Revision Exercise: Chp 8 Money, Banking and Money Supply

Multiple Choice

11. Mr Wong withdraws $500,000 in cash from a deposit-taking company. He then

deposits $300,000 with a bank as time deposit and remits the remaining
$200,000 overseas for the settlement of debts.
Which of the following about the money supply M1 and M3 is correct?
A. Both M1 and M3 will increase.
B. Both M1 and M3 will decrease.
C. M1 will remain unchanged and M3 will decrease.
D. Both M1 and M3 will remain unchanged.
(2000-27)

12. Suppose the money supply of Hong Kong in a certain year was as follows:
$ billion
Legal tender held by public 10
Legal tender held by all deposit-taking institutions 2
Demand deposits with licensed banks 15
Savings and time deposits with licensed banks and held by the public. 60
Negotiable certificates of deposits issued by licensed banks and held 25
by the public
Deposits with restricted licence banks and negotiable certificates of 32
deposits issued by restricted licence banks held by the public
The money supply M2 (in $ billion) was
A. 85
B. 110 =10+15+60+25
C. 112
D. 144
2000-28

13. Mr. Cheung has $100 000 cash in hand. He needs the money two months later to
use as partial payment for his new house. He may deposit the money into

(1) a licensed bank

(2) a restricted licence bank
(3) a deposit-taking company

A. (1) only
B. (1) and (2) only
C. (1) and (3) only
D. (2) and (3) only
(00-31)

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14. Which of the following about the central bank functions performed in Hong
Kong is correct?
A. The Hongkong Bank is responsible for the central clearance of the banking
system.
B. The Exchange Fund acts as the government’s banker.
C. The Hong Kong Monetary Authority carries out monetary policies for the
government.
D. The Hong Kong Association of Banks supervises banking activities.
(00-32)

15. In using the Easy Pay System (EPS) to settle a payment in exchange, an amount
of money is immediately transferred from the buyer’s bank account to the
seller’s. In response to an increase in EPS’s service charge, some shops have
stopped accepting payment by EPS.
Which of the following would be the immediate effect of the above change on
the money supply M1 and M2?
A. both M1 and M2 will increase.
B. M1 will increase and M2 will remain unchanged.
C. M1 will increase and M2 will decrease.
D. Both M1 and M2 will decrease.
(01-25)

16. In Hong Kong, drivers can buy tickets from tunnel companies for using tunnel
services. These tickets is NOT a standard of deferred payment. In other words,
A. the purchasing power stored in the tickets can only be used for certain
tunnel services.
B. Most people in Hong Kong do not use the tickets for the tunnel services.
C. The value of most goods and services are not measured in terms of the
tickets.
D. Payment in the future in general is not denominated in the tickets.
(01-48)

17. John wants to deposit $80 000 for 4 months in Hong Kong. Which of the
following financial institutions can accept his deposit?
A. a licensed bank
B. a restricted licence bank
C. a deposit taking company
D. All of the above
(01-27)

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18. Which of the following is NOT a function of the Hong Kong Monetary
Authority?
A. to manage the foreign exchange reserves
B. to carry out monetary policy
C. to act as the lender of last resort
D. to determine the best lending rate
(01-49)

19. ‘Currency in public circulation’ and ‘savings deposits’ are both included in Hong
Kong’s money supply
(1) M1
(2) M2
(3) M3
A. (2) only
B. (3) only
C. (1) and (2) only
D. (2) and (3) only
(02-33)

20. Which of the following statements about money are correct?

(1) The purchasing power of money will remain unchanged in times of
deflation
(2) A wider use of electronic money will reduce the cash held by the
public
(3) Money helps people to accumulate their purchasing power.
A. (1) and (2) only
B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3) (34-02)

21. Mr Chan withdraws HK$50,000 from his savings account with a bank in Hong
Kong and remits HK$40,000 through a bank to the U.K. He changes the
remaining HK$10,000 into the newly issued HK$10 notes and puts them into his
safety deposit box in a bank.
Which of the following would be the immediate effect of the above actions on
the Hong Kong dollar money supply?
A. Both the HK$M2 and M3 will decrease by HK$40,000.
B. HK$M1 will increase by HK$10,000 while HK$M2 will decrease by
HK$50,000
C. HK$M2 will decrease by HK$50,000 while HK$M3 will remain
unchanged.

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 D. HK$M1 will remain unchanged while HK$M2 will decrease by
HK$40,000.
(03-32)

22. Sue wants to deposit $300,000 for 1 month. Which of the following institutions
can accept her deposit?
(1) licensed banks
(2) restricted licence banks
(3) deposit-taking companies
A. (1) only
B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3)
(33-03)

23. When a barter economy changes to an economy that uses money in exchange,
(1) finding trading partners becomes easier
(2) making transactions involving future settlement of debt becomes easier
(3) agreeing upon prices takes a longer time
A. (1) and (2) only
B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3)
(2004-35)

24. A time deposit is better than a demand deposit in serving the

__________functions of money because the former______________
A. unit of account…..has a common unit
B. store of value….bears interest income
C. medium of exchange…is generally acceptable
D. standard of deferred payments…is a liquid asset
(2004-36)

25. Which of the following would decrease the money supply M2 in Hong Kong?
A. Mr.Au repays a HK $10 000 loan in cash to a licensed bank in Hong Kong
B. Mr Bean withdraws HK $20 000 from a savings account with a licensed
bank in Hong Kong and holds it as cash
C. Mr Chan transfers HK $30 000 from his savings account to his current
account with a licensed bank in Hong Kong.
D. Mr Ding withdraws HK $40 000 from his time deposit in a restricted
licence bank in Hong Kong and remits the money overseas. (2004-37)

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26. Which of the following kinds of assets has the lowest liquidity?
A. cash in hand
B. ordinary shares
C. demand deposits
D. savings deposits
(2004-40)

27. Which of the following central bank functions are performed by the Hong Kong
Monetary Authority?
(1) managing the foreign exchange reserves
(2) determining the deposit interest rates of banks
(3) acting as the lender of last resort
A. 1 and 2 only
B. 1 and 3 only
C. 2 and 3 only
D. 1, 2 and 3
(37-03)

28. Country A used gold as its currency. Suppose the scientists in the country have
found a method to produce gold at nearly zero cost. As a result, the government
has decided to give up using gold as its currency. This illustrates that good
money has to be
A. portable
B. divisible
C. scarce
D. durable
(2005-35)

29. Suppose Mrs. Wong withdraws HK $300 000 from her savings deposit with a
commercial bank. She converts HK $200 000 of the above amount into
Renminbi ( ) and deposits it into a Renminbi savings deposit with the
same banks. She keeps the remaining HK $100 000 at home. The immediate
effect of the above events is:
A. Hong Kong dollar money supply M1 would increase by $100 000
B. Hong Kong dollar money supply M2 would decrease by $300 000
C. Hong Kong dollar money supply M2 would remain unchanged
D. Hong Kong dollar money supply M3 would increase by $100 000
(2005-38)

30. Which of the following statements about money are correct?

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 (1) Under the electronic payment system, transactions are still settled with
money
(2) Deflation reduces the purchasing power of money
(3) With the use of money in exchange, there is no need to have double
coincidence of wants
A. (1) and (2) only
B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3)
(06- 33)

31. Mr. Chan plans to deposit $500 000 for one month. Which of the following
institutions can accept his deposit?
(1) licensed banks
(2) restricted licence banks
(3) deposit-taking companies
A. (1) and (2) only
B. (1) and (3) only
C. (2) and (3) only
D. (1), (2), (3)
(2005-36)

32. 9999 gold is a better form of money than grains of wheat because the former is
more
(1) durable
(2) homogeneous
(3) easily divisible
A. (1) and (2) only
B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3) (06- 34)

33. Mr. Chan withdraws HK $20 000 from his deposit in a restricted licence bank in
Hong Kong. He later puts HK $ 15 000 as time deposit in a licensed bank in
Hong Kong and holds the remaining HK $5 000 as cash.
The immediate effect of the above actions on the Hong Kong dollar money
supply would be:

A. Both M2 and M3 decrease

B. Both M1 and M2 remain unchanged
C. M1 increases while M2 remains unchanged

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 D. M1 increases while M3 remains unchanged (06- 35)

34. During inflation, people are less willing to keep their wealth in the form of
money. This is because at that time the function of money to serve as a ______
is weakened.
A. medium of exchange
B. store of value
C. unit of account
D. means of payment
(07-35)

35. If an individual deposits $600,000 cash into a time deposit account with a
deposit-taking company, Hong Kong’s money supply M1 will ______ and M2
will _________.
A. decrease …. decrease
B. decrease … remain unchanged
C. remain unchanged … increase
D. increase … increase
(07-39)

36. Which of the following functions are performed by the Hong Kong Monetary
Authority?
(1) maintaining the stability of the linked exchange rate
(2) supervising the liquidity position of the private banking institutions
(3) determining the market interest rate in Hong Kong
A. (1) and (2) only
B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3)
(07-37)

37. If an individual plans to deposit HK$200,000 in a financial institution in Hong

Kong for three months, which of the following institutions can accept this
deposit ?

(1) licensed banks

(2) restricted licence banks
(3) deposit-taking companies

A. (1) and (2) only

B. (1) and (3) only

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 C. (2) and (3) only
D. (1), (2) and (3)
(07-38)

38. An economy that changes from barter to using money in exchange would reduce
A. the need for specialization
B. the need for exchange
C. the time for searching trading partners
D. the frequency of making payments
(2008-34)

39. As a form of money, polymer notes (塑質鈔票) are more ________ than paper
notes.
A. homogenous
B. durable
C. divisible
D. portable
(2008-35)

40. A more popular use of electronic money can bring about the following
advantages :
(1) a smaller amount of coins and notes to be handled
(2) a lower chance of receiving fake banknotes
(3) more interest earned by keeping the money in banks for a longer period of
time
A. (1) and (2) only
B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3)
(2008-36)

41. Suppose, after making a series of unsuccessful add-value transactions through

EPS in which their bank accounts were debited, more Octopus cardholders use
cash to make their add-value transactions. This would immediately increase
A. the money supply M1
B. the money supply M2
C. the amount of savings deposits of banks
D. the amount of time deposits of banks
(2008-37)

42. Which of the following assets has the highest liquidity?

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 A. real estates
B. government bonds
C. savings deposits
D. time deposits
(2009-35)

43. When the price of a good is quoted in Renminbi (RMB) on a price tag in some
shops in Hong Kong,RMB is performing as
A. legal tender.
B. a store of value.
C. a unit of account.
D. a standard of deferred payment.
(2009-36)

44. In the financial system of Hong Kong Monetary Authority plays the role of
(1). operating the day to day business of the clearing house.
(2). stabilizing the exchange rate of the Hong Kong dollar.
(3). the lender of last resort.

A. (1) and (2) only

B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3)
(2009-37)
45. Which of the following statements about money are correct?
(1) the use of money reduces the information cost o f searching for trading
partners.
(2) Money would not exist if there are no banks.
(3) Money still exists if all transactions are settled by electronic transfer (or
settled online).
A. (1) and (2) only
B. (1) and (3) only

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 C. (2) and (3) only
D. (1), (2) and (3)
(2010-34)

46. Holders of ________ have the lowest liquidity.

A. negotiable certificates of deposits
B. ordinary shares
C. saving deposits
D. real estates
(2010-37)

47. David plans to deposit HK$400,000 in a Hong Kong financial institution for six
months. Which of the following can accept his deposit?
(1) licensed banks
(2) restricted licence banks
(3) deposit-taking companies
A. (1) and (2) only
B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3)
(2010-38)

48. Grace receives a remittance of HK$530 000 from overseas. She saves HK$500
000 of the total amount as time deposits in a restricted licence bank and the rest
as demand deposits in a licensed bank.
What will be the immediate effect of the above actions on the money supply of
Hong Kong?
A. M1 will increase by HK$30,000 and M2 will increase by HK$530,000.
B. M1 will increase by HK$30,000 and M3 will increase by HK$500,000.
C. M2 will increase by HK$30,000 and M3 will increase by HK$500,000.
D. M2 will increase by HK$30,000 and M3 will increase by HK$530,000.
(2010-39)

49. Which of the following statements about money is / are correct?

A. Deflation reduces the purchasing power of money.
B. Money exist in a cashless society where all transactions are settled through
an electronic payment system.
C. With the use of money in exchange, exchange is possible even when trading
parties do not have double coincidence of wants.
D. All of the above are correct. (sample paper-27)

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50. Mr Chan withdraws HK$4 000 000 from his deposit account in a restricted
licence bank in Hong Kong. He then puts HK$3 500 000 as time deposit in a
licensed bank in Hong Kong and holds the remaining HK$500 000 as cash.

The immediate effect of the above actions on the Hong Kong dollar money
supply would be:
A. Both M2 and M3 remain unchanged.
B. M1 increases while M2 remains unchanged.
C. M2 increases while M3 remains unchanged.
D. M2 increases while M3 decreases.
(sample paper-29)

51. If Mr. Chan withdraws HK$500 000 from his account in a deposit-taking
company and remits the sum to his relatives in Canada, Hong Kong’s money
supply M2 will __________ and M3 will _____________.
A. decrease … decrease
B. remain unchanged …remain unchanged
C. decrease …remain unchanged
D. remain unchanged …decrease
(practice paper-28)

52. An asset which can be readily converted into cash at short notice without making
a loss is regarded as a _____________ asset.
A. portable
B. durable
C. divisible
D. liquid
(practice paper-29)

53. The real value of money decreases when the __________ is rising.
A. deflation rate
B. general price level
C. money demand
D. nominal interest rate (practice paper-30)

54. Winnie withdraws HK$500 000 from her time deposit with a deposit-taking
company. Then she deposits HK$200 000 as a time deposit and HK$100 000 as a
demand deposit with a licensed bank. She keeps $50 000 in a safe at home and
remits the remainder overseas.
What will be the immediate effect of the above actions on the Hong Kong dollar
money supply?

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 A. M1 will increase by HK$50 000 and M2 will increase by HK$350 000.
B. M1 will increase by HK$l50 000 and M3 will decrease by HK$l50 000.
C. M2 will increase by HK$l50 000 and M3 will decrease by HK$l50 000.
D. M2 will increase by HK$350 000 and M3 will decrease by HK$500 000.
DSE 2012_28

55. Which of the following is NOT a function of the Hong Kong Monetary
Authority?
A. determining the inter-bank offered rate in Hong Kong
B. supervising the liquidity position of the private banking institutions
C. managing and investing the Exchange Fund
D. maintaining the stability of the linked exchange rate
DSE 2012_29

56. Which of the following is included in the money supply M2?

(1) legal tender held by licensed banks
(2) demand deposits with licensed banks
(3) time deposits with restricted licence banks
(4) negotiable certificates of deposit issued by licensed banks held by the
non-bank public
A. (2) and (3) only
B. (2) and (4) only
C. (1), (2) and (4) only
D. (1), (3) and (4) only
DSE 2013_25

57. Maggie plans to deposit $500 000 in a financial institution in Hong Kong for two
months. Which of the following institutions can accept this deposit?
(1) licensed banks
(2) restricted licence banks
(3) deposit-taking companies
A. (1) and (2) only
B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3)
DSE2014_31

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58. Which of the following transactions would increase the money supply (M2) of Hong Kong?
A. Ms Chan transfers $500 000 from her time deposit account in a restricted licence bank to her time
deposit account in a licensed bank.
B. Mr Lee transfers $200 000 from his current account to his savings account in a licensed bank.
C. Mr Man deposits $100 000 cash into his savings account in a licensed bank.
D. Ms Chung deposits $600 000 cash into her time deposit account in a deposit-taking company.
DSE 2015_30

59. Refer to the following news extract.

Yu’e Bao (餘額寶) is a new online investment fund introduced by Alibaba. Much of the
popularity of Yu’e Bao has come from its ability to give customers the convenience of a
demand deposit – meanings they can withdraw their funds whenever they like – but with
returns well above what a bank could offer. It recently advertised an annualised return of
5 .25%, but that level has on occasion risen to above 7% since the fund was set up. By
contrast, banks offer 3.3% as interest for a one-year fixed deposit and close to nothing
on savings deposits.
Yu'e Bao is a better as compared with bank deposits because .
A. unit of account … it provides a homogeneous means of payment
B. unit of account … it can facilitate people's buying and selling of goods and services
C. store of value … it allows customers to have higher purchasing power in the future
D. store of value … the customers can keep their unused funds in Yu'e Bao
DSE 2015_35

60. Refer to the following diagram.

Ken read the above advertisement and bought a new mobile phone by installments. In this payment, which
of the following functions did money perform?

(1) store of value

(2) unit of account
(3) standard of deferred payment

1
 A. (1) and (2) only
B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3)
DSE 2016_30

61. Winnie withdraws HK$500 000 from her savings account with a licensed bank. She puts half of it into
her current account and deposits the other half at a deposit-taking company. Which of the following
shows the immediate effects on the money supply of Hong Kong?

A. Ml increases and M2 decreases.

B. Ml increases and M3 decreases.
C. Both M l and M2 decrease.
D. Both M2 and M3 decrease.
DSE 2016_32

62. Refer to the following data about Hong Kong’s money supply.
Components $ billion
Total issue of legal tender 300
Legal tender held by all authorised institutions 80
Demand deposits 100
All types of deposits with licensed banks and negotiable 3000
certificates of deposit issued by licensed banks (other than those
held by authorized institutions)

Cash in public = $300-80 =$220 bn

M1= $220 +100 =$320 bn
M2= $3000 + 220 =$3220 bn

The money supply M2 is________.

A. $320 billion
B. $3180 billion
C. $3220 billion
D. $3300 billion
DSE 2017-33

63. Brian wants to deposit $80 000 for two months in an authorized institution in Hong Kong in the form of
a negotiable certificate of deposit. Which of the following statements is correct?
A. As the term of maturity is longer than one month, a deposit-taking company can accept his
deposit.
B. As the term of maturity is shorter than three months, a restricted licence bank can accept
his deposit.
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 C. As the amount of deposit is less than $500 000, a restricted licence bank cannot accept his
deposit.
D. As negotiable certificates of deposit are not available in a licensed bank, a licensed bank
cannot accept his deposit.
DSE 2018-31

64. Which of the following is NOT a function of the Hong Kong Monetary Authority?
A. to stabilize the mortgage rate
B. to issue currency notes
C. to supervise the commercial banks
D. to manage the Exchange Fund
DSE 2018-33

65. Which of the following is/are the function(s) of the Hong Kong Monetary Authority?
(1) Managing the Exchange Fund
(2) Supervising the implementation of fiscal policy
(3) Determining Hong Kong's market interest rate
A. (1) only
B. (2) only
C. (3) only
D. (1), (2) and (3) (DSE 2019-29)

66. Refer to the following hypothetical case.

The currency of Country T, T-Dollar, bas depreciated by 40 percent from the beginning of 2018
US announced a series of trade sanctions against Country T. As a result, some shops in Country
prices in US Dollar instead of T-Dollar. Shops in black markets refused to accept T-Dollar, some
bought foreign currencies to safeguard their assets.

Which functions of money of the T-Dollar were weakened?

(1) medium of exchange

(2) unit of account
(3) store of value

A. (1) and (2) only

B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3) (DSE 2019-30)

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67. When a Hong Kong citizen transfers $500 000 from her time deposit account with a restricted licensed
bank to her savings account with a licensed bank,

(1) money supply (Ml) will increase.

(2) money supply (M2) will increase.
(3) money supply (M3) will increase.

A. (1) only
B. (2) only
C. (3) only
D. (2) and (3) only (DSE 2019-31)

68. Which of the following results can be a negative number?

A. gross investment minus net investment
B. total exports minus re-exports
C. money supply (M3) minus money supply (M2)
D. employed population minus unemployed population (DSE 2019-39)

69. The legal tender in Hong Kong held by licensed banks is included in .
(1) monetary base
(2) money supply M2
(3) money supply M3
A.(1) only
B.(2) only
C.(2) and (3) only
D.(1), (2) and (3) (DSE 2020-29)

70. Study the following news extract about Bitcoin（比特幣）.

In 2018, Kentucky Fried Chicken Canada launched 'Bitcoin Bucket', The company set up a
Facebook live feed, displaying the number of bitcoins needed to pay for the meal as in the
picture below. The 'Bitcoin Bucket' could only be purchased online and would be delivered
to the buyers' home later.

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In the above case, Bitcoin performed as a ____________.
(1) medium of exchange
(2) unit of account
(3) standard of deferred payment

A. (1) and (2) only

B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3) (DSE 2021-30)

71. Jack wants to deposit $400000 for 5 months. Which of the following financial
institutions in Hong Kong can accept his deposit?
(1) a restricted licence bank
(2) a virtual bank which is classified as a licensed bank
(3) a deposit-taking company

A. (1) and (2) only

B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3) (DSE 2021-32)

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Questions

4.
Define money and explain how money helps to solve the problem of exchange in this case. (4
marks) (2000-5)

5. Define money supply M1 and M2. (4 marks) (99 5)

6. Explain why banknotes would be more generally-accepted as a medium of exchange than diamonds. (4
marks) (2001-5)

7. List TWO functions of a central bank. (2 marks) (7-02)

8. In Hong Kong, Mr Lee withdrew $300,000 from his savings account in Bank A. He deposited 50% of
this amount with a deposit-taking company and remitted through a bank another 20% of this amount
overseas. He put the rest of the money in his safety box in Bank B.
What is the immediate effect of the above transactions on Hong Kong’s money supply M1 and M3 ?
Explain your answer. (6 marks) (6-02)

9. In some Asian countries, the prices of goods and services in tourist areas are expressed in US dollars.
Suppose tourists pay cash in US dollars for their purchases.
a) Name TWO functions of money performed by the US dollar as illustrated in the above situation.
(2 marks)
b) Name and explain the other TWO functions of money. (4 marks) (7-03)

10. A famous chain of fashion stores opens a new branch.

To celebrate the new opening, the chain stores issue cash coupons to their customers who can use them
as cash in these stores. Explain why the cash coupons are not money. (2 marks) (04-11c
ii)

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11. Which function of money does cash perform better in times of deflation than in times of inflation?
Explain (3 marks) (04- 9b)

12. State and explain TWO functions of money. (4 marks) (2005-4)

13. The “individual travel scheme” brings many tourists from Mainland China to Hong Kong.
In the following table, fill in the blanks to indicate the function of money that is performed by Renminbi
(RMB) in each case.
Function of money performed by RMB
Case 1: The prices of goods and services
in some shops in Hong Kong are
expressed in RMB.
Case 2: Some shops in Hong Kong accept
cash payment in RMB.
Case 3: Some banks in Hong Kong accept
RMB savings deposits
(2006-7)

14.

Many shops in Macau accept payment in Hong Kong dollars. Banks in

Macau also accept Hong Kong dollar deposits
Name TWO functions of money performed by the Hong Kong dollars as illustrated in the above
situation. Explain these functions. (4 marks)
(2007-6)

15. In Hong Kong the money supply M2 consists of five components. One is given in the following
figure. Fill in the other four components in the appropriate blanks.
(4 marks)

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 (2008-6)
16. Two measures are suggested to cool down the overheated stock market.
(i) Explain, respectively, whether the opportunity cost of choosing to invest in shares instead of
depositing money with banks would change when
(1) the deposit interest rate of banks is raised
(2) the government imposes a tax on the capital gains from trading of shares. (6 marks)
(2008-9bi)

17. In recent years, the price of textbooks has become a public concern.
(a) Textbook publishers usually print textbooks in large amounts in order to reduce their average cost of
production.
Explain TWO economies of scale that a firm may enjoy when it expands its production scale.
(4 marks)
(b) The price of paper has increased sharply in recent years. With the aid of a diagram, explain under what
condition publishers' total revenue from the sale of textbooks would increase. (8
marks)
(c) Some students purchase second-hand textbooks in bookstores. Explain why part of their total spending
on buying second-hand textbooks should be included in the calculation of GDP. (2 marks)
(d) Some bookstores issue book coupons which the holders can use to pay for their purchases in these
bookstores.
(i) Apart from 'store of value' and 'standard of deferred payment', name TWO other functions of money.
(2 marks)
(ii) Book coupons cannot perform the two functions of money mentioned in the answer to (d)(i).Explain.
(2 marks) (2009-9d)

18.
(a) Money is defined as _____________________________________ (2 marks)
(b) Explain with TWO reasons why pearls are not a good form of money. (4 marks)
(2010-5)

19. Demand deposits can be regarded as money. Explain which TWO functions of money they can perform.
(4 marks) (practice paper-8)

20. “9999 gold is preferred to cigarettes when used as money.” Give TWO reasons to explain this argument.
(4 marks) (DSE 2012-7)

21. Due to political instability, the currency of a country depreciates sharply and
becomes highly volatile. Which TWO functions of money may be weakened? Explain. (4 marks)
(DSE 2017-5)

22. Tourism is one of the ‘pillar industries’ in Hong Kong.

8
Source 1: search result from a hotel booking website
Hotel A Book now!
Tsim Sha Tsui East, HK$2100
Kowloon 30 square metres Free cancellation OR
2 Twin Beds RMB¥1750
Hotel B Book now!
Tsim Sha Tsui East, HK$2040
Kowloon 32 square metres Non-refundable OR
2 Twin Beds RMB¥1700
Free WIFI

Which TWO functions of money does the Renminbi perform in Source 1? Explain. (4 marks)
(DSE 2018-12b)

23. Peter owes Mary $100 and he has no cash in his wallet. He suggests repaying Mary by a cash coupon
(with a face value of $100) issued by a supermarket chain. Give TWO economic reasons to explain why
Mary would refuse to accept the cash coupon as a repayment of Peter’s debt. (4 marks) (DSE 2020-5b)

24. In a country, most of the prisoner in a correctional institution（懲教所）use cigarettes as a medium of

exchange, but citizens in society refuse to settle payment by using cigarettes. Apart from not being generally
acceptable, explain with TWO reasons why cigarettes are NOT a good form of money in society.
(4 marks) (DSE 2021-7)