Universiti Teknologi Mara Final Examination Final Assessment

CONFIDENTIAL 1 BA/JUL 2021/ ECO211/210/164/219
UNIVERSITI TEKNOLOGI MARA

FINAL EXAMINATION
ASSESSMENT
COURSE : MACROECONOMICS
COURSE CODE : ECO211/210/164/219
EXAM : JUNE 2021
JULY 2019
TIME : 3 HOURS
INSTRUCTIONS TO CANDIDATES
1. This question paper consists oftwo (2) parts: PART A (40 Questions)
PART B (4 Questions)
2. Answer ALL questions in the Answer Booklet. Start each answer on a new page.
3. Answer ALL questions in English.
DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO

This examination paper consists of 13 printed pages
© HakCiptaUniversitiTeknologi MARA CONFIDENTIAL

PART A
1. Which of the following topics are more likely to be studied in macroeconomics?
A. The price of smartphone, wage differences between genders and antitrust laws.
B. How customers maximize utility and how prices are established in markets for
agricultural products.
C. The percentage of the labor force that is out work and differences in average
income from country to country.
D. The effect of taxes on the process of airline tickets, the profitability of automobile-
manufacturing firms and employment trends in the food-service industry.
2. Objectives of Islamic macroeconomics include all of the following except
A. to achieve universal education.

B. to produce many business firms.
C. to maximize employment generation.
D. to achieve economic justice and freedom.
3. What is the meaning of “equilibrium” in macroeconomics?
A. Aggregate supply is more than aggregate demand.

B. Aggregate demand is more than aggregate supply.
C. Aggregate demand is equal to aggregate supply.
D. Total value of output produced is more than total value of expenditure.
4. Macroeconomics is concerned about all the following except
A. the general price level.

B. the general economic factors that determine income.
C. the production decisions involving consumer goods in a market.
D. saving and investment from the standpoint of the whole economy.
5. Gross domestic product is officially measured by adding together
A. incomes received by all households.

B. gross national product and depreciation of resources.
C. the quantity of each good and service produced by Malaysian.
D. the market value of all final goods and services produced within the borders of a
nation.
6. Which of the following is a true statement concerning transfer payments?
A. Transfer payments are included in the import category of GDP.

B. Transfer payments are included in the next exports category of GDP.
C. Ultimately, transfer payments must be repaid to the government by the
recipients.
D. Transfer payments are payments made by the government for which no good or
service is currently received in return.

7. Which of the following serves as an example of the underground or “shadow” economy?
A. A woman barters home repairs with her neighbor.

B. A man sells illegal drugs and fails to report his income.
C. A teenager baby-sits regularly and fails to report her income.
D. All of the above are correct.
8. Real national product can be defined as
A. national product valued at current price.

B. national product valued at constant price.
C. national product valued at real factor cost.
D. national product valued in term of real value of money.
9. If the autonomous consumption increases, the size of the multiplier would
A. increase.
B. decrease.
C. remain constant.
D. either increase or decrease depending on the size of the change in autonomous
consumption.
10. If the Malaysian government decides to increase spending by RM80 million, with MPC =
0.8, the national income will
A. fall by RM400 million.

B. rise by RM400 million.
C. fall by RM100 million.
D. rise by RM100 million.
11. Investment demand curve will shift to the left as the result of
A. a decrease in business taxes.

B. a decrease in the interest rate.
C. an advancement of technology.
D. business pessimism about the future economic condition.
12. The multiplier effect means that
A. consumption is typically several times as large as saving.

B. a small increase in investment can cause national income to change by a larger
amount.
C. a small change in consumption demand can lead to a much larger increase in
investment.
D. a small decline in the MPC can cause equilibrium national income to rise by
several times that amount.

13. Given that the saving function in a two sector economy is S = - 80 + 0.15Yd, then the
value of multiplier in this economy is
A. 0.67
B. 1.33
C. 5.00
D. 6.67
14. How much is the marginal propensity to consume if the investment multiplier is 2.5?
A. 0.2.
B. 0.4.
C. 0.6.
D. 1.0
15. The consumption function is given as C = 200 + 0.7 Yd. If income is RM1,500 and net
taxes are RM50, saving equals
A. RM175
B. RM235
C. RM1 215
D. RM1 290
16. A house is bought by a bank and sold to you at an agreed price, then the bank and you
determine the period and manner of its installments. This Islamic financial product is
known as
A. al – Murabahah
B. al – Musyarakah
C. al – Mudharabah
D. al - Bai Bithaman Ajil
17. The three main tools of monetary policy are
A. tax rate, discount rate and open market operations.

B. discount rate, reserve ratio and open market operations.
C. government expenditures, reserve ratio and discount rate.
D. tax rate, government expenditures and open market operations.
18. Under this Islamic scheme of savings and current account, the customers will enjoy
interest free safekeeping of money, as well as a share of any profit that the bank makes
by utilizing the deposit. This Islamic financial product is known as
A. al – ‘araf
B. al – falah
C. al – wadiah
D. al – mudharabah

19. When economists refer to “tight” monetary policy, they mean the Bank Negara Malaysia
is taking actions that will
A. expand the money supply.

B. contract the money supply.
C. increase the demand for money.
D. decrease the demand for money.
20. Al – Jizyah
A. is imposed on all agricultural land owned by non – Muslims.

B. refers to movable possessions taken in battle for enemy.
C. is imposed on the non – Muslim in lieu of guarantee to them by an Islamic state.
D. is donated by individual for the use of certain group of Muslims such as orphans
and poor.
21. The intended goal of expansionary fiscal and monetary policy is
A. an increase in interest rates.

B. equal distribution of income.
C. an increase in the price level.
D. an increase in the level of aggregate output.
22. Nik Suriati pays a tax of RM200 on her income of RM40,000, while Azwani pays a tax of
RM300 on her income of RM60,000. This tax structure is
A. constant.
B. regressive.
C. progressive.
D. proportional.
23. Assume an economy is at full employment but planned investment exceeds planned
saving, other things being equal, what fiscal policy actions would best address these
problems?
A. Increase both taxes and government spending.

B. Decrease both taxes and government spending.
C. Decrease taxes and increase government spending.
D. Increase taxes and decrease government spending.
24. Fiscal policy includes the following except
A. changes in income tax.

B. changes in corporate tax.
C. changes in interest rates.
D. changes in government expenditures.

25. If a person is taxed RM300 on an income of RM1000, taxed RM500 on an income of

RM2000 and taxed RM600 on an income of RM3000, this person is paying a
A. excise tax
B. regressive tax
C. proportional tax
D. progressive tax
26. All of the following are not included in a labor force except
A. pensioner.
B. housewife.
C. quit voluntarily.
D. absent from the job because of bad weather.
27. If the number of people employed is 2,905,000 and the labor force is 3,500,000, the
unemployment rate is
A. 17%.
B. 20%.
C. 83%.
D. cannot be determined from this information
28. Which one of the following groups benefits from inflation?
A. Lenders.
B. Borrowers.
C. Pensioners.
D. Savers
29. It is difficult for cyclically unemployed individuals to find jobs because
A. the economy is in recession.

B. they have not looked long enough to find a job.
C. they quit their at last job and employers view the suspicion.
D. they do not meet the qualifications required for the available jobs.
30. Demand – pull inflation may be caused by
A. an increase in the wage rate.

B. an increase in resource availability.
C. a fall in per unit cost of production.
D. an increase in the aggregate demand.
31. Cost – push inflation is due to
A. increase in prices of resources.

B. excess total consumer spending.
C. too much money chasing too few goods.
D. the economy operating at full level of employment.

32. The inflation that occurred in the 1990s is known as
A. Global Financial Crisis.

B. Asian Financial Crisis.
C. Crisis of the Third Century.
D. Turkish Currency and Debt Crisis.
33. Unemployment that occurred during the Covid-19 pandemic outbreak can be considered
as
A. cyclical unemployment.
B. frictional unemployment.
C. seasonal unemployment.
D. structural unemployment.
34. The infant industry argument for protectionism suggests that an industry must be
protected in the stage of its development so that
A. firms can be protected from subsidized foreign competition.

B. there will be adequate supplies of crucial resources in case they are needed for
national defense.
C. domestic producers can attain the economies of scale to allow them to compete
in world markets.
D. none of the above reflects the infant industry argument.
35. Which of the following is true about quota?
A. Policy to protect.
B. Restriction on the volume of import.
C. Government restricts the supply of foreign currency in the country.
D. Government directly bans items into the country due to economic, social or
political reasons.
36. What is the meaning of embargo?
A. A limit on the quantity of imported products.

B. The law that bars trade with another country.
C. The prices of imported products to domestic consumers.
D. The ability of imported products to compete with domestic products.
37. Which of the followings not included in the current account balance?
A. Net income.
B. Current transfer.
C. Financial account.
D. Balance of goods and services.

38. Special drawing rights are
A. a form of international barrier to trade created by the IMF to help maintain fixed
exchange rates between member countries.
B. a form of international reserve holdings created by the IMF to help maintain
purchasing power parities.
C. a form of international money created by the IMF that member countries can use
to settle international accounts.
D. none of the above.
39. Which of the following is incorrect?
A. Embargo is a total ban on imported goods from a country.

B. Advalorem tariff is imposed to increase domestic product, export and export
revenue.
C. Tariff is imposed to raise the prices of imported foreign goods, so people choose
to by cheaper goods made domestically.
D. Quota is imposed to restrain demand for imports, so people would have to buy
the locally-produced goods.
40. Under a system of floating exchange rates, an excess supply of a currency will lead to
A. a depreciation of that currency.

B. an appreciation of that currency.
C. a long – term surplus of that currency.
D. a long – term shortage of that currency.

PART B
QUESTION 1
The table shows the monetary items for country COV in year 2019.
ITEMS RM (Million)
Coins 14,500
Short term interest bearing debt 10,500
Savings and fixed deposits in Merchant Bank 61,000
Negotiable instrument deposit 15,000

Current account in commercial banks 25,600
Bank Negara certificates 12,400
Fixed and savings deposits in commercial banks 13,000
Net issue of negotiable certificates of deposits in discount houses 40,000
Foreign deposits in Bank Negara Malaysia 22,500
Currency in circulation 36,500
Repurchase aggrements in other financial institutions 16,200
a) Calculate the amount of paper money.

(2 marks)
b) Find the value of:
i) M1
(3 marks)
ii) M2
(3 marks)
iii) M3
(3 marks)
iv) Narrow quasi money

(2 marks)
v) Broad quasi money

(2 marks)

QUESTION 2
Assume Bank STU receives a deposit of RM25,000 from Mr Yu and faces a reserve
requirement of 5%.
a) Determine how much the bank would lend out. Show your answer on Bank STU’s
balance sheet.
(3 marks)
b) Calculate the amount of credit created by Bank STU.

(2 marks)
c) Calculate the total money supply by Bank STU.

(2 marks)
d) If the central bank plans to increase cash ratio in the economy by 1%, what happened to
the new total money supply? Find the value.
(2 marks)
e) Assuming that the loan shown in Bank STU’s balance sheet is deposited into Bank
MNO. Using the reserve requirement rate of 5%, show the changes in Bank MNO’s
balance sheet.
(3 marks)
f) List any three (3) Islamic banking products.

(3 marks)

QUESTION 3
Table below shows the trade of two goods between two countries. Based on the table, answer
the following questions.
Country Medical Product (unit) Electronic Product (unit)
Japan 2200 1600
China 3800 3100
a) Based on the absolute advantage theory, determine which country has absolute
advantage in the production of medical product and electronic product? Give your
reason.
(2 marks)
b) Calculate the opportunity cost of producing each product for Japan and China. State
which country should specialize in the production of medical product and electronic
product.
(4 marks)
c) Construct a table to show the total production after specialization for both countries.
(3 marks)
d) Which country will export medical product? Justify your answer.

(2 marks)
e) Define term of trade. Assuming the term of trade is 1 medical product for 1.5 electronic
product and both countries need 2200 units of medical product each. Show in the table
the amount of goods consumed by both countries after trade takes place.
(4 marks)

QUESTION 4
The following table shows the Balance of Payments item for Malaysia in 2020.
ITEMS RM (MILLION)
Freight charges 2230
Consultancy services 3230
Travel and tourism 1030
Banking and insurance 930
Errors and omissions 4580
Transportation 530
Government services 1130
Export goods 88050
Import goods 90050
Other services 1230
Income from investment: private investment 3220
Private investment 2760
Short term capital 6560
Long term capital 5560
Net transfer -2720
Corporate investment 3560
Income from investment: Corporate investment 2320
Other investment -3860
Portfolio investment 4560
Direct investment 5560
a) Define balance of payment.

(2 marks)
b) Calculate balance of trade.

(1 mark)
c) Calculate balance of services.

(4 marks)

d) Calculate balance of current account.

(2 marks)
e) Calculate balance of Capital and financial account.

(3 marks)
f) Calculate overall balance.

(2 marks)
g) Calculate official reserve account. Determine the effect on reserve asset of this country.
(1 mark)
END OF QUESTION PAPER

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CONFIDENTIAL 1 BA/JUL 2021/ ECO211/210/164/219

UNIVERSITI TEKNOLOGI MARA

3. Answer ALL questions in English.

DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO

© HakCiptaUniversitiTeknologi MARA CONFIDENTIAL

1. Which of the following topics are more likely to be studied in macroeconomics?

2. Objectives of Islamic macroeconomics include all of the following except

A. to achieve universal education.

3. What is the meaning of “equilibrium” in macroeconomics?

A. Aggregate supply is more than aggregate demand.

4. Macroeconomics is concerned about all the following except

A. the general price level.

5. Gross domestic product is officially measured by adding together

A. incomes received by all households.

6. Which of the following is a true statement concerning transfer payments?

A. Transfer payments are included in the import category of GDP.

© HakCiptaUniversitiTeknologi MARA CONFIDENTIAL

7. Which of the following serves as an example of the underground or “shadow” economy?

A. A woman barters home repairs with her neighbor.

8. Real national product can be defined as

A. national product valued at current price.

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

A. fall by RM400 million.

A. a decrease in business taxes.

12. The multiplier effect means that

A. consumption is typically several times as large as saving.

© HakCiptaUniversitiTeknologi MARA CONFIDENTIAL

17. The three main tools of monetary policy are

A. tax rate, discount rate and open market operations.

© HakCiptaUniversitiTeknologi MARA CONFIDENTIAL

A. expand the money supply.

A. is imposed on all agricultural land owned by non – Muslims.

21. The intended goal of expansionary fiscal and monetary policy is

A. an increase in interest rates.

A. Increase both taxes and government spending.

24. Fiscal policy includes the following except

A. changes in income tax.

© HakCiptaUniversitiTeknologi MARA CONFIDENTIAL

25. If a person is taxed RM300 on an income of RM1000, taxed RM500 on an income of

28. Which one of the following groups benefits from inflation?

29. It is difficult for cyclically unemployed individuals to find jobs because

A. the economy is in recession.

30. Demand – pull inflation may be caused by

A. an increase in the wage rate.

31. Cost – push inflation is due to

A. increase in prices of resources.

© HakCiptaUniversitiTeknologi MARA CONFIDENTIAL

32. The inflation that occurred in the 1990s is known as

A. Global Financial Crisis.

A. firms can be protected from subsidized foreign competition.

35. Which of the following is true about quota?

36. What is the meaning of embargo?

A. A limit on the quantity of imported products.

© HakCiptaUniversitiTeknologi MARA CONFIDENTIAL

38. Special drawing rights are

39. Which of the following is incorrect?

A. Embargo is a total ban on imported goods from a country.

A. a depreciation of that currency.

© HakCiptaUniversitiTeknologi MARA CONFIDENTIAL

Short term interest bearing debt 10,500

Savings and fixed deposits in Merchant Bank 61,000

Negotiable instrument deposit 15,000

Bank Negara certificates 12,400