 – Practice Paper

S5 economics practice paper: GDP by expenditure approach, CPI and inflation, unemployment, money multiplier, trade balance and growth. Full answers with mark schemes.

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Paper details　Secondary 5 economics practice paper with full answers: GDP by expenditure approach, CPI and inflation rate, unemployment, money multiplier, trade balance and economic growth.

Section A: Gross Domestic Product (18 marks)

An economy reports the following expenditure data for a year (in hundred million dollars): private consumption 5,200, gross domestic fixed capital formation 1,800, government consumption 1,500, exports of goods and services 3,200, imports of goods and services 2,900. Real GDP at 2020 constant prices is 8,000 hundred million dollars and population is 7.5 million.

#	Question	Answer and marking notes
1	(a) Find net exports of goods and services.	Answer: 3,200 – 2,900 = 300 hundred million dollars. (Marking: exports 2 marks, imports 2 marks)
2	(b) Calculate GDP using the expenditure approach.	Answer: 5,200 + 1,800 + 1,500 + 300 = 8800 hundred million dollars. (Marking: four components 1 mark each, total 1 mark)
3	(c) Find the GDP deflator with 2020 as the base year.	Answer: 8800 / 8,000 x 100 = 110. (Marking: nominal GDP 2 marks, dividing by real GDP 2 marks)
4	(d) Find GDP per capita in dollars, rounded to the nearest dollar.	Answer: 8800 hundred million dollars / 7.5 million people = 117,333 dollars. (Marking: unit conversion 3 marks, division 2 marks)

Section B: Consumer Price Index and Inflation (16 marks)

A city has household expenditure weights of food 40 per cent, housing 30 per cent, transport 15 per cent and other items 15 per cent, with all base year indices equal to 100. In the second year the indices are food 120, housing 110, transport 105 and other items 102. Nominal wages rise from 20,000 dollars to 22,000 dollars.

#	Question	Answer and marking notes
5	(a) Find the consumer price index in the second year, correct to two decimal places.	Answer: 0.40 x 120 + 0.30 x 110 + 0.15 x 105 + 0.15 x 102 = 112.05. (Marking: 1 mark for each weighted term)
6	(b) Find the inflation rate for the year.	Answer: (112.05 – 100) / 100 x 100 = 12.05 per cent. (Marking: index change 2 marks, percentage 2 marks)
7	(c) Find the rise in nominal wages and the real wage (nearest dollar), and state the change in purchasing power.	Answer: nominal rise 10 per cent; real wage = 22,000 / 1.12 = 19,634 dollars, 1.83 per cent below the base year, so purchasing power falls. (Marking: nominal rise 1 mark, real wage 3 marks, judgement 1 mark)
8	(d) Which two groups lose most when inflation continues?	Answer: people on fixed incomes (pensions, fixed salaries) and creditors (lenders), because the purchasing power of money falls. (Marking: 1 mark per group, 1 mark for reason)

Section C: Unemployment and the Labour Force (14 marks)

In a place the population aged 16 and over is 6,240,000, the labour force is 3,900,000 and employment is 3,744,000, of whom 78,000 are underemployed.

#	Question	Answer and marking notes
9	(a) Find the number of unemployed people.	Answer: 3,900,000 – 3,744,000 = 156,000 people. (Marking: subtraction 3 marks, unit 1 mark)
10	(b) Find the unemployment rate.	Answer: 156,000 / 3,900,000 x 100 = 4.0 per cent. (Marking: numerator 2 marks, denominator 2 marks)
11	(c) Find the labour force participation rate.	Answer: 3,900,000 / 6,240,000 x 100 = 62.5 per cent. (Marking: labour force 2 marks, percentage 1 mark)
12	(d) Find the underemployment rate.	Answer: 78,000 / 3,900,000 x 100 = 2.0 per cent. (Marking: labour force as denominator 2 marks, value 1 mark)

Section D: Money and Banking (20 marks)

A banking system starts with deposits of 50,000 million dollars and a required reserve ratio of 20 per cent; the public holds no cash and banks hold no excess reserves. The public later holds 30,000 million dollars of cash, 90,000 million dollars of demand deposits and 400,000 million dollars of savings and time deposits.

#	Question	Answer and marking notes
13	(a) Find the money multiplier.	Answer: 1 / 0.20 = 5. (Marking: formula 3 marks, value 2 marks)
14	(b) Find the final total deposits and the new deposits created.	Answer: 500 x 5 = 2500 hundred million; new deposits = 2500 – 500 = 2000 hundred million. (Marking: total 3 marks, new deposits 2 marks)
15	(c) Find M1.	Answer: 300 + 900 = 1200 hundred million (cash plus demand deposits). (Marking: 2 marks each, total 1 mark)
16	(d) Find M3 and explain the effect of a rise in interest rates on bond prices.	Answer: M3 = 1200 + 4,000 = 5200 hundred million; when interest rates rise bond prices fall, an inverse movement. (Marking: M3 3 marks, inverse relation 2 marks)

Section E: International Trade and Exchange Rates (16 marks)

A place records goods exports of 420,000 million dollars, services exports of 80,000 million, goods imports of 440,000 million and services imports of 70,000 million. The exchange rate is 7.8 Hong Kong dollars per US dollar and a machine sells locally for 780 Hong Kong dollars.

#	Question	Answer and marking notes
17	(a) Find the visible trade balance and state whether it is a surplus or a deficit.	Answer: 4,200 – 4,400 = -200 hundred million, a visible trade deficit of 20,000 million. (Marking: value 3 marks, judgement 1 mark)
18	(b) Find the invisible trade balance.	Answer: 800 – 700 = 100 hundred million, an invisible trade surplus of 10,000 million. (Marking: value 3 marks, label 1 mark)
19	(c) Find the overall trade balance.	Answer: -200 + 100 = -100 hundred million, an overall deficit of 10,000 million. (Marking: combining 3 marks, conclusion 1 mark)
20	(d) Find the price of the machine in US dollars; if the US dollar rises to 7.9 Hong Kong dollars, by what percentage does the Hong Kong dollar cost rise?	Answer: 780 / 7.8 = 100 US dollars; 7.9 x 100 = 790 Hong Kong dollars, a rise of (790 – 780) / 780 x 100 = 1.28 per cent. (Marking: US dollar price 2 marks, new cost 1 mark, percentage 1 mark)

Section F: Economic Growth and Living Standards (16 marks)

Real GDP in a place rises from 800,000 million dollars to 840,000 million while population rises from 7.5 million to 7.56 million; nominal GDP for the year is 924,000 million.

#	Question	Answer and marking notes
21	(a) Find the real economic growth rate.	Answer: (8,400 – 8,000) / 8,000 x 100 = 5.0 per cent. (Marking: difference 2 marks, dividing by base year 2 marks)
22	(b) Find real GDP per capita in each year, to the nearest dollar.	Answer: 800,000 million / 7.5 million = 106,667 dollars; 840,000 million / 7.56 million = 111,111 dollars. (Marking: 2 marks per year)
23	(c) Find the growth rate of real GDP per capita and explain why it is below the real growth rate.	Answer: (111,111 – 106,667) / 106,667 x 100 = 4.17 per cent; population grew 0.8 per cent over the same period, diluting the gain per person. (Marking: value 2 marks, explanation 2 marks)
24	(d) Find the GDP deflator for the year.	Answer: 9,240 / 8,400 x 100 = 110. (Marking: nominal GDP 2 marks, dividing by real GDP 2 marks)

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