CONFIDENTIAL

FINAL EXAMINATION

COURSE : MACROECONOMICS
MACROECONOMICS
COURSE CODE : PEC2143

DURATION : 2 HOURS

INSTRUCTIONS TO CANDIDATES :

1. This question paper consists of THREE (3) parts : PART A (25 questions)
: PART B (15 questions)
: PART C (3 questions)

2. Answer ALL questions from PART A, PART B and PART C.

3. Please check to make sure that this examination pack consists of :

i. The Question Paper

4. The answer must be in handwriting. Please write your answer using a ball-point pen
onfoolscap paper. The answer need to be submitted to your respective lecturer using:

i. Upload the PDF file via Google Classroom OR,

ii. Upload the PDF file via email OR,
iii. Upload the PDF file via WhatsApp OR,
iv. Upload the PDF file via OLES.

5 Plagiarism, copying and cheating will not be tolerated where no marks will be given and
disciplinary actions can be taken.

MYKAD NO : ___________________________________________
ID. NO. : ___________________________________________
LECTURER : _______________________________________
SECTION : _______________________________________

DO NOT OPEN THE QUESTION PAPER UNTIL YOU ARE TOLD TO DO SO

The question paper consists of 12 printed pages

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PART A: MULTIPLE CHOICE QUESTIONS

Choose the best answer.

1. (1 point)
Ameera saves a portion of her earnings in a safe deposit box, she uses money
as ___________________.

A. store of value
B. measure of value
C. medium of exchange
D. standard of deferred payment

2. (1 point)
Money demand for a speculative motive is mainly dependent on the
_____________.

A. money supply
B. rate of interest
C. level of income
D. general price level

3. (1 point)
Which of the following is NOT an example of commercial bank in Malaysia?

A. RHB Bank
B. CIMB Bank
C. HSBC Bank
D. Affin Investment Bank

4. (1 point)
The minimum percentage of deposits that a depository institution must hold and
cannot use for lending is known as the __________________.

A. discount rate
B. minimum rate
C. money multiplier
D. required reserve ratio

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5. (1 point)
According to Bank Negara Malaysia (BNM), money supply consists of
____________.

A. fiat money
B. M1, M2 and M3
C. broad quasi money
D. narrow quasi money

6. (1 point)
The central bank should implement expansionary monetary policy to reduce
unemployment by_______________________.

A. increasing the interest rate

B. increasing the discount rate
C. decreasing the required reserve ratio
D. selling government securities in open market operation

7. (1 point)
Which of the following is NOT an Islamic financial product?

A. Al-Falah
B. Al-Ijarah
C. Al-Wadiah
D. Al- Musyarakah

8. (1 point)
Which of the following would be classified as unemployment?

A. A person who quits his/her job and attend college.

B. A woman who marries and chooses to be a housewife.
C. A person who is actively looking for job but is unable to find it.
D. A person who has given up looking for a job, after job hunting for a long
time.

9. (1 point)
Khairi was fired by his employer because the company had to downsize its operations
due to the recession. This is an example of _______________ unemployment.

A. cyclical
B. frictional
C. seasonal
D. structural

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10. (1 point)
Sabri is temporarily unemployed because he has voluntarily quit his job with TNB
and will begin a better job next month with Bank Negara Malaysia. Sabri will be
considered as ___________________.

A. cyclical unemployment
B. frictional unemployment
C. seasonal unemployment
D. structural unemployment

11. (1 point)
Anwar lost his job because he was replaced by machines. Anwar considered to
be _____________ unemployment

A. cyclical
B. frictional
C. seasonal
D. structural

12. (1 point)
An increase in the overall price level is known as _________________.

A. inflation
B. deflation
C. stagflation
D. disinflation

13. (1 point)
If too much money is chasing too few goods, the resulting inflation is known as
__________.

A. deflation
B. stagflation
C. cost-push inflation
D. demand pull inflation

14. (1 point)
Cost-push inflation occurs when _____.

A. there is excess supply of goods and services

B. total cost of producing goods and services falls
C. there is excess demand for goods and services
D. total cost of producing goods and services rises

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15. (1 point)
The group of people that badly affected during the inflation is __________________.

A. debtors
B. pensioners
C. businessmen
D. property owners

16. (1 point)
When a country produces a good at a lower opportunity cost than any other
country, this country is said to have a(n) ___________.

A. free-trade advantage
B. trading advantage
C. absolute advantage
D. comparative advantage

17. (1 point)
A limitation on the value of imported goods is a(n) ____________.

A. trade
B. tariff
C. quota
D. industry subsidies

18. (1 point)
The following are the advantages of international trade, EXCEPT __________.

A. variety of goods and services

B. better relationship between trading
C. economic and political dependence
D. higher income and economics growth

19. (1 point)
Trade restrictions that are used by most countries to protect their local products
from foreign competition is called _____________.

A. protectionism
B. balance of payment
C. absolute advantage
D. comparative advantage

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20. (1 point)
Floating exchange rate system is also known as _______________system.

A. Bretton Wood
B. flexible exchange rate
C. pegging exchange rate
D. gold standard exchange rate

21. (1 point)
Appreciation of a currency occurs when one currency becomes
_______________ in terms of another currency.

A. equal
B. cheaper
C. expensive
D. less or more

22. (1 point)
The demand curve for foreign exchange is _______________________.

A. vertical
B. horizontal
C. upward sloping
D. downward sloping

23. (1 point)
In a fixed exchange rate system, a decline in the value of the dollar would be called
a _______________ of the dollar.

A. revaluation
B. devaluation
C. appreciation
D. depreciation

24. (1 point)
Floating exchange rate is determined through the ________________.

A. world bank
B. market forces
C. banking system
D. International Monetary Fund

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25. (1 point)
If RM4.19 are required to buy USD1, instead of RM4.00 earlier. It shows
_________________.

A. domestic currency revaluation

B. domestic currency devaluation
C. domestic currency has appreciated
D. domestic currency has depreciated

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PART B : TRUE/FALSE QUESTIONS

Indicate whether the statement is true or false.

1. (1 point)
According to Keynes, people hold money as a precautionary motive such as
paying for car repairs.

2. (1 point)
Assume that Azah Aziz deposit RM1000 in CIMB Bank, and this deposit will be
included in M2, but not in M1

3. (1 point)
Accepting deposit from individuals and providing loans to the general public are
the basic functions of Standard Chartered Bank.

4. (1 point)
Contractionary monetary policy aims to decrease the money supply. It is used to
control unemployment in an economy.

5. (1 point)
Al-Ijarah is a leasing contract in which a lessor or owner leases out an asset or
equipment to a client at an agreed rental fee for a pre-determined lease period.

6. (1 point)
There is negative relationship between inflation rate and purchasing power of money.

7. (1 point)
If an economy is operating at full employment, excess demand for goods and services
can cause demand-pull inflation.

8. (1 point)
Higher wage rate is an important factor that leads to the existence of cost-push inflation.

9. (1 point)
Shamsul works as a fisherman. He is currently unemployed as a result of Pahang's
monsoon season. Shamsul is a prime example of structural unemployment.

10. (1 point)
Full employment is the economic situation where all resources are efficiently utilized and
any kind of unemployment does not exist.

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11. (1 point)
During an inflationary period, the government will sell government bonds to offset the
inflation.

12. (1 point)
Exchange rate is the price of one currency in terms of another currency.

13. (1 point)
Depreciation of Malaysian Ringgit will increase the import from Malaysian citizens.

14. (1 point)
If exchange rate from RM 4.18 = 1 US Dollar to RM 4.50 = 1 US Dollar therefore
this situation refers to Malaysia Ringgit has depreciated relative to the US Dollar.

15. (1 point)
Malaysians purchasing property in Singapore will cause the Ringgit Malaysia to
appreciate.

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PART C: STRUCTURED QUESTIONS

Answer ALL questions.

1. (10 points)
a. Table 1 shows the money supply for Indonesia for the year 2020 issued
by the central bank.

Table 1

Items RM (million)
Fiat money 7,235
Paper money 5,657
Negotiable certificates 2,345
Saving deposits in commercial banks 1,890
Fixed deposits in commercial banks 4,123
Current deposits in commercial banks 5,567
Fixed and saving deposits in other financial institutions 5,908

Calculate;

i. The amount of token money (2 points)

ii. M1 (2 points)

iii. M2 (2 points)

b. The following data shows the balance sheet of Al-Tijari Bank for the year
ended 2020.

Assets (RM) Liabilities (RM)

Cash 10,350 Deposits 75,000
Loans 64,650
Total 75,000 Total 75,000

Calculate;

i. The cash ratio (2 points)

ii. Money multiplier (2 points)

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2. (10 points)
Table 2 shows the production possibilities of two countries in 2020. Both countries divide their
resources equally to produce meat and spices products.

Table 2
Country Sheep(tone) Cinnamon(tone)
Argentina 620 510
Sri Lanka 833 1157

a. Which country has an absolute advantage in the production of (2 points)

sheep and cinnamon? Why?

b. Calculate the opportunity cost of producing each product in each (4 points)

country.

c. Which country has the comparative advantage of producing sheep (1 point)

and cinnamon?

d. Construct a table to show the amount of outputs produced after (2 points)

specialization.

e. Suggest a term of trade that will equally benefit for both countries. (1 point)

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3. (10 points)
Table 3 shows the balance of payments for Malaysia in 2020.

Table 3

ITEMS RM (MILLION)

Exports 650,000

Imports 500,000

Transportation -20,280

Travel 29,424

Other business services -15,627

Compensation of employees -3,824

Investment income -30,302

Direct investment -34,708

Portfolio investment -10,634

Other investment 15,040

Error and omissions 9,000

Based on the above information, calculate:

a. Balance on merchandise account. (2 points)

b. Balance on service account (2 points)

c. Balance on current account (2 points)

d. Balance on capital and financial account (2 points)

e. Overall balance (2 points)

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