Name Tan Yu Jun Chon Kar Mun Vincent Ling Moo Chang Chen Lim Yong Shen

ID J12011282

Signature

J12011248 J12011208

LECTURERS NAME SUBJECT NAME SUBJECT CODE PROGRAMME

: Ms. : Principle of Macroeconomics : ECO 2104 : Diploma in Business

TYPE OF ASSIGNMENT : Group Assignment DUE DATE : 23rd October, 2013

We declare that this assignment is our individual work. We have not worked collaboratively nor have we copied from any other students work or from any other source except where due acknowledgement is made explicitly in the text, nor has any part been written for us by another person.

Questions (i) Based on the above data and other relevant information, comment on Malaysias real GDP, inflation rate, unemployment rate and merchandise trade from year 2010 to year 2012 (both years inclusive).

Based on the table above, it shows that the Real Gross Domestic Product was decreased from year 2010 to year 2012. Increase in Real Gross Domestic Product will leads to the lower inflation rate in a country. However, decrease in Real Gross Domestic Product is due to the higher inflation rate in a country. Real GDP refers to the measurement of the goods and services at the constant prices. The example for the Real GDP is the income earned in a country. Other than that, it gives better measurement of economic well being as do not effect of inflationary pressure. The value of Real GDP obtained by deducting the inflation rate from Nominal GDP. Real GDP is usually lower than the value of Nominal GDP. According to the department of statistics in Malaysia, the Consumer Price Index / inflation rate was increased from 1.7% to 3.2% in 2010 to 2011. Due to the increasing in inflation rate, the value of money will decreased as the price of goods and services increased and the purchasing power of the citizens decreased. For example, the price for 15 eggs is RM5 when before the inflation but after the inflation, we can only purchase 10 eggs with RM5. This is because too much money was chasing too few goods. But, the inflation rate was being decreased from 3.2% to 1.6% in 2011 to 2012. Due to the decreasing in inflation rate, the value of money will increased because the price of goods and services decreased. Based on the data given, the unemployment rate was decreased from 2010 to 2011, 3.3% to 3.1% and also decreased in 2011 to 2012 from 3.1% to 3.0%. Unemployment is a macroeconomic phenomenon that directly affects people and Unemployment rate is the percentage of the total labour force (total number of people employed plus unemployed) that is unemployed but actively looking for a work. The unemployment rate decreased year by year mean that the economic growth rate of Malaysia is growing and which mean is accompanied by higher inflation rate and also in interest rate. For example why the unemployment rate will decreased there are two reason, reason one is people are get job and another reason is people are stop looking for job.

According to the department of statistics in Malaysia and BNM, the merchandise trade (merchandise export minus merchandise import) of Malaysia in year 2010 to 2011 is decreased from 6.1% to 0.7% and also decreased in year 2011 to 2012 from 0.7% to -5.3%. Merchandise trades trade in goods only. Merchandise trade basically is used to measure the total trades of exports and imports by month and year. From the resources that given we can know about the value of our country Malaysias import is always greater than value of export from year 2010 to 2012, it means Malaysia trade balance is negative also calls trade deficit. Trade deficit is not a bad thing because it means the quality life of Malaysian people is improve and resident of Malaysia can buy enough than the country produces. But if Malaysias merchandise trade continues decreasing, the economic growth of Malaysia will fall and inflation rate will increase.

(ii) Explain if the above figures suggest any macroeconomic problem(s) faced by Malaysia.

According to above figures suggest Malaysias real GDP was decreased from 7.4% to 5.1% in year 2010 to year 2011 that means had an inflation problem faced by Malaysia because decrease in Real Gross Domestic Product is due to the higher inflation rate in a country. Moreover, the evidence is Malaysias Consumer Price Index was increased from 1.7% to 3.2% in year 2010 to year 2011. And, due to the increasing in inflation rate, the value of money will decreased as the price of goods and services increased and the purchasing power of the citizens decreased. Besides, a decrease in real GDP (a recession), ceteris paribus, will cause a decrease in average interest rates in an economy. Furthermore, due to the increasing in inflation rate, the value of money will decreased that means in the Malaysia had a price instability problem. According to the department of statistics in Malaysia and BNM the data show Malaysia in year 2010, 2012 and 2013 for the merchandise imports is bigger than merchandise exports that means Malaysia had face the "trade deficit" or "trade deficit" problem. It indicates that the country's foreign exchange reserves and the international competitiveness of its good are weak that cause to the country's foreign trade at a disadvantage in the period of time. A large amount of trade deficit will lead to the outflow of domestic resources intensifies, foreign debts, affect the normal effective operation of national economy. In addition, Real GDP decreased means the national output is decreased this problem, the Malaysias price instability problem and the trade deficit problem will cause to the people's standard of living will decline.