BBCE1023: Principles Of Macroeconomics Assignment, (TAR UMT), Malaysia

SECTION A – STRUCTURED QUESTIONS

Answer ALL FOUR questions. Show your workings.

 QUESTION 1

 The table below shows the Malaysian budget for the years 1996 to 2001.

Fill in the blank information on the overall budget and type of budget for each year.

The table below shows the source of borrowing by the government in the year 2019.

Calculate the internal debt and external debt of the country in the year 2019.

QUESTION 2 

 The table below shows income data in two countries last year.

Calculate

• Gross Domestic Product at market price for each country.
• Gross Domestic Product at factor cost for each country.
• Gross National Product at factor cost for each country.
• National income for each country.
• Disposable personal income for each country.

QUESTION 3

The circular flow of income will show the economic interaction between the four sectors of the economy.

• Draw the diagram that will explains the between households, firms, government and the rest of the world
• Explain the diagram above (3a).

SECTION B – ESSAY QUESTIONS

 Answer ALL THREE questions.

 QUESTION 1

1. There are two categories of government expenditure namely operating expenditures and development expenditures.

Discuss the components of the government development expenditures

1. Unemployment is a situation where labour force participants are available and willing to work but are unable to find the jobs.

Elaborate the measure to control unemployment that can be implemented by the government.

Economist will focus on achieving macroeconomic goals. There are four major economic goals namely as full employment, price stability, economic growth and equitable distribution of income. However, it is impossible for a government to achieve all four macroeconomic goals simultaneously.

Briefly discuss how a government will not be able to implement two particular goals at the same time.

Investment refers to the spending on purchases and accumulation of capital goods such as buildings, equipment and accumulation of capital goods such as buildings equipment and additions to inventories.

Hence, identify the TWO (2) factors influencing investment.

QUESTION 2

1. International trade refers to exchange of good and services between the people of two countries. Internal trade refers to exchange of goods and services within the political boundaries.

Discuss THREE (3) positive impact of international trade to a country.

Trade restriction is important even though international trade brings a greater increase in world output

Explain TWO (2) instruments to enforce protectionism

Gross domestic product (GDP) and Gross national product (GNP) are very important for the countries.

Explain the meaning of GDP and GNP.

1. The main concern of any macroeconomic policy is to solve macroeconomics problems and to achieve the macroeconomics goals. The two important sub division of any government policy are the monetary policy and fiscal policy.

Differentiate between expansionary fiscal policy and contractionary fiscal policy.

QUESTION 3 (20 MARKS) – ESSAY/OPEN ENDED QUESTION

KUALA LUMPUR:  Malaysia’s core inflation has surged to an almost five-year high as domestic demand strengthens. The headline inflation rose to 2.8 per cent year-on-year (YoY) in May, the fastest gain since July 2017, to surpass Bloomberg consensus of 2.7 per cent. Food and non-alcoholic beverages price inflation saw an accelerated increase to 5.2 per cent YoY last month, the highest level since October 2012.

UOB Malaysia senior economist Julia Goh and economist Loke Siew Ting said all food items logged a persistent price hike, particularly meat which was up by 9.5 per cent YoY compared to 6.2 per cent increase registered in April.

Both price inflation of food at home and food away from home spiked up to 5.5 per cent (April: 4.1 per cent) and 5.1 per cent(April: 4.4 per cent) respectively. On a month-on-month (MoM) basis, consumer price index (CPI) rose the most in seven months by 0.6 per cent (April: 0.2 per cent).This brought year-to-date inflation to an average of 2.4 per cent in the first five months of 2022 (January-May 2021: 2.1 per cent. In May, 67 per cent of 12 CPI components recorded a larger annual gain in prices as compared to the preceding month, led by food a non-alcoholic beverage, transport, recreation services and culture, restaurants and hotels, as well as housing, utilities and other fuels segments.

“The food price index as a whole posted the largest increase since October 2011 of 5.3 per cent YoY while the non-food price index rose 1.7 per cent. “This suggests broader second-round effects on consumer prices from higher energy prices, raw material and labour shortages,” Goh and Loke said in a note today.

Core inflation rose for eight straight months to 2.4 per cent (April: 2.1 per cent), marking the highest level since July 2017, they added.They said it had also risen above the 2016-2021 long-term average of 1.4 per cent for five consecutive months. Going into the second half of 2022, they expect CPI growth to trend higher as low-base effects kick in and the government has begun to gradually adjust prices of administered item amid elevated global commodity prices, currency weakness, and recovering domestic demand.

The government recently announced the removal of the ceiling price for chicken and chicken eggs, as well as subsidies for cooking oil in bottles of 2 kilogram (kg), 3kg and 5kg, from July 1. “The price of chicken is expected to be raised by 12 per cent to 35 per cent following the removal of the ceiling price, while that of chicken eggs is expected to be hiked by 10 per cent to 30 per cent. “As for cooking oil, the government is currently subsiding about RM6.00 per kg based on market price of around RM8.50 per kg. .

Source: https://www.nst.com.my/business/2022/06/807924/malaysias-inflation-shoots-fastest-nearly-five-years

1. “The government recently announced the removal of the ceiling price for chicken and chicken eggs, as well as subsidies for cooking oil in bottles of 2 kilogram (kg), 3kg and 5kg, from July 1”

In your opinion, why government decide to remove the ceiling price and subsidies? Explain your answer.

2. “Inflation rose to 2.8 per cent year-on-year (YoY) in May, the fastest gain since July 2017 to surpass Bloomberg consensus of 2.7 per cent”

Identify and explain the cause of inflation to rise faster as compared to what have been forecasted.

Answer

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