Final Term Exam (UAS)

Name : Dede Rezanda

Student ID : C1B022195
Class : R-006 Management
Lecturer : Dr. Sanju Kumar Singh BBS., MSM

Short Questions

1. What is the emergence of money in Macroeconomics?

2. What is Inflation? Give an example!
3. What is the relation between Unemployment and inflation?
4. What is monetary policy?
5. What is Fiscal Policy? Explain it
6. What is the balance sheet payment? Explain it.

Answer :

1. The emergence of money in macroeconomics can be traced back to various societal needs
and developments. Early forms of currency were used in non-commercial contexts to
facilitate social relationships and resolve various matters within communities. As
agricultural practices and trade expanded, livestock and plant products were utilized as a
medium of exchange. The establishment of cities in Mesopotamia introduced asset-backed
credit and representative money, with agricultural produce such as barley serving as a unit
of account. The need for a universal medium of exchange in trade with foreigners led to
the emergence of proxy commodities like gold and silver. The use of money of exchange
often preceded the development of local money of account, and it played a crucial role in
facilitating trade, economic growth, and the development of systems such as accounting
and writing.

2. Inflation is the persistent rise in the general price level of goods and services in an economy
over time. This means that as inflation occurs, the purchasing power of money declines,
and it takes more money to buy the same goods and services.
Example: Let's say you receive a salary of Rp.100.000.000 per year. If the inflation rate is
3%, the following year, prices will generally be 3% higher. As a result, you would need
Rp.103.000.000 to maintain the same purchasing power. The increase in prices reduces the
value of your money, and you need more of it to maintain the same standard of living.

3. The relationship between unemployment and inflation is often referred to as the Phillips
curve. In simple terms, it suggests that there is an inverse relationship between the two
variables. When unemployment is low, inflation tends to be higher, and when
unemployment is high, inflation tends to be lower. This relationship implies that as the
 economy approaches full employment and unemployment decreases, inflationary pressures
increase, and vice versa.

4. Monetary policy refers to the actions taken by a central bank to manage the money supply,
interest rates, and credit conditions in an economy. Central banks adjust monetary policy
to achieve specific goals, such as price stability, controlling inflation, promoting economic
growth, and maintaining financial stability.

5. Fiscal policy refers to the government's use of taxation and spending to impact the
economy. It involves adjusting taxes and government expenditure to achieve specific
economic goals like promoting growth, controlling inflation, and reducing unemployment.
Essentially, fiscal policy is how the government manages money to influence and stabilize
the economy.

6. The balance of payments is a systematic record of all economic transactions between

residents of a country and residents of other countries within a certain period of time. The
balance of payments records all payments and receipts involving exports, imports, money
transfers and investments between countries. The balance of payments consists of two main
components: namely the current account balance and the Capital and Financial account.
The balance of payments is important in monitoring economic relations between countries,
measuring the trade balance, and observing international capital and financial flows
Long Questions

1. What is the difference between fiscal policy and Monetary Policy? Give an example.
2. Do you think Unemployment is a global problem? Unemployment in Indonesia is also a
big issue. How can the government solve these issues?

Answer :

1. Fiscal policy and monetary policy are two key tools used by governments and central banks
to manage and stabilize the economy, but they operate in different ways.

- Fiscal Policy:
Fiscal policy refers to the government's decisions regarding taxation and spending. It
involves the use of government revenue and expenditure to influence the overall economy.
Key components of fiscal policy include government spending, taxation, and borrowing.

Example: Suppose an economy is experiencing a recession, and the government wants to

stimulate economic growth. It can implement expansionary fiscal policy by increasing
government spending on infrastructure projects, such as building roads, bridges, and
schools. Additionally, the government may reduce taxes to put more money into the hands
 of consumers, allowing them to increase their spending. These measures aim to boost
aggregate demand, create jobs, and encourage economic activity.

- Monetary Policy:
Monetary policy refers to the actions taken by a central bank to control the money supply
and influence interest rates in an economy. It focuses on regulating the availability and cost
of money and credit to promote price stability and sustainable economic growth.

Example: Let's consider a situation where inflation is rising rapidly. In response, the central
bank can implement contractionary monetary policy. It may increase interest rates to
discourage borrowing and spending, which reduces the money supply and slows down
economic activity. By raising interest rates, the central bank aims to curb inflationary
pressures and maintain price stability in the economy.

In summary, fiscal policy is concerned with government spending and taxation, while
monetary policy involves the control of money supply and interest rates. Fiscal policy
operates through changes in government revenue and expenditure, while monetary policy
is implemented by the central bank through adjustments in interest rates and other monetary
tools.

2. Unemployment is indeed a global problem that affects countries around the world,
including Indonesia. High levels of unemployment can lead to various social, economic,
and political challenges. Governments play a crucial role in addressing unemployment by
implementing policies and strategies to promote job creation and reduce unemployment
rates. Here are some measures the Indonesian government (or any government facing
unemployment challenges) can consider:

• Promote Economic Growth: The government can focus on implementing policies that
foster economic growth. This can be achieved through investments in infrastructure
development, attracting foreign direct investment, supporting small and medium-sized
enterprises (SMEs), and creating a favorable business environment. Economic growth
often leads to increased job opportunities.

• Enhance Education and Skills Training: Governments can invest in education and
vocational training programs to equip the workforce with the necessary skills for available
jobs. This includes improving the quality of education, promoting technical and vocational
training, and collaborating with industries to align skills training with labor market
demands. Developing a skilled workforce enhances employability and reduces structural
unemployment.
• Support Entrepreneurship: Governments can encourage entrepreneurship by providing
support to aspiring entrepreneurs, such as access to financing, mentorship programs, and
simplified regulations for starting businesses. Entrepreneurship can spur job creation and
innovation, contributing to employment generation.

• Labor Market Reforms: The government can undertake labor market reforms to enhance
flexibility and efficiency. This may involve reviewing labor regulations, reducing
bureaucratic hurdles, and promoting a more business-friendly environment. Flexible labor
markets can encourage investment and job creation.

• Social Safety Nets: Establishing social safety nets can help protect the most vulnerable
individuals during periods of unemployment. These safety nets can include unemployment
benefits, job retraining programs, and assistance for those actively seeking employment.
Social safety nets provide temporary support and help individuals transition back into the
workforce.

• Public-Private Partnerships: Collaboration between the government and private sector can
lead to job creation initiatives. The government can work with businesses to identify
sectors with growth potential, provide incentives for job creation, and foster public-private
partnerships to address employment challenges.

It's important to note that tackling unemployment is a complex and multifaceted issue,
requiring a comprehensive approach and long-term strategies. The specific measures taken
by the Indonesian government should consider the country's unique economic, social, and
cultural context. Additionally, collaboration with various stakeholders, including
businesses, educational institutions, and civil society organizations, is crucial for effective
implementation and sustainable solutions.