Reference no: EM131201983

1. Suppose the following are national accounting data for a given year for Malaysia (hypothetical data).

Amount(Billions of RM)

Consumption of fixed capital	285
Gross private domestic investment	725
Government  consumption  expenditures	720
Government  investment  expenditures	165
Imports	-550
Exports	625
Household  consumption expenditure	3010
Net property income paid overseas	-35

Calculate GDP and the country's gross national expenditure using the expenditure approach;
Derive the country's gross national product (GNP);
Derive the country 's net national product (NNP);
Derive the country's current account balance;
Derive the country's gross national savings.

2. Using the aggregate demand - aggregate supply (AD-AS) diagram, show how the four economic events would affect economic activity, the price and employment levels. (Note: use a separate AD­ AS diagram for each event)

A decrease in personal income tax;
An increase in workforce skills through special training programs;
An decrease in exports;
An increase in an economy 's capital stock.

3. (a) Describe three problems of using fiscal policy to achieve a precise level of GDP.

Why is frictional unemployment inevitable in an economy characterised by imperfect job information and non-zero job-search time?

Is structural unemployment something macroeconomic policymakers should be concerned about? How does it differ from cyclical unemployment ?

Illustrate and explain with diagrams the difference between demand-pull and cost-push inflation; (2.5 marks for the diagram and 2.5 marks for the explanation)

4. Ifthe Bank Negara Malaysia sold RM800 million of government securities to private sector money markets, holding other things being held constant, what is the effect on:

The economy 's monetary base;
Short-term money market interest rates;
Longer-term maturity interest rates;
Aggregate demand , economic activity and inflation.

Explain what happens (if anything) to the economy 's monetary base when the Bank Negara Malaysia sells RM800 million in foreign currency to one of the banks operating in the country.

Which policy is more expansionary: RM200 billion increase in government spending for goods and services or a RM200 billion cut in taxes? Explain why.

5. The Keynesian and Monetarist schools of thought differ somewhat.

Why is the shape of the aggregate supply curve important to the debate between the Keynesians and Monetarists?

Ifthe investment demand curve was vertical , which view of monetary policy (i.e. Keynesian and Monetarist) impact on investment spending, aggregate demand, and economic activity be morecorrect?

Explain how they differ regarding an increase in the money supply causing inflation;