1.How does an Investment Schedule (Ig) differ from an Investment demand

curve (Id)?

[10 Marks]

2. Ally owns a chain of bakery stores. He is considering whether he should build

a new store downtown. The expected rate of return is 15% per year, while the

cost of borrowing money to finance the project is 12% per year. Should Ally

proceed with this project? Provide justification to your answer.

[10 Marks]

3. According to the Keynesian theory, the main factor that determines the

economic status of an economy is the aggregate expenditure level. Explain

the theory in detail.

[20 Marks]

4. Answer the following two (2) questions

[20 Marks]

4.1 Is Saving a good practise in macroeconomic perspective? Provide

justification to your answer with graphical assistance. [10 Marks]

4.2 Given S-function is S=-110 + 0.25Yd. Supposed a RM10 Million tax is

imposed, Find the amount of Consumption expenditure need to be

reduced in response to this policy implementation. Show your

workings, illustrate graphically and provide explanation of your

answers. [10 Marks]

PET3033 Macroeconomics

[See next page

4

5. Answer questions 5.1 to 5.5 by referring to Table 1.

[20 Marks]

Table 1 Income and Consumption Data

Yd C

0 80

100 140

200 200

300 260

400 320

5.1 By referring to Table 1, generate the consumption (C) and the Saving

(S) functions. [4 Marks]

5.2 By referring to Table 1,, determine Yd at break-even level. [4 Marks]

5.3 By referring to Table 4, if the government expenditure (G) = RM5 million,

investment (I) = RM3 Million , find the equilibrium (Y0 ) in a closed

economy. [4 Marks]

5.4 By referring to your answer in question 5.3, now assume the government

imposes tax worth RM10 million. Find the new economy equilibrium

point (Y1 ) [4 Marks]

5.5 By referring to your answer in question 5.4, what is the tax multiplier (MT)

value? [4 Marks]

[See next page

PET3033 Macroeconomics

5

6. The original condition of the Maxima Bank's Balance sheet is as displayed in

Table 2. Questions 6.1 to 6.10 are related to the information in Table 2.

[20 Marks]

Table 2 Balance Sheet Maxima Bank

Balance Sheet Maxima Bank

Asset RM ('000) Liability RM ('000)

Rizab (Reserves) 250 Checkable Deposit 250

Given: The requirement reserve ratio (rrr) is 25%.

6.1. Determine the amount of Required Reserve. [2 Marks]

6.2. Determine the amount of Excess Reserve. [2 Marks]

6.3. Suppose Maria makes a RM50 thousand loan from Maxima's bank. State

the adjustments that take place in the bank's balance sheet. [2 Marks]

6.4 Based on the transaction at 6.3, what is the current reserve requirement

and the excess reserves? [2 Marks]

6.5 Assume the latest position of Bank Maxima's balance sheet is as discussed

in question 6.3. Suppose Bank Maxima buys government securities worth

RM30,000. State the adjustments that take place in the bank's balance

sheet. [2 Marks]

6.6 Based on the transaction 6.5, the overall balance in the asset and liability

divisions are _______. [2 Marks]

6.7 Assume the current account status is at 6.6. Suppose Maria returns to

Maxima's bank and settles her loan worth RM50,000. State the adjustments

that take place in the bank's balance sheet. [2 Marks]

6.8 After transaction 6.7, Maxima Bank decides to sell all government

securities. State the adjustments that take place in the bank's balance

sheet. [2 Marks]

6.9 Refer to transaction 6.8. State the final balance of the Asset and the

Liability columns. [2 Marks]

6.10 Assume the current account status is as in 6.9. Calculate the latest

amount of required reserve (RR) and excess reserve (ER). [2 Marks]

[See next page

PET3033 Macroeconomics

6

7. Adopting an open economic policy will involve international trade, which in

turn will affect the country's currency value.

[20 Marks]

7.1 How does the currency value (exchange rate) is determined? [10 Marks]

7.2 The following questions are based on the information provided in Table 3.

[10 Marks]

Table 3 The Exchange Rates of MYR to Other Currencies

1 MYR =

0.25 USD

0.34 SDR

0.21 EURO

3554.45 IDR

27.57 YEN

Based on the information in Table 3, find the value of the following

currencies.

a. MYR/USD [2 Marks]

b. MYR/YEN [2 Marks]

c. MYR/1000 IDR [2 Marks]

d. USD/YEN [2 Marks]

e. SDR/EURO [2 Marks]

[END OF QUESTIONS]

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