Question 8:

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


(Billions of RM)

Consumption of fixed capital


Gross private domestic investment


Government  consumption  expenditures


Government  investment  expenditures






Household  consumption expenditure


Net property income paid overseas


  1. Calculate GDP and the country’s gross national expenditure using the expenditure approach;
  2. Derive the country’s gross national product (GNP);
  3. Derive the country ‘s net national product (NNP);
  4. Derive the country’s current account balance;
  5. Derive the country’s gross national savings. (2 marks each)

Question 9:

(2.5 marks each part)

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)

  1. A decrease in personal income tax;
  2. An increase in workforce skills through special training programs;
  3. An decrease in exports;
  4. An increase in an economy ‘s capital stock.

Question 10:

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

  1. Why  is  frictional  unemployment  inevitable  in  an  economy  characterised  by  imperfect  job information and non-zero job-search  time?  (3.5 marks)
  2. Is structural unemployment something macroeconomic policymakers should be concerned about? How does it differ from cyclical unemployment ? (3.5 marks)

(10 marks total – 5 marks each part)

  1. 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)


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