DIPLOMA IN MANAGEMENT (DIM)

SEPTEMBER SEMESTER / 2021

BDEK2203

INTRODUCTORY MACROECONOMICS
CONTENT PAGE
PART 1
Question 1 (CLO1) 1-3
Question 2 (CLO1) 3
Question 3 (CLO1) 3-5

PART II
Online Class Participation 6-10

REFERENCE 11
PART 1

QUESTION 1 (CLO2)

a) Discuss the outlook of Malaysia’s Gross Domestic Product (GDP) and

unemployment rate after COVID-19 using graphs (2020-2022 or 2019-2022).

According to the Okun’s law, a one percent in gross domestic product (GDP) has
been associated with a slightly less than two percentage point increase in the
unemployment rate. Below is a graph of the Malaysia’s unemployment rate after
covid -19 from 2019 to August 2022.

Malaysia’s Gross Domestic Product(GDP) and

Unemployment Rate 2019 - 2022 (First Half)
8

2 rate of unemployment
Rate of Gross Domestic Product
0
2019 2020 2021 2022

-2

-4

-6

-8

According to the graph, Malaysia unemployment rate for 2019 was 3.26% and the
GDP growth rate is 4.44%. Following by the next year, in 2020 the unemployment
was 4.50% which is increased 1.24% from the last year and the GDP growth rate
decreased 10.09% from 2019, which is -5.56%. The unemployment increased to
0.11% from 2020 which is 4.61% in 2021 and the its GDP growth is 3.13% a 8.78%
increase from 2020.

The unemployment rate in Malaysia declined to 3.7 percent in August 2022 from 4.6
percent in the same month a year earlier, as the economy recovered from the
corona virus hit. The number of unemployed plunged 18.3 percent from a year
earlier to 612.0 thousand, while employment increased 4.2 percent to 16.02 million.
Meantime, the labor force rose 3.1 percent to 16.63 million. In July 2022, the jobless
rate was also 3.26 at 3.7 percent. The Expectant of Malaysia GDP growth rate in
2022 is 6.66% and it would be expectant that the growth momentum wolud
continue in second half of 2022.

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b) Identify the macroeconomic problems that Malaysia is currently facing after
COVID-19 and propose ways how the Malaysian government and Bank Negara
Malaysia can mitigate the identified macroeconomic problems.

In response to the significant economic disruption brought on by the COVID-19

pandemic and measures taken to contain its spread, the Bank introduced broad-
ranging measures to help businesses and individuals weather this difficult period.
The measures are aimed at supporting the economy through the large, temporary
shocks experienced, and thereby avert longer-term harm to the economy. At the
same time, ensuring that the pandemic does not evolve into a financial crisis
continues to be of paramount importance to secure a swift and firm economic
recovery.

During pendemic, banking instituitions provide immediate cashflow relief following

implementation of the Malaysia Contol Order (MCO). The bank rescheduling and
restructuring of corporate loan or financing, the conversion of credit card balances
into term loans/financing and automatic 6 months deferment on all eligible loan or
financing of individuals and SMEs on the phase one of MCO. Meanwhile during the
two of MCO, the bank have been given another additional three months deferment
of loan/financing repayments for unemployed borrowers, proportionate reduction of
loan/financing repayments for borrowers with reduced income and suspension of
increace in pricing for repayment in arrears between 1 October to 31 December
2020.

On the other hand, the bank focus on regulatory and supervisory measures to
facilitate repayment assistance programmes and support lending/financing to the
real economy. Wide-ranging regulatory and supervisory measures were deployed by
the Bank to provide additional operational capacity for banking institutions to
effectively manage and respond to the impact of the pandemic crisis. This included
clarifying the application of prudential and conduct requirements to avoid cliff
effects and unintended operational frictions which could hurt critical
lending/financing activity and repayment assistance efforts. Several earlier planned
measures to improve the overall consistency of the capital and credit risk
management frameworks were also brought forward to enhance the capacity of
banking institutions to support economic activity. In addition, timelines for a number
of regulatory and supervisory initiatives were temporarily deferred to enable
banking institutions to better manage their resources at this time. These measures
are not expected to materially impact the financial strength and resilience of banking
institutions.

Lastly, the bank preserve the smooth functioning of the financial intermediation
process to support economic recovery and post-COVID-19 economic restructuring
and reforms. Complementing the financing schemes offered by the Government and
financial institutions, the Bank enhanced the existing financing facilities under the
BNM’s Fund for SMEs (the Fund) and increased the allocation of these facilities to
ease lending/financing conditions for viable SMEs during this challenging
period.RM10 billion was provided under the Special Relief Facility (SRF) which was

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introduced specifically to support the cash flow needs of viable SMEs affected by the
pandemic, Rm 5 billion on All Economic Sectors (AES) enhance access to financing,
RM 1 billion to PENJANA Tourism Financing (PTF) aid SMEs in the tourism sector, RM
300 million to Automation and Digitization Facility (ADF), RM1.5 billion to Agrofood
Facility (AF) to increase the food production and RM300 million to Micro Enterprise
Facility (MEF)to collateral-free financing for micro enterprise.

QUESTION 2 (CLO1)

a) Calculate the Gross Domestic Product (GDP) market price for Country AIR.

Component $ (million)
Household consumption 40
Gross investment 20
Government expenditure 35
Export 35
Import 10
Indirect taxes 25
Subsidies 100
Capital depreciation 30

Market Price = Factor cost + Indirect Tax - Subsidies

= C + I + G + (x-m)
= 40 + 20 + 35 (35-10)
= 40 + 20 + 35 (25)
= 120 million

b) Calculate the GDP factor cost for Country AIR

Market price = Factor cost + Indirect Tax - Subsidies

= 210 - 25 + 100
= 95 + 100
= 195 million

c) Discuss the activities that are not included in calculating the GDP for a country.

Sales of goods that were produced outside our domestic borders.Only goods and
services produced domestically are included within the GDP. That means that goods
produced by Malaysian outside the Malaysia. will not be counted as part of the GDP.

Sales of used goods.Only newly produced goods - including those that

increase inventories - are counted in GDP. Sales of used goods and sales from
inventories of goods that were produced in previous years are excluded.

Illegal sales of goods and services (which we call the black market).Only goods that
are produced and sold legally, in addition, are included within our GDP. That means
that goods produced illegally are not counted.

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QUESTION 3 (CLO1)

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

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

leakage approach.

Y=C+I+G
Y = 600 + 0.8Yd + 600 + 300
Y = 600 + 0.8Y (Y-T) + 600 + 300
Y = 600 + 0.8Y (Y - 200 ) + 600 + 300
Y (1 -0.8) = 600 - 160 + 600 + 300
Y (0.2) = 1340
Y = 1340
0.2
Y = 6 700

b) Calculate the value of the multiplier for this economy.

1
XI
(1 - MPC)

1
X 600
(1 - 0.8Yd)

= 3 000

c) Calculate the equilibrium level of income when there is a decrease in

investment from 600 to 500 using expenditure and injection-leakage approach.

I = 500

Y=C+I
Y = 600 + 0.8Yd + 500
Y (1-0.8) = 600 + 500
Y = 1100
0.2
Y = 5 500

d) Discuss how fiscal policy is used in various economic situations in an economy.

Fiscal policy is a which the government adjusts its budget balance through spending
and revenue changes to influence broader economic conditions. According to
mainstream economics, the government can impact the level of economic activity,
generally measured by gross domestic product (GDP), in the short term by changing
its level of spending and tax revenue.

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The Expansionary fiscal policy is when the government spending is increased the tax
revenue will decreased, or a combination of the two which is expected to spur
economic activity, whereas contractionary fiscal policy is when a decrease in
government spending, an increase in tax revenue, or a combination of the two is
expected to slow economic activity.

When the government’s budget is running a deficit, fiscal policy is said to be

expansionary: when it is running a surplus, fiscal policy is said to be contractionary.
From a policymaker’s perspective, expansionary fiscal policy is generally used to
boost GDP growth and the economic indicators that tend to move with GDP, such as
employment and individual incomes.

However, expansionary fiscal policy also tends to affect interest rates and
investment, exchange rates and the trade balance, and the inflation rate in
undesirable ways, limiting the long-term effectiveness of persistent fiscal stimulus.
Contractionary fiscal policy can be used to slow economic activity if policymakers are
concerned that the economy may be overheating, which can cause a recession. The
magnitude of fiscal policy’s effect on GDP will also differ based on where the
economy is within the business cycle whether it is in a recession or an expansion.

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PART II
Online class participation

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REFERENCE

1. https://www.macrotrends.net/countries/MYS/malaysia/unemployment-rate
2. https://tradingeconomics.com/malaysia/unemployment-rate
3. https://www.macrotrends.net/countries/MYS/malaysia/gdp-growth-rate
4. https://www.bnm.gov.my/documents/20124/1395181/ba1.pdf
5. https://study.com/academy/lesson/gross-domestic-product-items-excluded-
from-national-income.html
6. https://crsreports.congress.gov/product/pdf/R/R45723/1

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