Suggested answer for FHBM1024 Past Year Examination (Apr 2019)

Section A: MCQ
Q1. D
Q2. D
Q3. C
Q4. B
Q5. C
Q6. C
Q7. B
Q8. B
Q9. C
Q10. A
Q11. A
Q12. C
Q13. A
Q14. A
Q15. B
Q16. C
Q17. D
Q18. A
Q19. C
Q20. C

Section B: Structured Questions

Q1. (a) (i) NGDP (2016) = RM 65700
NGDP (2017) = RM 77360
NGDP (2018) = RM 71000

RGDP (2016) = RM 66600

RGDP (2017) = RM 73560
RGDP (2018) = RM 67200

(ii) GDP deflator (2017) = 105.17

GDP deflator (2018) = 105.65

(iii) Inflation rate (2018) = 0.46%

Inflation happened.
The average prices for goods and services increased by 0.5
percent in 2018 compare to the previous year (2017).

(b) (i) Spain did not achieve at the full employment because the actual
unemployment rate (15.2%) is greater than the natural rate of
unemployment.

(ii) Effects of unemployment:

Poverty, Low rate of economy, Expanding divisions in society,
Increasing illiteracy rate,Crime rate level increased
(Any four effects are acceptable)
Q2. (a)
i = Decrease
ii = Left
iii = Downward sloping
iv = Increase
v = Increase
vi = Right
vii = No changes
viii = Decrease
ix = Perfectly inelastic or vertical

(b) The Wealth Effect

Price Level (PL) => Reduction of purchasing power ¯ => Consumption ¯

The Interest-Rate Effect

Price Level (PL) => Interest rate => Investment ¯

The Open Economy Effect OR The Exchange-Rate Effect

Price Level (PL) => Exports ¯=> Net Exports ¯

(c) (i) Decrease

(ii) Decrease
(iii) Increase
(iv) Decrease
(v) Decrease

Q3. (a) (i) Expansionary fiscal policy

(ii) (A) Aggregate Demand: increase

(B) Aggregate Demand curve: right
(C) Real gross domestic product: increase
(D) Price level: increase
(E) Employment: increase

(iii)

Price Level (PL) LRAS

SRAS

PL1 E1
E0
PL0
AD1

AD0
RGDP
RGDP0 RGDPnr
(b) (i) Change in AD = RM5,500 million
AD increase by RM5,500 million

(ii) Change in AD = - RM3,683.33 million

AD decrease by RM3,683.33 million

Q4. (a) - Contractionary Monetary Policy

- sell bonds
- raise reserve requirements
- raise the discount rate
- Aggregate Demand decrease
- Aggregate Demand curve shifts left
- Real GDP (RGDP) – decrease
- Price Level (PL) decrease

LRAS
Price Level (PL)
SRAS

E0
PL0

PL1
E1
AD0

AD1

RGDP
RGDPnr 0 RGDP0

(b)
Expansionary or Contractionary
No Economic Conditions
Monetary Policy
(i) Contraction Expansionary Monetary Policy
(ii) Expansion Contractionary Monetary Policy
(iii Recession Expansionary Monetary Policy
)
(iv) Recovery Contractionary Monetary Policy
(v) Financial crisis Expansionary Monetary Policy