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CONFIDENTIAL BM/APR2011/ECO211/210/164/219 UNIVERSITI TEKNOLOGI MARA FINAL EXAMINATION COURSE MACROECONOMICS COURSE CODE EC0211/210/164/219 EXAMINATION APRIL 2011

TIME 3 HOURS INSTRUCTIONS TO CANDIDATES 1. This question paper consists of three (3) parts: PART A (20 Questions) PART B (4 Questions) PART C (4 Questions) 2. Answer ALL questions from PART A and PART B, and two (2) questions from PART C. i) Answer PART A in the Objective Answer Sheet. ii) Answer PART B and PART C in the Answer Booklet. Start each answer on a new page. 3. Do not bring any material into the examination room unless permission is given b y the invigilator. 4. Please check to make sure that this examination pack consists of: i) the Question Paper ii) an Answer Booklet - provided by the Faculty iii) an Objective Answer Sheet - provided by the Faculty DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO This examination paper consists of 10 printed pages Hak Cipta Universiti Teknologi MARA CONFIDENTIAL

CONFIDENTIAL 2 BM/APR 2011/EC0211/210/164/219 PART A 1. Macroeconomics approaches the study of economics from the viewpoint of A. the entire economy. B. government units. C. the operations of specific product and resource markets. D. individual consumers. 2. The circular flow of income for a two-sector model shows A. the flow of income to the household and government sector. B. the flow of income between the household and business sectors. C. the flow of income between the household, business and government sectors. D. the flow of income between the government and business sectors. 3. Gross Domestic Product (GDP) measured using current prices is called A. nominal GDP. B. real GDP. C. constant GDP. D. deflated GDP. 4. The problem of double counting in measuring GDP can be avoided by A. including the values of the intermediate and final goods produced. B. deducting indirect taxes and adding subsidies to the value of output. C. deducting the value of goods imported from the value of goods exported. D. including the value of all final goods and services produced. 5. Autonomous consumption is consumers spending A. that is dependent on changes in disposable income. B. on durable goods. C. that causes MPC to rise. D. that is independent of the level of disposable income. 6. If Y = RM500 billion, autonomous consumption = RM300 billion and the marginal propensity to save (MPS) = 0.20, then saving will equal

A. -RM200 billion. B. RM200 billion. C. -RM100 billion. D. RM100 billion. Hak Cipta Universiti Teknologi MARA CONFIDENTIAL

CONFIDENTIAL 3 BM/APR 2011/ECO211/210/164/219 7. If marginal propensity to consume (MPC) is equal to 0.8, then A. marginal propensity to save (MPS) equals 1.20. B. multiplier equals to 0.20. C. multiplier equals to 1 divided by 0.80. D. multiplier equals to 5. 8. Assume an economy is in recession and the marginal propensity to consume (MPC) is 0.8. An increase of RM200 billion in national income is needed in order to re ach full employment. The target can be reached if government spending increased by A. RM20 billion. B. RM40 billion. C. RM80 billion. D. RM200 billion. 9. The speculative demand for money A. varies inversely with income. B. is only concerned with active money. C. varies inversely with the interest rate. D. varies directly with the transactional demand for money. 10. If central bank wishes to increase the money supply then it should A. increase the interest rate. B. increase the discount rate. C. buy government securities in the open market. D. All of the above. 11. What is the Islamic financial concept used by Syarikat Takaful Malaysia? A. Al-Mudharabah. B. Al-Musyarakah. C. Al-Murabahah. D. Al-Wadiah. 12. A budget deficit occurs when A.

export is more than import. B. import is more than import. C. government purchasing is more than government revenue. D. government revenues is more than government expenses. 13. Which of the following taxes are examples of indirect taxes? A. Import duties, excise duties and petroleum revenues taxes. B. Petroleum revenue taxes, road taxes and sales taxes. C. Export duties, personal income taxes and sales taxes. D. Import duties, export duties and excise duties. Hak Cipta Universiti Teknologi MARA CONFIDENTIAL

CONFIDENTIAL 4 BM/APR 2011/ECO211/210/164/219 14. A progressive tax is a tax that A. is imposed only on higher income earners. B. will be the same for all income levels. C. goes on increasing with income. D. falls with the increase in income. 15. Intan pays a tax of RM400 on her income of RM80, 000, while Maya pays a tax of RM180 on her income of RM60, 000. This tax structure is A. progressive. B. regressive. C. proportional. D. constant. 16. Structural unemployment is unemployment caused by A. discrimination. B. a temporary changes in jobs. C. the time required to match employers and workers. D. a mismatch between worker skills and employer requirements. 17. When a country produces a good at a lower opportunity cost than any other countr y, this country is said to have A. an absolute advantage. B. a free-trade advantage. C. a comparative advantage. D. a trading advantage. 18. If foreign exchange rate is determined by the market forces for various currenci es, then the exchange rate is A. fixed. B. floating. C. set by the value of gold. D. government-determined.

19. A fall in the value of one currency relative to another is A. a floating of the currency. B. a strengthening of a currency. C. an appreciation of a currency. D. a depreciation of a currency. Hak Cipta Universiti Teknologi MARA CONFIDENTIAL

CONFIDENTIAL 5 BM/APR 2011/EC0211/210/164/219 20. A quota affects trade by A. limiting the quantity of goods that can be imported. B. imposing a tax on imported goods. C. offering a subsidy to producer who exports to foreign countries. D. the voluntary action of foreign manufacturers to limit their exports. Hak Cipta Universiti Teknologi MARA CONFIDENTIAL

CONFIDENTIAL 6 BM/APR 2011/EC0211/210/164/219 PARTB QUESTION 1 Malaysia's exports advance 17.2% in June PETALING JAYA: Malaysia's June 2010 external trade continued to see strong growth, albeit at a moderating pace, with exports expanding 17.2% year-on-year ( y-oy) to RM52.83bil, while imports soared 30.1% y-o-y to RM46.79bil. Overall, total tr ade grew 22.9% y-o-y to RM99.62bil, the International Trade and Industry Ministry sa id yesterday. Malaysia continued to enjoy healthy trade surplus, which totalled RM6.04bil in June. That was the 152th consecutive month of trade surpluses for t he country since November 1997. However, problems in Europe and easing Chinese appetite, amid the backdrop of high employment and weaker consumer sentiment in G3 markets (US, Japan and Euro region) could be reasons for the growth moderation in the future. On the im ports growth in June, which exceeded economists' expectations, economists attributed t hat to improvement in both domestic demand and higher capital investment by companies, reflecting stronger confidence. Oh said: "The recent strengthening of the ringgit against major currencies has also boosted Malaysia's purchasing power to import more." Products that contributed to exports growth in June were electrical and electron ic (E&E) products valued at RM21.3bil (40.2% of total exports), palm oil at RM4.1bi l (7.7%), chemicals and chemical products at RM3.4bil (6.3%), liquefied natural ga s at RM3bil (5.7%) and crude petroleum at RM2.4bil (4.5%). Singapore, China, the US, Japan and Hong Kong were the top five export destinations, accounting for 50.8% of Malaysia's total exports in June. Asean accounted for RM12.97bil, or 24.6%, of Malaysia's total exports, up by 7% from June 2009. Malaysia's major import produ cts in June were E&E products valued at RM17bil (36.2% of total imports), chemicals and chemical products at RM4.4bil (9.3%), and machinery, appliances and parts at RM4bil (8.5%). The main import sources were China, Japan, Singapore, the US and Thailand, which collectively represented 54.3% share of the total. Adapted from The Star, 4th August 2010. a) Explain two (2) reasons why international trade is important to Malaysia. (4 marks) b) Define trade surplus. Explain why it is important for Malaysia to maintain a surplus.

(3 marks) c) Based on the article, what determine the export and import performance of Mal aysia? (3 marks) Hak Cipta Universiti Teknologi MARA CONFIDENTIAL

CONFIDENTIAL 7 BM/APR 2011/ECO211/210/164/219 QUESTION 2 Based on the diagram below and given tax is equal to RM20, answer the following questions. S.I.G J k S = -60 + 0.15Yd I + G 400 ^ 120 0 I National Income ^s^ Y, Y2 Ya a) Determine the value of marginal propensity to consume (MPC) and autonomous consumption. (1 mark) b) Calculate the equilibrium level of national income, Y3 (2 marks) c) If the full employment income level is RM3,000, is there an inflationary gap or a deflationary gap? Draw a diagram to show the situation. (3 marks) d) Determine the change in government expenditure required to achieve the full employment level of income. (2 marks) e) Why is saving considered as leakage and investment considered as injection? (2 marks) Hak Cipta Universiti Teknologi MARA CONFIDENTIAL

CONFIDENTIAL 8 BM/APR2011/ECO211/210/164/219 QUESTION 3 The following data shows the balance sheet of Bank Y for the year ended 2010. Assets (RM) Liabilities (RM) Cash 435 Initial deposits 4,985 Loans 4,550 Total 4,985 Total 4,985 a) Define cash ratio and calculate its value. (2 marks) b) Calculate the total money supply and total credit created. (4 marks) c) Assume Bank Y wishes to hold 3% of the excess reserves, how would this affect the total change in money supply? Why? (2 marks) d) List two (2) limitations of the credit creation. (2 marks) Hak Cipta Universiti Teknologi MARA CONFIDENTIAL

CONFIDENTIAL 9 BM/APR 2011/EC0211/210/164/219 QUESTION 4 The following table represents the national income data for a country in 2010. Items RM Million Personal consumption expenditures Net foreign factor income received in Malaysia Transfer payments Capital consumption Social security contributions Proprietor's income Net exports Dividends 245 440 120 270 220 330 110 160 Indirect business taxes 180 Undistributed corporate profits Personal income taxes 125 260 Corporate income taxes Government expenditure Net private domestic investment Subsidy Personal saving 190 990 880 120 200 Calculate: a) Gross domestic product at market price (GDPmp). (2 marks) b) Net domestic product at market price. (2 marks) c) Net national product at factor cost. (2 marks) d) Disposable income. (2 marks) e) Give two (2) uses of national income accounting. (2 marks) Hak Cipta Universiti Teknologi MARA CONFIDENTIAL

CONFIDENTIAL 10 BM/APR 2011/EC0211/210/164/219 PARTC QUESTION 1 a) By using numerical example, show how two countries can specialize in producin g goods based on comparative advantage principle. (10 marks) b) Explain four (4) reasons why a country implements protectionism policy. (10 marks) QUESTION 2 a) Define deficit trade balance. Explain four (4) measures how a country correct s a deficit trade balance. (10 marks) b) Explain any four (4) tools of protectionist policy. (10 marks) QUESTION 3 a) With an appropriate diagram, explain the circular flow of income for a two-se ctor economy. (8 marks) b) Explain any two (2) determinants of investment. (4 marks) c) Explain any four (4) problems in calculating national income. (8 marks) QUESTION 4 a) Explain any four (4) macroeconomic objectives from the Islamic perspective. (10 marks) b) Explain the components of the Malaysian government's revenue. (10 marks) END OF QUESTION PAPER Hak Cipta Universiti Teknologi MARA CONFIDENTIAL

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