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MATRIC NO.:____________________________DATE:_______________________

TOPIC 1
INTRODUCTION TO MACROECONOMICS

Question 1

Why study macroeconomics?

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Question 2

Describe the THREE (3) primary concerns of Macroeconomics.

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Question 3

Which of the following events are studied in Macroeconomics?

Event (√)
(a) Increase 20 sen per litre of RON 95 as announced in the news
recently.
(b) The unemployment rate in Malaysia has been steadily at 1.3%.

(c) Expanding the money supply decreases the interest rate,

increases investment, and stimulates aggregate demand.

(d) When a new technology is introduced in the production of

lemonade, the supply of lemonade will increase.
(e) The Chinese government makes it increasingly difficult for
American firms to export goods to China.

Question 4

Based on the following events, identify the phase of the economic cycle (peak; slowdown;
recession; recovery) when each event is likely to occur and mark it on the figure below:

(a) Government has

recently announced
tax cuts on income
earned by
households and
lowering the interest
rates.

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(b) The economic
effects arising from
the September 11
attacks were
causing global stock
markets to drop
sharply.

(c) The economy is

experiencing over
heating due to too
much money in the
economy.

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Question 5

The Circular Flow of Payments

A diagram showing the flows in and out of the sectors in the economy. Discuss the circular
flow of payments.

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***End of Exercise Questions***