DPB20033- MACROECONOMICS CHAPTER 1: INTRO TO MACROECONOMICS

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1.1 THE CONCEPT OF

MACROECONOMICS
1.1.1 Define macroeconomics
1.1.2 Compare between macro &
micro
1.1.3 The macroeconomics goals
1.1.4 The problem of macroeconomics
goals

SUMMARY OF CHAPTER 1.1:

1.1.1 Define macroeconomics

Macroeconomics is a field of economics that studies the relationship

between aggregate variables such as income, purchasing power,
price and money.

Macroeconomics examines the functions of the economy as a whole;

for example, the problem of inflation, level of unemployment, and
payment of a deficit.

It studies a national’s total output (GDP) as a whole, and the

economic forces at work.

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1.1.2 The compare between macro & micro

MACROECONOMICS MICROECONOMICS
1. INCOME

2. LABOUR

3. PRICE

4. DECISION

5. DD/SS

1.1.3 The macroeconomics goals

Achieving full Maintaining Sustainable

employment price stability good economic
growth

Competitive Fair & Satisfactory

international equitable equilibrium in
trade distribution of Balance of
income Payment

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1.1.4 The problem of macroeconomics goals

Trade cycle Unemployment

Inflation Deficit balance

of payment

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1.2 AGGREGATE DEMAND &

AGGREGATE SUPPLY
1.2.1 Define AD & AS
1.2.1 AD & AS Curves
1.2.3 The factor that shift the
AD curve & AD curve

SUMMARY OF CHAPTER 1.2:

1.2.1 Define AD & AS

AGGREGATE DEMAND is the total amount of goods and services demanded in the
economy at a given overall price level and in a given time period. In other words, the
aggregate demand is simply the total of all levels of spending in the national income
accounts, consumption, investment, government purchases, and net exports.

AGGREGATE SUPPLY means total of real production of final goods and services
available in the country.

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1.2.2 The AD curve & AS curve

AD (market demand) table

AS (market supply) table

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1.2.3 Factor that shift the AD curve & AS curve

AGGREGATE DEMAND

Shift to the left (-) Shift to the right (+)

1. Income

2. Wealth

3. Population
Saiz and
4. Credit
availability
5. Seasons

AGGREGATE SUPPLY

Shift to the left (-) Shift to the right (+)

1. Technology

2. Production cost

3. Weather

4. No of producer

5. Expectation

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1.3 4th INDUSTRIAL REVOLUTION &

ITS IMPAACT ON THE ECONOMY
1.3.1 4th Industrial Revolution (4IR)
1.3.1 The influence of 4IR on the
economy
a. The growth of gig economy &
digital economy.
b. Technologies & the future of
jobs

SUMMARY OF CHAPTER 1.3:

1.3.1 4th Industrial revolution (4IR)

4IR refers to the disruptive transformation of industries through the application of emerging
technology. It is characterised by new technology that is fusing the physical, digital and biological
worlds, impacting all disciplines, industries and the economy.

Industry 4.0 is built on nine technology pillars. These innovations bridge the physical and digital worlds
and make smart and autonomous systems possible. Businesses and supply chains already use some of
these advanced technologies, but the full potential of Industry 4.0 comes to life when they’re used
together.

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1. Big Data and AI analytics: In Industry 4.0, Big Data is collected from a wide range of sources,
from factory equipment and Internet of Things (IoT) devices, to ERP and CRM systems, to
weather and traffic apps. Analytics powered by artificial intelligence (AI) and machine
learning are applied to the data in real time – and insights are leveraged to improve decision-
making and automation in every area of supply chain management: supply chain planning,
logistics management, manufacturing, R&D and engineering, enterprise asset
management (EAM), and procurement.
2. Horizontal and vertical integration: The backbone of Industry 4.0 is horizontal and vertical
integration. With horizontal integration, processes are tightly integrated at the “field level” –
on the production floor, across multiple production facilities, and across the entire supply chain.
With vertical integration, all the layers of an organisation are tied together – and data flows
freely from the shop floor to the top floor and back down again. In other words, production is
tightly integrated with business processes like R&D, quality assurance, sales and marketing,
and other departments – and data and knowledge silos are a thing of the past.
3. Cloud computing: Cloud computing is the “great enabler” of Industry 4.0 and digital
transformation. Today’s cloud technology goes way beyond speed, scalability, storage, and cost
efficiencies. It provides the foundation for most advanced technologies – from AI and machine
learning to the Internet of Things – and gives businesses the means to innovate. The data that
fuels Industry 4.0 technologies resides in the cloud, and the cyber-physical systems at the core
of Industry 4.0 use the cloud to communicate and coordinate.
4. Augmented reality (AR): Augmented reality, which overlays digital content on a real
environment, is a core concept of Industry 4.0. With an AR system, employees use smart glasses
or mobile devices to visualise real-time IoT data, digitised parts, repair or assembly instructions,
training content, and more when looking at a physical thing – like a piece of equipment or a
product. AR is still emerging but has major implications for maintenance, service, and quality
assurance as well as technician training and safety.
5. Industrial Internet of Things (IIoT): The Internet of Things (IoT) – more specifically, the
Industrial Internet of Things – is so central to Industry 4.0 that the two terms are often used
interchangeably. Most physical things in Industry 4.0 – devices, robots, machinery, equipment,
products – use sensors and RFID tags to provide real-time data about their condition,
performance, or location. This technology lets companies run smoother supply chains, rapidly
design and modify products, prevent equipment downtime, stay on top of consumer
preferences, track products and inventory, and much more.
6. Additive manufacturing/3D printing: Additive manufacturing, or 3D printing, is another key
technology driving Industry 4.0. 3D printing was initially used to as a rapid prototyping tool
but now offers a broader range of applications, from mass customisation to distributed
manufacturing. With 3D printing, for example, parts and products can be stored as design files
in virtual inventories and printed on demand at the point of need – reducing both
transportation distances and costs.
7. Autonomous robots: With Industry 4.0, a new generation of autonomous robots is emerging.
Programmed to perform tasks with minimal human intervention, autonomous robots vary
greatly in size and function, from inventory scanning drones to autonomous mobile robots for
pick and place operations. Equipped with cutting-edge software, AI, sensors, and machine
vision, these robots are capable of performing difficult and delicate tasks – and can recognise,
analyse, and act on information they receive from their surroundings.
8. Simulation/digital twins: A digital twin is a virtual simulation of a real-world machine, product,
process, or system based on IoT sensor data. This core component of Industry 4.0 allows
businesses to better understand, analyse, and improve the performance and maintenance of
industrial systems and products. An asset operator, for example, can use a digital twin to
identify a specific malfunctioning part, predict potential issues, and improve uptime.

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9. Cybersecurity: With the increased connectivity and use of Big Data in Industry 4.0,
effective cybersecurity is paramount. By implementing a Zero Trust architecture and
technologies like machine learning and blockchain, companies can automate threat detection,
prevention, and response – and minimise the risk of data breaches and production delays
across their networks.

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1.3.2 The influence of 4IR on the economy

The benefit of 4IR

1. Intelligent products
Develop connected, self-aware products that are capable of sharing information about their
health, location, usage level, storage conditions, and more. The data these smart products share
can help you improve everything from product quality and customer service to logistics and
R&D. They can also anticipate service needs, receive remote upgrades, and open the door to
new, service-based business models.

2. Intelligent factories
Run smart factories – highly digitised, largely autonomous facilities that take full advantage
of advanced technologies like Big Data, artificial intelligence, robotics, analytics, and the IoT.
Also called Factory 4.0, these plants are self-correcting, employ smart manufacturing 4.0
processes, and make it possible to deliver customised products cost efficiently and at scale.

3. Intelligent assets
Almost every physical asset deployed today has built-in sensors – which, when connected to
the IoT and analytics, are game changers for enterprise asset management. With intelligent
assets, technicians can monitor asset performance in real time, anticipate and prevent
downtime, employ dynamic and predictive maintenance, take advantage of digital twins, and
tightly integrate assets and business processes.

4. Empowered people
No matter how autonomous your systems get, you will always need people. Empower them with
technologies like AI and access to live sensor data – so they know what’s happening on the
shop floor and are ready to make quick decisions and handle issues as they spring up. Wearable
devices and augmented reality apps can also help them solve problems, monitor their health,
and keep them safe.

5. Radical improvements in productivity and automation:

Businesses are making data-driven decisions across their operations, improving forecast
accuracy, supporting on-time delivery, and building profit-optimised plans.

6. Resiliency and agility no matter what the market or economy bring:

Companies are shaping the future digital supply chain based on state-of-the-art planning.

7. Confidence to explore new business models and seize opportunities quickly:

Thanks to Industry 4.0 solutions, businesses are reducing costs, improving market efficiency,
and connecting supply chains by sea, land, and air.

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8. Green and sustainable solutions without sacrificing profitability:

Customers are becoming more efficient and cost-effective by going digital – while meeting
their environmental objectives without compromising on other business goals, such as
profitability and scalability.

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EXERCISE 1.1 (TEXTBOOK: SAs)

1. TRUE AND FALSE QUESTION

Macroeconomics is associated with the fluctuation of the

1 TRUE / FALSE
general price level in the country.
Macroeconomics explains the behavior of individual households
2 TRUE / FALSE
and business firms.
Competitive international trade is one of the macroeconomic
3 TRUE / FALSE
goals
The purpose of a monetary policy is to maintain the overall
4 TRUE / FALSE
price level and to achieve higher economic growth.

5 Full employment means zero unemployment rate. TRUE / FALSE

Monetary policy changes in the money supply or credit

6 TRUE / FALSE
conditions are designed to achieve the macroeconomic goal.
Factors that affect the supply curve are technology,
7 TRUE / FALSE
government expenditure, and cost of production.

8 Inflation is an increase in the relative price level. TRUE / FALSE

Aggregate demand is the total aggregate output and price

9 TRUE / FALSE
level of the economy in a given period.
The aggregate supply curve is a positive relationship between
10 TRUE / FALSE
the price level and the level of national output.

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EXERCISE 1.2 (ECONOMICS WORKBOOK)

2. TRUE AND FALSE QUESTION

Macroeconomics is associated with the fluctuation of the general price
1 level in the country.
TRUE / FALSE

Macroeconomics explains the behavior of individual households and

2 business firms.
TRUE / FALSE

3 Price level stability is one of the macroeconomic goals. TRUE / FALSE

A more equitable distribution of income may help accelerate growth and

4 promote economic development.
TRUE / FALSE
Economic growth refers to the development of economic activities which
5 result in the increase of the production of goods, services and social TRUE / FALSE
welfare.
Nominal GDP is the sum value of all produced goods and services at
6 current prices.
TRUE / FALSE

Macroeconomics theory studies are to determine types and quantities of

7 goods produced
TRUE / FALSE

8 Financial policy influences the supply of money in the economy. TRUE / FALSE

Macroeconomic variable includes national output, labor force, interest

9 rate, inflation and foreign currency exchange.
TRUE / FALSE

Full employment is achieved when all available resources or factors of

10 production are efficiently used to produce goods and services.
TRUE / FALSE

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EXERCISE 1.3 (ECONOMICS WORKBOOK)

3. TRUE AND FALSE QUESTION

Aggregate demand is the total aggregate output and price level of
1 economy within a given period.
TRUE / FALSE

Being innovative and producing goods will shift the aggregate supply
2 curve to the left.
TRUE / FALSE

Higher interest rates would reduce investment spending, which would

3 shift the aggregate demand curve in.
TRUE / FALSE

The aggregate demand curve shows a negative relationship between the

4 price level and the real GDP.
TRUE / FALSE

The aggregate supply curve is a positive relationship between the price

5 level and the level of national output.
TRUE / FALSE

Consumers’ wealth and consumers’ expectations cause the AD curve to

6 shift either to the left or to the right.
TRUE / FALSE

The higher the level of disposable income, the AD curve will shift to the
7 right.
TRUE / FALSE

The aggregate supply curve will shift to the right when there are higher
8 costs of production.
TRUE / FALSE

When an economy is producing at its maximum level of output, the AS

9 curve becomes vertical.
TRUE / FALSE

An expansionary policy at a given price level causes the AD curve to shift

10 to the right.
TRUE / FALSE

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QUESTION 1.2 (FE: SESI 2/2022)

List FOUR (4) economic functions of a government. (4m)

ANSWER 1.2
Economic functions of a government
1.

2.

3.

4.

QUESTION 1.3 (FE: DIS 2018)

a. i. Define macroeconomics (2m)
ii. Describe FOUR (4) macroeconomics goals (8m)

ANSWER 1.3
a. i.

ii.
Macroeconomics goals Explanation

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QUESTION 1.4 (FE: JUNE 2017)

Macroeconomic is branch of economics that studies economics activities in aggregate.
Briefly describe FIVE (5) variables in macroeconomics below:
i. National income (2m)
ii. Economic growth (2m)
iii. Employment and unemployment (2m)
iv. Inflation (2m)
v. Balance of payment (2m)

ANSWER 1.4
Economics activities Explanation 1 Explanation 2

National income

Economic growth

Employment and
unemployment

Inflation

Balance of payment

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QUESTION 1.5 (FE: JUNE 2013)

Describe FOUR (4) macroeconomics goals of the Malaysian government and support your
answer with brief explanation. (12m)

ANSWER 1.5
Macroeconomics goals Explanation Examples

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