(i) The concept of price level and the definition of inflation (4 periods)
At the end of the lessons, pupils should be able:
(i) to understand the nature and the calculation of price indexes,
Class Activities:
Use a CPI (eg. CPI(A)) of Hong Kong for illustration, explain the nature and
calculation of price indexes. Briefly discuss its components and weights.
(ii) to understand the use and limitations of price indexes as an indicator of changes in the price level,
Class Discussion:
Discuss with pupils the limitations of the use of CPIs. Ask them to give examples of the following aspects:
(i) quality of goods and services not taken into consideration
(ii) goods not included in the calculation (iii) substitution between goods as a result
of changes in relative prices.
(iii) to define inflation. Class Activities:
Ask pupils to identify examples of rise in prices, which by definition, are not inflation.
(ii) The causes and
consequences of inflation (6 periods)
At the end of the lessons, pupils should be able:
(i) to understand the causes of inflation, (ii) to distinguish the concepts of anticipated
inflation from unanticipated inflation, (iii) to understand the effects of inflation.
Class Activities:
With newspaper cuttings on the causes and effects of inflation in Hong Kong, analyse with pupils the following points:
(i) if the causes claimed have really led to a sustained rise of the price level of Hong Kong
(ii) some effects of inflation.
Project:
Arrange the pupils in small groups.
Ask them to write a survey report on inflation in Hong Kong in the past decade.
The following points may be included:
(i) collection of data on CPIs and money supply, apply the quantity theory of money to analyse the correlation between money supply and the price level in the past ten years
(ii) collect newspaper cuttings on the cause of inflation
(iii) conduct an expenditure and investment survey of a few families. Find out how families might have been affected by inflation
(iv) ask pupils to explain, with relevant data, the effects of inflation on:
- the distribution of wealth and income
- transfer of wealth between the public and the government.
Class discussion:
Examine the anti-inflation policies of the Hong Kong Government and discuss their effectiveness in relation to the causes of inflation.
(iii) Nominal and real rates of interest and inflationary expectations (6 periods)
At the end of the lessons, pupils should be able:
(i) to distinguish nominal rate of interest from real rate of interest,
Class Activities:
With data of the current inflation rates, deposit rates and lending rate quoted by Hong Kong banks, help pupils to estimate the real rate of interest for depositors and lenders in Hong Kong. Discuss the wealth transfer implications with the pupils.
Role play:
Ask pupils to imagine themselves as bankers and explain how they would determine the interest rate to be charged on a mortgage loan for a period of five years.
Discuss the factors mentioned by the pupils.
(ii) to understand the trade off between inflation rate and unemployment rate: the short run and long run Phillips Curve.
10.
Interna-tional trade and finance
(i) Gains from trade: The law of comparative advantage (8 periods)
At the end of the lessons, pupils should be able:
(i) to understand the law of comparative advantage, Data Response Exercise:
Use hypothetical data to illustrate the law of comparative advantage and gains from trade.
(ii) to illustrate the gains from trade for countries with constant and increasing costs of production, (NB: offer curve NOT required)
(ii) Protectionism versus free trade: an elementary graphical analysis of the effects of tariffs and quotas (optimal tariff NOT
required) (8 periods)
At the end of the lessons, pupils should be able to understand and illustrate graphically the economic effects of tariffs and quotas.
Case Study:
Ask pupils to make a case study on textiles quotas in Hong Kong. The following aspects may be included in their reports:
(i) background for imposition of textile quotas
(ii) effects of quotas
(iii) method of allocating quotas and gains of quota holders
(iv) suggestions on alternative method(s) of allocating quotas and the effects on existing quota holders.
Class Debate:
Organize a class debate with the following motion:
“Trade protectionist measures are necessary for less developed countries.”
Project:
Ask pupils to write a survey report on:
(i) how the main exports of Hong Kong are affected by protectionism. (collect relevant newspaper cuttings if
available) and,
(ii) how Hong Kong entrepreneurs respond to these protectionist measures.
Class Activities:
With newspaper cuttings on trade protectionism, ask pupils to analyse the rationales / fallacies in the newspaper cuttings.
(iii) Balance-of-payments accounting and
adjustments (8 periods)
At the end of the lessons, pupils should be able:
(i) to identify the major components of the balance-of-payments account,
Data response Exercise:
Assign pupils some data response exercise on balance-of-payments accounting. Ask pupils to classify some examples into their appropriate accounts in the
balance-of-payments.
(ii) to understand the effects of the
balance-of-payment surplus (deficit) on national income and foreign exchange markets,
(iii) to explain the means of adjusting the
balance-of-payment surplus (deficit) and the conditions affecting their effectiveness. (NB:
This topic may be discussed in detail under Topic 10 (iv) (iii))
(iv) Exchange rates: a brief discussion of fixed rates, flexible rates and the Hong Kong linked rate (16 periods)
At the end of the lessons, pupils should be able:
(i) to explain the determination of exchange rate under the fixed exchange rate system and the flexible exchange rate system,
(ii) to understand the factors affecting the exchange rate,
(iii) to understand the adjustment mechanism under the different exchange rate systems,
(iv) to compare the merits and demerits of the flexible exchange rate system and fixed exchange rate system,
(v) to understand the operation of the Hong Kong linked rate and its impact on the local economy.
Class Debate
Organize a class debate with the motion:
“Hong Kong should keep the linked rate”
Project:
Ask pupils to do a survey report on the linked rate in Hong Kong. The following sections may be included:
(i) background of introduction (ii) operation of the linked rate
(iii) economic impact of the linked rate (supplemented with newspaper cuttings).
Eight periods (40 minutes each) per week are recommended. The number of periods for the teaching, revision, activities and assessment of each topic is suggested as follows:
Topic No. of period Topic No. of period
1 (i) 5 8 (i) 3
(ii) 8 (ii) 10
(iii) 6 19 (iii) 3
(iv) 6
2 (i) 14 (v) 10 32
(ii) 6
(iii) 14 9 (i) 4
(iv) 10 (ii) 6
(v) 4 48 (iii) 6 16
3 (i) 14 10 (i) 8
(ii) 4 (ii) 8
(iii) 6 (iii) 8
(iv) 16 (iv) 16 40
(v) 18
(vi) 2 60 Total 370
4 (i) 8
(ii) 6
(iii) 6
(iv) 6 26
5 (i) 8
(ii) 2
(iii) 6
(iv) 14 30
6 (i) 10
(ii) 21 31
7 (i) 10
(ii) 11
(iii) 8
(iv) 4
(v) 24
(vi) 3
(vii) 8 68