CONFIDENTIAL Infrastructure University FINAL EXAMINATION MARCH SEMESTER 2019 — MACROECONOMICS (ECON 1301D) (TIME :2 HOURS) Neen ee ea se ma MATRIC NO. . ] IC. /PASSPORT NO. : LECTURER : MOHD AZHAR HAMZAH 1, This question booklet consists of 13 printed pages including this page. 2. Answer ALL quetins inthe QUESTION PAPER. 5. PLEASE DO NOT TURN THIS PAGE AND START THE EXAM UNTIL YOU ARE, ‘TOLD TODOSO. CONFIDENTIAL Page 1 of 13INSTRUCTION SECTION A @oMARKs) this section. Answer ALL Questions in the Question ‘There are FOURTY (40) question Paper. 1. Allof the following components represent sources of government revenue exeept ‘A. Socal Security toes. B, personal income taxes transfer payments. D. corporate income taxes. 2. A government surplus is defined as ‘A. the government printing money to pay its ills Ban exces of government tax revenies relative to government oxtlays on-budget expenditures interest payments on the federal overnment debt ‘3. When te economy is it by spending fhctuatons,the government can tr to minimize the effets by ‘A. changing government expenditures on goods B. changing taxes CC changing government expenditures on services D.allofthe above. 4. An example of fiscal policy designed to increase real GDP is Acacutintaxes Blan increase in taxes Ca decrease in government expenditre ca decrease in money supply 5. Which ofthe folowing are not intemal sources of public deb? ‘A.Borrowing from citizen B. Borrowing from financial institution. C. Loans from the central bank Loans from intemational financial institution. ‘BCONISOID/MarehQ019. Paye2or Is6. Government operating expenditure consist of ‘A defense and sooty B, economic services - general administration D. emoluments 7. Which ofthe following canbe catogorized into quantitative instruments of monetary poly? A. Selective credit control BB. Open market operation, Legal cash requirement. D. Discount ate 8. Inthe above figure the distance between points Sand T represents ‘A-an expansion Bea trough Ca peak Dia teccstion 9. Which ofthe following could stata demand-pllinfation? ‘A.A increase in government expenditures, BB. An increase in import, (C-decrease inthe quant of money. 1D. An increase inthe money prices of raw material ‘BCONTSOID/March2079 Page dof 1Scol 0 oe 8 5 tl the 10, Inthe above, which figure shows the start of eostpush inflation? A Figure A. B. Figure B, Figure C. D. Figure D. 1, Sigfaton isthe result of ‘Aan increase in aggregate demand 'B. high unemployment and rpid inflation simultaneously (Ca decrease in agarogate demand Dan increase in short-run aggregate supply 12, The labor force is the sum ofthe ‘A. working-age population and the number of unemployed people 'B. number of employed people and the working-age population C; number of employed people andthe numberof unemployed people D.toal population and the numberof unemployed people 13. The government may practice policy which increases monty supply in the economy during monetary poly ‘A expansionary monetary 1B. contractionary monetary (C expansionary fiscal . contactionary fiscal ‘BCONTBOID Marcha019 ee eactiseeM4, ‘unemployment occurs when people are inbetween jobs, entering and "Renteing the labor force. A. Frictional B. Cyclical Structural D. Technical 13 The tac that sing money avoids the double coincidence of wants necessary ina barter economy illustrates which function of money? A. Medium of exchange B. Unit of eccount. Store of value . Source of liquidity. 16. Commercial banks ae able to ereate money by ‘A. printing Central Bank Notes ‘B.making loans (C.making customers pay back thei loans 1D. exchanging thei eserves atthe Fed for vault cash 17. The required reserve ratio A. isthe amount of money that banks require borrowers to reservein their 2. is the fraction ofa bank’ total deposits that are required to behold in reserve CC. increases when withdrawals froma banc are made D.ishigher for banks tht make skier loans 18, Which of the followings are wot included in M2? |A. Checkable deposits BML C. BNMeertficates. D. REPO, 19. Issue currency and keep reserves safeguarding te value ofthe currency are the basic functions of. B. Central benk C. insurance companies . merchant banks CC LL20, Ringgit Malaysia, US dolar, Thal Baht and Pound Sterling are examples of A. fiat Money B, legal tender CC token money D. demand deposit 21, Non-bank financial intermediaries include AA. development financial institution B, development financial institution and employees provident fnd C. employees’ provident find and discount houses D. commercial banks and Central Bank 22, Comparative advantage implies that countries will, ‘A. import those goods in which the country has a comparative advantage export those goods in which the country has a comparative advantage find it dificult to conclude fre trade agreements with other nations D. export goods produced by domestic industries with low wages elative ois trading partners 23, Who benefits from imports? ‘A. Domestic consumers B. Domestic producers. C: Foreign consumers. D. Domestic workers in the industry. 24, Suppose the country of Mooland imposes tariffs on imported beef from the country of| Aqualand, Asa result ofthe tariffs, the ‘A. price of been Mooland falls B. quantity of beef exported by Mooland inveases CC. quantity of beet imported by Mooland decreases . quantity of bef imported by Mooland inreases 25, When the U.S. dollar depreiates against the yen the yen becomes expensive and the exchange rate A. mors Bless ses (Core; falls D less falls FCONTOIDMarch019.———SSSC«S PTS26, When we have a negative current account, We ae ‘A. borrowing ftom the est ofthe word Blending to the rest ofthe works C-running a government budget surplus None ofthe above is correct 27. The current account balance is equa to ‘A. net exports + net interest income + net transfers Bnet exports - et interest income - nt transfers Cnet exports + net interest income - net transfers D. net interest income + net transfers - net exports 28, A county's balance of payments accounts include allo the following except __- A. military account ‘current account Capital account D_ official settlements account 29, Direc taxes include the fllowing except ‘A. companies, income tx Beexport duties . stamp duties D. individuals income tax 30. Changes in government expenditure and taxes which occur automaticaly without ny ‘government action eefer to ‘A. automate stabilization B. discretionary fiscal policy C. open market operation D. legal cash requizement 31. The wough in business cycle followed by ‘A. an expansion Bia trough Coa peak D. arocovery ‘FCONTSOID/March2019.———SSSSSSSSSSage TFT32, An individual who wants to work but hasbeen unsuccessful fora long period of ime in Finding ajo and who has consequently given up en seeking fer obs known as, A. underemployed B. a discouraged worker . employed D. technological unemployment 33. the weighted CP1is 136.5, general price level has increased by ___compare tothe base year A. 136596 B, 365% 6.5% D. 03% 54, Intemational trade differs from domestic trade because usage of diferent units of currency in intemational trade size of market is relatively smaller fo international inde resources are more mobile in international tade compared to comesti trade Alf the above pope 38. isa situation where the vale ofall currencies was fixed diet to gol and {has Tred relationship to one another. A. Bxchange ate B, Gold standard (C Breton Wood system D. Adjustable peg system 36, Advelocem taf isa ‘A. law that bars teade with anoer country 1B. isa legal limit onthe numberof units of @ good based on the valve ofthe good (tux imposed bythe government onthe imported products D. imposed on imported goods based on the value 37. MB equals 0, ‘A currency + checkable doposite BMI + near money (C.-M + savings and fixed deposits in other banking institution 1D, M2-+ near money + checkable deposits PGI O70 a tara Page Sof 1338, A peakis indicated by _unemployment and _ovtput. ‘A. declining; inereasing Blower; higher higher lower D. increasing; decreasing 39. [fgoverament’s total revenues are les than its total expenditure, it called a A. balance budget surplus budget . deficit budget D. trade surplas 40. _ includes the buying and selling of government securities bythe ___to influence te eas reserves in ‘A. Open market operation; central bank; commercial bank 'B. Open market operation; commercial bank; ental bank C Legal eash reserve requirement; cen bank; commercial bank D. Legal cash requirement; central bank; commercial bank ‘BCONIS0IDIMarck2019 OO Page dof 3Answers for Maltiple Choice Questions: BCONTSOIDIMareh2019 Pag 10 of 13SECTION B (@OMARKS) ‘There are THREE (8) questions inthis section. Answer ALL questions in the Question Paper. QUESTION 1 (15 MARKS) Not in Labor mployea ‘Unemployed Force Persons Persons Year | nitions) (lions) (ulion) 1 250 75 2 400 200, 3 500, 350 4 1000, 720 4) Complete the table by calculating the total population and unemployed persons (@ marks) (CLOLPLOL:C3) ') Compute the unemployment rate for yar I, 2,3 and 4 (marks) (CLOLPLOL:C3) ©) Briefly explain two (2) effects of inflation, G marks) (CLOL:PLOI:C3) CONTSOID/Mareh2019 Page Hof 13‘QUESTION 2 (15 MARKS) ‘You ae given this acount fora bank, ‘Arete Rexwes EM 300 Loans 3000 “The rquired reserve ratio is 10%, a » 9 % 9 How much isthe bank required to hold as reserve given its deposits of RLA35002 (Gmarks) (CLOLPLOL:C3) Hw much are its exces reserves? (mars) (CLOLPLOL:C3) By how much can the bank increase its loan? @ marks) (CLOLPLOT:C3) fhe bank doesnot hold any excess reserve, how much total deposits it can create? (G marks) (CLOLPLOL:C3) State two @) differences between commercial banks and Ceatral Bank: (4 marks) {CLOL:PLOI:C4) BCONTSOIDMarch2019 Page 2of13UES! IARKS) ‘The following table shows the balance of payments fora country Trem Slions Exports Ta7 SD Traporis RIT “Transporation “1586 et eanster a56T Troms and omissions 286 ‘Offical Tong erm capital 3506 Diet investment Bae ‘Oi sevices FS Travel Ese Tavestment income “BAT ‘Government tansections % Compute: 3) Service account balance i) Balance in current aesount it) Capital account balance iy) Overall balance G marks) (CLOL-PLOL:C3) (@ marks) (CLOLPLOI:c3) @marts) (CLouPLor-c3) (marks) (CLOLPLOL:C) 14 END OF QUESTIONS *** ‘BOONISO1D March2019 Page 13 of 1S