Question
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
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]
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started