ECO TUTORIAL CHAPTER 6 (NUR SYAZREEN BINTI MOHD JURAINA)

1) Two contributions of tertiary sector? (5 marks)

a) Contribution of tourism. For example, foreign exchange earning which is
tourism expenditure and export and import related goods and services
generates income to economy.
b) Contribution of banking and financing. For example, economic growth
through other industries investment.
2) Explain government budget and three types of government budget.
a) Government budget is a forecast by a government of its expenditures and
revenues for a specific period of time.
b) Typer of budget :
i) Budget deficit is a government will used this budget hen the
economy is having the problem of recession or deflation. The
government’s total revenue is lower than total expenditure
ii) Budget surplus is a budget will be adopted by the government to
overcome the problem of inflation or economy boom. The
government’s total revenue is higher than total expenditure.
iii) Balanced budget is adopt this type of budget when it does not want
to change the level of economic activities. The government’s total
revenue equal or same with the total expenditure.
3) Define the concept of deficit trade balance and list in three causes.
a) The balance of trade is the difference between the value of exports and
imports. When exports exceed imports it is recorded as a surplus while a
deficit is registered when imports exceed exports.
i) Overvalued exchange rate-Imports will be cheaper.
ii) High consumer spending resulted from lower interest rates and high
economic growth
iii) Uncompetitive export-lack of incentives.
4) List 5 contributions in the banking and financial system in Malaysia
a) Economic growth through other industries investment
b) Employment
c) Supporter to other industries promotion of trade, agriculture.
d) Balance development
e) Promote capital formation, and export.
5) Explain 5 causes of the surplus in Malaysian trade balance.
a) Export of natural Resources. Malaysia is rich in natural resources such as
petroleum, liquefied natural gas ,palm oil and rubber. The export of these
resources can contribute significantly to a trade surplus,especially when
gobal demand and prices are favourable.
b) Manufacturing exports. Malaysia has a well-established manufacturing
sector,particularly in electronics ,electrical products and machinery. The
export of these manufactured goods, especially hoigh tech products, can
 contribute to a trade surplus as they are often in demand in international
markets.
c) Tourism: Malaysia is a popular tourist destination with its diverse
attractions, including cultural sites, beautiful beaches, and vibrant cities.
Revenues from tourism, including spending by international tourists, can
contribute to a surplus in the country's services trade balance.

d) Foreign Direct Investment (FDI): Malaysia has been successful in

attracting foreign direct investment, particularly in manufacturing and
technology sectors. FDI can lead to an increase in exports as multinational
companies located in Malaysia often produce goods and services for
export to other countries.

e) Currency Exchange Rates: Favorable exchange rates can make

Malaysian exports more competitive in international markets, leading to
increased demand for Malaysian goods and services. A relatively weaker
domestic currency can also make imports more expensive, further
contributing to a trade surplus.

6) Explain 5 causes of the deficit in Malaysian trade balance

a) Oil and Gas Imports: Malaysia is a net exporter of oil and natural gas, but
it also imports a significant amount of refined petroleum and petroleum
products. The country's energy needs may lead to a trade deficit,
especially when global oil prices are high.

b) Capital Goods Imports: Malaysia may import a substantial amount of

capital goods, such as machinery, equipment, and technology, to support
its industrial and manufacturing sectors. These imports can contribute to a
trade deficit, especially if the country's domestic production of such goods
is limited.

c) Consumer Goods Imports: Like many countries, Malaysia imports a wide

range of consumer goods, including electronics, automobiles, clothing, and
household products. Consumer demand for imported goods can contribute
to a trade deficit, particularly if domestic production does not fully meet the
demand.

d) Infrastructure and Development Projects: Malaysia may engage in large-

scale infrastructure and development projects that require the importation
of materials and expertise. Imports related to these projects can contribute
to a trade deficit, especially during periods of extensive development and
investment in the country.
e) Foreign Remittances and Royalties: Malaysia receives a significant
amount of foreign remittances and royalties, particularly from foreign
workers and intellectual property rights. While these inflows are beneficial
for the economy, they are recorded as imports in the current account,
potentially contributing to a trade deficit.