Hong Kong's fiscal reserves stood at HK$800 billion. The government runs a deficit of HK$100 billion in Year 1 and HK$150 billion in Year 2. Assuming no investment income, the fiscal reserves at end of Year 2 are:

Question

Accepted Answer

A. Fiscal reserves = 800 - 100 - 150 = 550. Deficits draw down reserves. HK's large reserves act as a buffer for counter-cyclical fiscal policy.

Hong Kong's fiscal reserves stood at HK$800 billion. The government runs a deficit of HK$100 billion in Year 1 and HK$150 billion in Year 2. Assuming no investment income, the fiscal reserves at end of Year 2 are:

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