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BM/OCT 2012/ECO211/210/164/219

UNIVERSITI TEKNOLOGI MARA

FINAL EXAMINATION

COURSE

MACROECONOMICS

COURSE CODE

EC0211/210/164/219

EXAMINATION

OCTOBER 2012

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 by the invigilator.

4.

Please check to make sure that this examination pack consists of:
i)
ii)
iii)

the Question Paper

an Answer Booklet - provided by the Faculty
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
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BM/OCT 2012/ECO211/210/164/219

PART A

1.

Macroeconomics focus on the study of economics from the standpoint of

A.
B.
C.
D.

2.

When an economy is experiencing inflation

A.
B.
C.
D.

3.

macroeconomics, microeconomics.
demand analysis, supply analysis.
microeconomics, macroeconomics.
none of the above.

Gross Domestic Product (GDP) measured in terms of the price of the base year is
A.
B.
C.
D.

5.

the value of money falls.

the value of money increases.
the price level falls.
the Gross National Product falls.

The determination of prices and the behavior of individual markets are studied in
, whereas topics such as business cycles, unemployment, and
inflation are studied in
.
A.
B.
C.
D.

4.

individual economic units.

a typical firm.
a typical household.
the entire economy.

nominal GDP.
current GDP.
real GDP.
base GDP.

If net factor income from abroad is positive

A.
B.
C.
D.

Gross National Product is greater than Gross Domestic Product.

National Income is less than personal income.
Gross National Product is less than personal income.
Gross National Product is less than Gross Domestic Product.

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6.

C.
D.

income equals consumption.

saving is positive.
saving is negative.
income is bigger than consumption.

The sum of the average propensity to consume (APC) and the average propensity of
save (APS) always equals to
A.
B.
C.
D.

10.

net investment.
gross investment.
capital consumption.
net factor income abroad.

At the breakeven point

A.
B.
C.
D.

9.

entrepreneurs pay wages to workers in return for their labour services.

consumers spend money on consumptions goods, thus paying to the
producers,
producers pay to factors of production for their services, thus
generating income.
government pays to the public as government expenditures and receives from
the public as taxes.
exports pay for imports.

The main factor that differentiates Gross National Product from Net National Product
is
A.
B.
C.
D.

8.

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The circular flow of income and expenditure shows

A.
B.

7.

one.
zero.
the interest rate.
the marginal propensity to invest (MPI).

If the autonomous consumption increases, the size of the multiplier would

A.
B.
C.
D.

remain constant.
increase.
decrease.
either increase or decrease depending on the size of the change in
autonomous consumption.

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11.

direct tax and indirect tax.

tax revenue, non-tax revenue and non-revenue receipts.
tax revenue, import and export.
tax revenue and petroleum royalty.

Inflation is
A.
B.
C.
D.

16.

flat tax.
proportional tax.
regressive tax.
progressive tax.

Federal government revenue comprises from sources such as

A.
B.
C.
D.

15.

Al-Wadiah.
Al-Mudharabah.
Al-Musyarakah.
Al-Falah.

The tax structure where wealthy people pay a larger percentage of their income than
poor people is known as
A.
B.
C.
D.

14.

included in M1, but not in M2.

included in both M1 and in M2.
included in M2 but not in M1.
excluded from M1 and M2.

Which of the following is not an Islamic financial product?

A.
B.
C.
D.

13.

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Coins in people's pockets and purses are

A.
B.
C.
D.

12.

an increase in the purchasing power of the ringgit.

a loss in disposable income due to increased government spending.
a sustained increase in the general price level.
real income are rising.

During unemployment, the central bank will perform open market operations by
government bonds, so that the money supply could be
to
stabilize the economy.
A.
B.
C.
D.

buying, decreased.
buying, increased.
selling, decreased.
selling, increased.

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17.

To protect infant industry.

To diversify the economy.
To solve the unemployment problem in country.
To stabilize the social imbalances in the country.

The balance of payment is

A.
B.
C.
D.

20.

some workers have lost their jobs due to seasonal factors.

some workers quit their job to look for another job.
some workers lack marketable job skills.
some workers have lost their jobs during a recession.

Which of the following is not a reason for imposing trade barrier?

A.
B.
C.
D.

19.

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Cyclical unemployment exists because

A.
B.
C.
D.

18.

a periodic statement of the monetary value of all transactions between

residents in one country and residents of all other countries.
a statement that shows that the total value of imports must equal to the total
value of exports in term of ringgit.
any transaction that supplies the domestic country's currency.
all of the above.

The exchange rate is the

A.
B.
C.
D.

depreciation of the currency.

price of one country's currency in terms of another country's currency.
sum of net unilateral transfers.
amount of a country's currency that can be exchanged for one ounce of gold.

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BM/OCT 2012/EC0211/210/164/219

PARTB

QUESTION 1
Malaysia Records Highest Total Trade
KUALA LUMPUR: Malaysia recorded its highest total trade of RM1.3 trillion last year, up
8.7 per cent from 2010, said International Trade and Industry Minister Datuk Seri
Mustapa Mohamed. He projected a growth of between five and six per cent for
Malaysia's total trade this year. Mustapa said exports expanded 8.7 per cent to
RM694.55 billion last year while imports grew 8.6 per cent to RM574.23 billion. Trade
surplus rose 9.4 per cent to RM120 billion."This was the 14th consecutive year of trade
surplus recorded by the country since 1998," Mustapa said.
He said rising demand for production inputs and consumer goods from Asian markets
boosted this sector's contribution by 71.3 per cent to Malaysia's total exports. Exports to
Asia increased 11.2 per cent to RM495.19 billion in 2011."Within a span of five years, the
share of exports to Asia grew 8 per cent from 63 per cent in 2007, in tandem with the
region becoming the new economic growth centre of the world. Manufactured goods
were again the mainstay, accounting for 67.7 per cent share or RM470.3 billion of total
exports.
Mustapa also said China, for the first time, emerged as Malaysia's largest export market
in 2011, with exports to the country growing 13.9 per cent to RM91.25 billion. About 70
per cent of exports to China were manufactured goods and they mainly comprised
chemicals & chemical products, rubber products, electrical and electronic products,
manufactures of metal, processed food, and petroleum products. Meanwhile, exports to
Asean accounted for 25 per cent of the country's offtake with 5.8 per cent growth
recorded in 2011 to RM171.54 billion. Despite the uncertainties in the Eurozone,
Malaysia's exports to all major markets in the European Union (EU), excluding the
Netherlands and the United Kingdom, recorded an increase last year. Exports to EU
grew 4.7 per cent to RM71.95 billion with palm oil accounting for the largest export,
recording an increase of 31 per cent to RM6.88 billion. Mustapa said major growth
markets in 2011 were Indonesia, Nigeria, Bangladesh, Saudi Arabia, Belgium and
Germany where exports expanded by more than RM1 billion for each country.
Adapted from New Straits Times, February 9, 2012

a)

Explain any two (2) advantages of international trade.

(3 marks)

b)

Based on the above article, list two (2) factors which can increase the total exports of
Malaysia?
(2 marks)

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BM/OCT 2012/ECO211/210/164/219

c)

Based on the above article, which sector is the mainstay of total export in Malaysia for
year 2011?
(1 mark)

d)

Based on the above article, list any four (4) components of manufactured goods
exported to China.
(4 marks)

QUESTION 2
The following are extracts from the National Income accounting of Malaysia.
Items

RM Million

Interest

550

Personal consumption expenditure

1500

Government services

100

Income received from abroad

450

Transfer payment

350

Undistributed profits

470

Rent

220

Indirect taxes

300

Income paid to abroad

330

Depreciation

50

Employees' Provident Fund

500

Distributed profits

370

Wages and salaries

4000

Personal Income tax

500

Based on the table above, answer the following questions

a)

Gross Domestic Product at factor cost

b)

Gross National Product at factor cost

c)

National income

d)

Disposable income

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(3 marks)
(2 marks)
(2 marks)
(3 marks)
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QUESTION 3
Based on the following information, answer all questions below (all figures are in RM million).
Consumption
Government expenditure
Investment
Taxation

a)

=
=
=
=

400+0.75Yd
150
100
0.1 Y

Calculate the national income equilibrium.

(2 marks)

b)

Find the amount of savings at equilibrium income.

(2 marks)

c)

What type of budget is the government implementing?

(1 mark)

d)

What is the value of tax multiplier?

(2 marks)

e)

If full employment income is RM 1400 million, what problem is this country facing?
Show this situation in a well labeled diagram.
(3 marks)

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QUESTION 4
a)

The table below shows the money supply for Country M in year 2011.
RM Million

Items
Paper Money

3200

Negotiable certificates of deposits of commercial banks

1800

Bank Negara certificates

2000

Fixed deposits and saving deposits at Comercial bank

7550

Current deposits in commercial banks

7880

Fixed deposits and saving deposits in other financial institutions

6555

i)

Assuming that the amount of fiat money is RM 4500, calculate the amount of
coins.
(1 mark)

ii)

Calculate M1, M2 and M3 by considering Question 4a (i).

(3 marks)

b)

The following table shows the production possibilities of two countries before
specialization.
Country

Computer (units)

Rice (Kg)

Malaysia

300

900

Thailand

700

400

i)

Calculate the comparative advantage of producing computer and rice for both
countries and state the goods that each country should specialize in.
(4 marks)

ii)

Construct the table to show the amount of goods produced after specialization.
(2 marks)

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BM/OCT 2012/ECO211/210/164/219

PARTC

QUESTION 1
a)

Explain any four (4) macroeconomic objectives from the conventional perspective.
(10 marks)

b)

Using an appropriate diagram, explain the circular flow of income in three sector
economy.
(10 marks)

QUESTION 2
a)

Discuss any four (4) determinants of consumption.

(10 marks)

b)

Using appropriate diagrams, explain differences between autonomous investment and

induced investment.
(10 marks)

QUESTION 3
a)

Discuss any four (4) sources of Islamic government revenue for a country.
(10 marks)

b)

Discuss any two (2) tools for each of the following policies used by the government to
overcome the problem of unemployment.
i)

Monetary policy

ii)

Fiscal policy

(5 marks)
(5 marks)
QUESTION 4
a)

Using appropriate examples, illustrate the process of credit creation.

(10 marks)

b)

Write short notes with examples on the followings :

i)

Absolute advantage
(5 marks)

ii)

Zakat
(5 marks)
END OF QUESTION PAPER

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