Question 1

(a) There are FOUR main components of GDP. Explain the components.

[16 marks]

(b) Assume the GNP for Malaysia is lower than the GDP. Explain why this could happen.

[14 marks]

Question 2

Answer the following questions based on the table below.

Goods Quantity Base Year Price Current Year Price

A 8 RM11 RM12

B 3 RM1.50 RM1.50

C 5 RM4 RM3

(a) Calculate the nominal expenditure for each of the goods.

[9 marks]

(b) Determine the base and current year CPI index.

[8 marks]

(c) Calculate the rate of inflation in the current year.

[3 marks]

Question 3

Explain why the consumption function is upward sloping and the investment function is horizontal.

[30 marks]

Question 4

Elaborate how fiscal policy can solve the problem of unemployment in Malaysia.

[20 marks]