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BACHELOR OF BUSINESS ADMINISTRATION WITH HONOURS

SEMESTER JANUARY 2022

BBEK4203

PRINCIPLES OF MACROECONOMIC

NO. MATRIKULASI : 810803085592001

NO. KAD PENGNEALAN : 810803-08-5592
NO. TELEFON : 0167919172
E-MEL : moganacolindy@oum.edu.my
PUSAT PEMBELAJARAN : OUM MANJUNG
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TABLE OF CONTENT PAGES

1. Introduction 3
Malaysian current economy 3
 Inflation 4
 Unemployment 4
 Government budget deficits 4
 Interest rates 4
2. Identification and explanation of the current macroeconomic problems faced by
Malaysia 5
 Inflation 5
 Unemployment 6
 Balance payment 6
 Government growth 7
3. How Malaysia uses the macroeconomic policies to mitigate the macroeconomic
problems
 Fiscal policy 7-8
 Government expenditure 8
4. Opinion on the macroeconomic policies undertaken/ proposed by Malaysia 9
 Lowering tax charges 9
 Raise government spending 9
 Buying Malaysian products 9
 Overcome financial recession 10
5. Conclusion 11
6. Reference 11-12
7. Part 2
 Question 1 13
 Question 2 14-15
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Introduction

Macroeconomic is a branch of economics that investigates the relationship between

aggregate variables including income, purchasing power, price, and money, according to
economics. In other terms, macroeconomics studies how the economy works. Looking at how
demand and supply of items affect economy, the resources, as well as the factors that influence
them, are determined. makes a specialty of the general performance of economies in term of
modification in economic output, income, inflation, interest, unemployment, foreign exchange
rates, and the steadiness of payments. Poverty reduction, social equity, and sustainable growth
are most effective possible with sound economic and financial policies. The worldwide has
entered a latest generation of fast worldwide change driven through fundamental shifts in
demographics, wealth, technology, and weather.

Malaysian current economy

https://www.focus-economics.com/countries/malaysia
According to available data(link), economic condition improved in Q4 2021, owing in
part to the relaxation of covid-19 restrictions. Due to robust overseas demand for electronics,
industrial production returned on average in October-November, while goods exports
expanded at a faster rate. These variables, together with a significant improvement in
industrial operating conditions in Q4, point to a pick-up in private sector activity.
Similarly, a reduce unemployment rate in October- November bodes favorably for
consumer spending, while the quarters high inflation will have stifled growth. On a less
upbeat note, devastating floods in the fourth quarter of 2021 and early 2022 will have a
negative impact on current quarter activity. However, on December 29,2021 the government
announced a flood assistance package worth approximately USD 335 million, which might help.
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Inflation
A sustained rise in the general price level is defined as inflation. A gain in GDP has often
been accompanied by an increase in the overall price level, according to global experience. In
most cases, moderate inflation is thought to be an essential condition for economic growth.
However, the continuously rising overall price level spiraled out of hand, reaching incredible
heights. In macroeconomics, the phenomenon of inflation (and its inverse, deflation) is
traditionally studied.

Unemployment
Another recurrent occurrence in most economies around the world, both established and
developing, is that the rate of new job creation has trailed behind the demand for jobs. As results,
a significant portion of the workforce remaining unemployed. This underutilization of the
economy available resources is referred to as a deadweight loss. Macroeconomics has been
attempting to find a long-term solution to this recurring issue.

Government Budget Deficits

Government has a history of spending more than they can generate through taxes and the
selling of commercial commodities and services they produce. The resulting shortfall (also
known as a budget deficit) could be funded through capital mobilization through loans. Because
the government spent more than it looks in, it was able to create more jobs and so help the
economy generate more revenue. However, this method of funding government spending has a
slew of other consequences, many of which may be negative:

 A considerable portion of domestic saving may be held by the government

 This may put pressure on market rates of interest. In recent years,
macroeconomics has paid increased attention to these challenges.
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Interest Rates
Interest rates have risen to the forefront of today’s globalizing world. Globalization
entails fierce rivalry. Successful globalization necessitates that all actors work to their maximum
efficiency. No one wants to be priced out because they must pay exorbitant interest rates. As a
result, the question of how to maintain interest rates low has piqued economists’ interest.

2 Identification and explanation of the current macroeconomic problems faced by

Malaysia

Chart 1: employed persons and employment-to-population ratio, January 2018-november 2021

In term of the effects of the covid-19 Epidemic, Malaysia, like most other countries, has
been severely impacted by the pandemic, forcing the Malaysian government to take various
efforts to alleviate the effects, particularly on the nation’s economic and social activities. The
Malaysian government’s decision to implement the strict Movement Control Order (MCO) in
March 2020, followed by a few others after that with some adjustment in terms of its applied
rules and procedures, has had an impact on the public and private sectors, industries, business
communities, and ordinary people’s daily life activities, affecting the nation’s economy and
social systems. Even though there are few empirical studies on this pandemic and its direct
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influence on Malaysia’s economy and social system to date, a few early published academic and
non-academic articles revealed that Malaysia is severely affected by this epidemic. For example,
plainly stated that from 11 January 2020 to 16 march 2020, a total of 170,084 hotel room
bookings were cancelled, resulting in a revenue loss of RM68,190,364. The emergence of covid-
19 was directly responsible for the loss.
In comparison focused on the influence of covid-19 on the employees associated with the
industry. The pandemic has had a substantial impact on the hotel industry’s employees,
particularly in terms of compensation cuts, forced unpaid absence, and in the worst-case
scenario, layoffs. Chart 1 showing employed persons and employment-to-population ratio which
indicates the ability of an economy to create employment went up by 0.2 percentage points to
records 66.0 percent in November 2021 (october2021:65.8%). In comparison with one year
earlier, the ratio ascended by 0.9 percentage points(november2020;65.1%). This are consistent
with, claims that covid-19 has had a major negative impact on the hotel and airline businesses,
both in terms of cash losses and employee compensation cuts, unpaid leave, and layoffs. The
situation of affected personnel in the industry. Regarding the influence of covid-19 on the tourist,
aviation, and hospitality industries, there are a few more essentially provide the issues raised.

Inflation
The general price level rises continuously and indefinitely.
 The cost-of-living increase as total spending increases living standard fall
purchasing power falls as the value of money falls economic growths affected.
 Living standards are falling
 Purchasing power falls as the value of money falls.
 Economic growth is affected.

Unemployment
The total workforce is between 15 and 64 years old who are actively for any job but have
not yet found one.
 Decreasing living standards as per capita income decreases.
 Poverty rates increased.
 Affect the economic growth of reduced national output.
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Economic growth
The development of economic activity is reflected by the increasing the real GDP of
current year compared to the previous year.
 Employment opportunities due tp declining per capita income
 Living standards and social welfare deteriorated

Balance payments
Financial statements that record the value of all transactions and cash flows made
between one country and another in a period of one if year.
 Foreign exchange reserves declined.
 The value of the national currency (RM) depreciated.
 Economic activity is affected.

3. Discussion how Malaysia uses the macroeconomic policies to mitigate the

macroeconomic problems.

Fiscal policy
Fiscal policy can be defined as how the federal government or the public sector, through
its members of parliament and other elected parties, influences the economy through spending
and taxing, with the primary goal of affecting aggregate demand, employment, and output.
Monetary policy covers the use of numerous ways with the goal of regulating the value, supply,
and cost of money in accordance with the predicted level of economic activity, notwithstanding
their conceptual differences.
When it comes to fiscal policy, the government normally employs two types of fiscal
policies: expansionary and contractionary fiscal policies. Both are concerned with striking a
balance between the use of two major fiscal policy instrument such as spending and taxation.
The most common sort of fiscal policy utilized by the government is expansionary fiscal policy.
It operates by either increasing government spending or reducing income through tax cuts
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or by a mix of the two. The major goal of this strategy is to ensure that consumers have more
money to spend, resulting in increased demand and it turn favorable economic growth for the
country. Contractionary fiscal policy, on other hand, entails the government cutting
spending or increasing tax revenue, or a mix of the two. This short of fiscal policy is rarely
utilized, and the main goal is to limit consumption in order to manage rapid economic growth
and slow the rate of inflation.
As previously stated, the primary tool in fiscal policy is the central government’s
spending behavior, which includes subsidies, public works projects, public sector wages, and
welfare programmed. According to most relevant earlier empirical researches have shown that
government expenditure is the most effective and rapid way of enhancing a country’s economic
growth under low economic conditions, particularly visible in the year 2020. When Malaysia,
Singapore, and Japan, for example, have just launched a stimulus package worth over a trillion
dollars in the form of fiscal policy to support economic growth, which has been severely harmed
by the corona virus outbreak.
The governments use of taxation policy to enhance the aggregate economy is the
second weapon under fiscal policy. In general, economists and academics believe that modifying
the tax system, namely the deduction in tax rate and preferential tax allocation, will lead to
increased public spending, innovation, investment, and savings. As a result, the nation’s overall
economic performance will improve, and vice versa. In terms of monetary policy, the
governments weapons for intervening in the aggregate economy is to ensure that the supply
of money or the amount of money available at any given time is under control. They are a
variety of methods or tools for doing so, but the most common method is to cut or raise interest
rates, exchange and inflation rates, and external reserve. The federal government controls the
demand and supply of money through monetary policy, which is implement through central
bank processes. When the interest rate is reduced, for example the cost of borrowing is reduced,
and the ability of industry and business players to borrow money increases, and vice versa. This
will lead to and influence microeconomic activity, which in turn will affect aggregate economic
growth.

Government expenditure
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At the outset of the pandemic, one of the first few national-level policies was to declare
and channel an initial fund of RM1 million to the Malaysian Ministry of Health (MOH) for
funding the RM100 to each person affected by the MCO, as well as equipping frontline workers
(i.e the MOH staff including medical doctors, nurses and other government servants directly
involved such as policemen and other enforcement officers for MCO). Furthermore, the
Malaysian Inland Revenue Board, or LDHN in short form, as the government agency charged
with collecting taxes, was allowing tax deductions for cash donations and purchases for items to
be sent to the affected resident. At the same time, the larger Malaysian based private sector
enterprises have teamed up with the Malaysian government to generate funds for general use in
minimizing the covis-19s effects on the country. Clearly, at the start of covid-19, the Malaysia
government had implemented fiscal and monetary policies using fiscal and monetary tools at the
same time.
A few days after the first initiative, the Malaysian government announced an RM600
million allocation to the ministry of health, of which RM 500 million would be used to purchase
ventilators and personal protective equipment (PPE), and the remaining RM100 million would
be use to hire 2000 nurses on a contract basis. Furthermore, when announcing the RM250 billion
PRIHATIN package to help micro, small, and medium- sized businesses retain their employees
on march 27,2020, the prime minister announced an additional RM 1billion budget to cover
medical needs, such as the purchase of equipment and service to combat cocid-19. One of the
government positive actions was the PRIHATIN package, which was followed by extreme
measure such as a 6-month moratorium granted by BNM to decreased the financial damage. To
date, the Malaysian government has announced several economic stimulus packages and social
sickness mitigation strategies to offset the negative effects of covid-19.

4 My opinion on the macroeconomic policies undertaken/ proposed by Malaysia

In 2022, economic growth is prepared to enhanced up in evaluation to remaining year, in

huge part due to the fading impact of pandemic- caused disruption to domestic interest, amid a
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markedly higher interest vaccination rate. Moreover, getting higher interest among key buying
and selling companions will keep exports. That said, covid-19 flare ups and the chance of
preferred election in 2022 could the outlook. Focus economic panelists assume the economic
system growing 5.8% in 2022, its down 0.1 % elements from final months forecast. In 2023, the
panel sees the economic system growing 5.1%.

Lowering tax charges

When tax charges go down, disposable earning will increase. Consumption will growth,
combination expenditure will growth. Consumption will lower inventory and companies will
growth output. National output or countrywide profits increases. Unemployment will lower.
Thus, the economic recession may be overcome.

Raise government spending

As government spending goes up, combination spending will growth. Stocks are
declining and companies will growth output. National output or countrywide profits increases.
Unemployment is declining. So, the economic recession may be overcome.

Buying Malaysian products

Next, the efforts of the authorities and the people to overcome the trouble of economic
recession is to keep a marketing campaign to buy items made in Malaysia. With purchase of
products made in Malaysia, circuitously the flow of national foreign money will now no longer
come out. Example of Malaysian made items are specific Malaysian logo.

Overcame financial recession

The authorities’ efforts to overcome the financial recession is to reduce imports of food
and merchandise from abroad. The government additionally desire to domesticate the spirit
withinside the nearby network in growing the manufacturing of food and local merchandise to
save us overseas items from being introduced in.
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5 Conclusion

Economic growth is expected to pick up in 2022 compared to last year, owing to the
fading impact of pandemic related disruptions to domestic activity and a significantly higher
vaccination rate. Furthermore, exports will be supported by resurgent activity among important
trading partners. Covid-19 flare-ups, as well as the threat of general elections in 2022, cast a pall
on the outlook. The economy will increase 5.8% in 2022, according to focus economic panelists,
down 0.1% point from last month projection. According to the panel, the economy would grow
by 5.1% in 2023. The Malaysian government concentrated on social issues, the national
economy, and the transition to a low -carbon economic during covid-19, which ran from 2020 to
early 2021, including how and ro what extent these policies were executed. Through balanced
fiscal and financial policies and tools, and environmental issues such as carbon emissions.
However, more relevant future studies of the impact of fiscal policy on the economy, such as
low-carbon economic, will contribute to the theory.

References

Adegoriola, A. E. ‘An Empirical Analysis of Effectiveness of Monetary and Fiscal Policy

Instruments in Stabilizing Economy: Journal, Vol. 7, (3), pp. 133-140,2018.

Lut, M. and Moolio, P. ‘The Impact of Monetary Policy on Economic Growth in Cambodia’.
Journal of Management for Global Sustainable Development, Vol. 1, pp. 40-63, 2015.

Foo, L. P., Chin, M. Y., Tan, K. L. and Phuah, K.T. ‘The impact of COVID-19 on tourism
industry in Malaysia, Current Issues in Tourism’. Current Issues in Tourism, pp. 1-5, 2020.
https://www.tandfonline.com/doi/full/10.1080/13683500.2020.1777951
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Idris, M. ‘Relative Impact of Monetary and Fiscal Policy on Output Growth in a Small-open
Economy’. American Research Journal of Humanities & Social Science, Vol. 02, 08, pp. 26-38,
2019.

Scarth, W. ‘Fiscal Policy Can Raise Both Employment and Productivity’. The International
Productivity Monitor Journal, 11, pp. 39-46, 2005.

Amadeo, K. ‘Fiscal Policy Types, Objectives, and Tools’. 2020. Downloaded through:
https://www.thebalance.com/what-is-fiscal-policy-types-objectives-and-tools-3305844

Adegoriola, A. E. ‘An Empirical Analysis of Effectiveness of Monetary and Fiscal Policy

Instruments in Stabilizing Economy: Evidence from Nigeria’. Social Science Journal, Vol. 7,
(3), pp. 133-140, 2018.

Shah, A. U. M., Safri, S. N. A., Thevadas, R., Noordin, N. K., Rahman, A. A., Sekawi, Z.,
Ideris, A. and Hameed Sultan, M. T. H. ‘COVID-19 outbreak in Malaysia: Actions taken by the
Malaysian government’.

Trading Economic. (2018). Malaysia unemployment rate. Retrieved from

https://tradingeconomics.com/malaysia/unemployment-rate.

‘COVID-19 outbreak in Malaysia: Actions taken by the Malaysian govern Department of

Statistics, Malaysia. (2012). Principal statistics of labor force, Malaysia, September 2012.
Retrieved from
http://statistics.gov.my/portal/images/stories/files/LatestReleases/employment/
Labour_Force_Indicator_Malaysia_Sept_2012BI.pdf
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PART II

QUASTION 1
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Posting 1 Posting 2
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QUASTION 2

Posting 3
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Posting 4 Posting 5