QUESTION 1 (CLO2)

a) Illustrate and explain the Gross Domestic Product (GDP) and unemployment for Malaysia
for the years 2018-2021 using graphs.

RM bil- Gross Domestic Product 2018-2021

lion
400

350

300

250

200

150

100

50

0
2018 2019 2020 2021

Q1 Q2 Q3 Q4

Unemployment Rate in Malaysia 2018-2021

2021

2020

2019

2018

0 500,000 1,000,000 1,500,000 2,000,000 2,500,000

No Of Person
 Malaysia's GDP shrank 17.1 per cent from a marginal growth of 0.7 per cent in the first
quarter of 2020. This quarterly performance is the lowest GDP growth recorded since the fourth
quarter of 1998 (-11.2%). In terms of production, negative growth was recorded by all sectors
except the Agriculture sector. The Services and Manufacturing sector recorded negative growth
of 16.2 per cent and 18.3 per cent respectively. Construction declined 44.5 per cent while Mining
& Quarrying declined 20.0 per cent. In terms of demand, all components of final demand
declined except Government final consumption expenditure which recorded a positive growth of
2.3 per cent. Private final consumption expenditure declined 18.5 per cent, Gross fixed capital
formation declined 28.9 per cent. Exports fell 21.7 per cent while Imports contracted 19.7 per
cent. In conclusion, in the year 2020 the economy was affected as economic activity was frozen
during the PKP. It is hoped that the implementation of packages such as PRIHATIN &
PENJANA is expected to reduce the economic impact gradually.

b) Identify the macroeconomic problems that Malaysia is currently facing and discuss how
the Malaysian government and Bank Negara Malaysia can mitigate the identified
macroeconomic problems.

The COVID-19 pandemic has evolved into a health, socioeconomic and humanitarian crises of
unprecedented scale and impact. The situation in Malaysia is compounded by the fact that the
Government came into power only in early March of 2020 and is already facing a heavy debt
problem, financial constraints, plummeting oil prices and knock-on effects on trade and tourism
from the global shut down. On the pandemic front, the Government has received international
recognition for its efforts regarding testing, contact tracing, quarantine, and treatment, while
keeping first responders safe and providing reliable information and advice to the public. Daily
updated information on the numbers and rates of infection, fatalities and recoveries and
identification of ‘hot spots’ track progress in ‘flattening the curve’.
 On the economic front, the lockdown is turning into an economic knockout. The
economy is nosediving with intensifying negative impacts on jobs, incomes and livelihoods,
disrupting supply chains and upending businesses, and exacerbating inequalities, poverty and
hardships especially among the most vulnerable. The Government has made available several
economic stimulus measures intended to “preserve rakyat’s welfare, support businesses and
strengthen the economy. In announcing the Prihatin Rakyat (Caring for People) package on 27
March 2020, the Prime Minister emphasized that “no one would be left behind.” 1 On 6 April
2020, the Prime Minister announced an additional stimulus package aimed at support for small
and medium-sized enterprises (SMEs) and micro businesses which, according to him, account
for two-thirds of the workforce and 40 per cent of the economy. The total Concerned stimulus
package amounts to 260 billion Malaysian ringgit. The key challenge, however, is how the
different measures will be delivered to reach those most in need and whether they will provide
the expected relief in the immediate term and stimulate the economy and employment to ‘recover
better’ in the longer term.

To support the Malaysian Government’s efforts to address the socioeconomic impacts of

COVID-19, this paper pulls together data and information to serve as baselines and diagnostics
for identifying those workers and enterprises most at risk and in need, so that their specific
characteristics and vulnerabilities can be taken into account to more effectively design and
deliver the stimulus measures. Within the United Nations Development System (UNDS), the
International Labor Organization (ILO) is well placed in terms of its technical expertise and
experiences and its normative labor standards to provide policy guidance to protect the most
vulnerable workers and support enterprises.
QUESTION 2 (CLO1)
Given that information for Country A are as below:

Component $ (million)
Household consumption 35
Gross investment 20
Government expenditure 35
Export 35
Import 10
Indirect taxes 25
Subsidies 100
Capital depreciation 30
a) Calculate the GDP market price for Country A

GDP factor cost = GDP at market price - net indirect taxes

GDP at market price = consumption + investment + government expenditure + export - import

= 25 + 15 + 35 + 35 - 10

= $100 million

b) Calculate the GDP factor cost for Country A

Net indirect taxes = indirect taxes - subsidies

= 25 - 100

= 75

GDP at factor cost = 100 - 75

= $25 million

c) Discuss the problems in calculating Gross Domestic Product (GDP) for a country

Its nominal GDP of a country is a measure of the country's overall economic output. It is
frequently used to measure economic growth since it contains price and is therefore not adjusted
for inflation. Because it estimates the value of production generated at the current price level,
nominal GDP is also known as GDP at current prices. When conducting a comparison between
the two years, however, it is not feasible. Economists and statisticians choose to use real GDP as
a determinant of economic growth because of this. GDP Growth is a better indicator of a
country's economic health since it represents the economy's real state. When comparing variables
that just aren't inflation-adjusted, including the debt-to-GDP ratio, the nominal GDP is useful. It
may be used to compare the results of multiple quarters within the same year. Because nominal
GDP does not account for price changes, it is often greater than real GDP. Both metrics,
however, have limits due to the omission of a variety of factors such as leisure time,
contamination, political freedom, banking transactions, and so on.

QUESTION 3 (CLO1)

Given: C = 600 + 0.8Yd I = 500 G = 300 T=200

a) Determine the equilibrium level of income using expenditure and injection-leakage approach

Y = TI + ( G-T )

= 600 + 0.8Y + 500 + 100

= 1200 + 0.8Y

0.2 Y = 1200
Y = 1200/0.2

= 6000

b) Calculate the value of multiplier for this economy

Multiplier K = 1/NPS = 1/1-NPC

= 1/1-0.8

= 1/0.2

=5

Multiplier K = 5

c) Calculate the equilibrium level of income when there is an increase in investment

from 500 to 800 using expenditure and injection-leakage approach.

I = 800

Y = 600 + 0.8Y + 800 + 100

0.2 Y = 1500

Y = 7500

d) Discuss the differences between expansionary fiscal policy and contractionary fiscal
policy.

Expansionary Fiscal Policy Contractionary Fiscal Policy

G > T Government spends more than taxes
Government spending increase
Lower tax rate to boost economic growth
Increase borrowing
Loose monotery policy
Where G < T, Taxes are more than
government spends
Government spending decrease
Higher tax rate to slow economic growth
Decrease borrowing
Tight monotery policy
REFERENCES

Bank Negara Malaysia. 2020. Economic and financial developments in Malaysia in the first

quarter of 2020. Available at:

https://www.bnm.gov.my/files/publication/qb/2020/Q1/Q1_en.pdf.

—. 2020. Laporan Survei Khas Kesan COVI-19 kepada ekonomi dan individu (Pusingan 2).

Putrajaya, Malaysia. Available at:

https://www.dosm.gov.my/v1/index.php?r=column/cone&menu_id=Skp1WWd

zalp0aVZ6MG9jRUdIbXdwUT09.

Hassan, Hakim. 2020. “Bantuan sara hidup: For the poor or for politics?” Rakyat Post, 8 January.
Available at: https://www.therakyatpost.com/2020/01/08/bantuan-sara-hidup-for-the-

pooror-for-politics/.