Hong Kong Government Expects Further GDP Contraction

More bad economic news ...sorry!

Read this WSJ article on the latest Hong Kong Government budget and then answer the following questions.


1) Define GDP and Recession
2) Who is John Tsang, and what does he do?
3) Fill in the gaps: A Government budget is a financial plan published by a Government. It shows the expected Government revenue (that is - money the Government expects to get from its working citizens who pay _______) and Government _________ (that is – details how the Government plans to spend money on _______ sector work such as public education, and health).

Each year, the Hong Kong Government creates a new budget to cover the period from _______ to ________)

4) Why do you think that the Hong Kong Government plans to reduce its annual spending from US$38.66 to US 30.16 billion dollars?
5) Why are some people critical of the budget?
6) Mr. Tsang said his spending plans, including up to HK$39.3 billion on capital works, will boost domestic demand and create jobs. Use a suitable diagram to explain the planned impact on local jobs.
7) The Government plans to issue something called ‘sovereign debt’. What do you think it is, and why do you think it is needed?
8) What are 'externalities'? Briefly explain 2 reasons why Mr Tsang has chosen to increase the level of tax on cigarettes.