2022-23 budget

Q1: What are the four phases of business cycle? How does an economy perform at each phase?

A: Peak (Boom), recession (contraction), trough (depression), and expansion (recovery).

Q2: Can consumption voucher scheme boost real GDP growth?

A: Recall the formula: Real GDP = Nominal GDP - Inflation rate. The change in real GDP depends on nominal GDP and inflation rate. Since consumption vouchers can boost consumption, nominal GDP will increase. On the other hand, consumption vouchers could lead to inflation. Therefore, the effect on real GDP is ambiguous.

Q3: How does tax deduction facilitate economic recovery?

A: When there are tax deduction and tax rebate, the disposable income of people will increase. Therefore, at least they may spend part of the money on consumer goods. The consumption expenditure will increase and nominal GDP will thus increase, boosting the economic recovery.

Q4: The government will provide an extra half-month allowance of standard CSSA payments to eligible citizens. How does it affect the unemployment rate?

A: Note that the extra allowance is a one-off policy. Therefore, it will not incentivize workers to withdraw from their current job. The unemployment rate will remain unchanged.

Q5: The government will create 30 000 time-limited jobs through the $6.6 billion earmarked in AEF. How does it affect the unemployment rate?

A: Recall the formula unemployment rate = unemployed person / labour force. If there is more job opportunity, at least some unemployed person could find a job and become employed. Therefore, given that there is no change in labour force and number of unemployed person decreases, the unemployment rate will decrease.