Question 1

a.Using economic reasoning, analyze and explain whether higher saving is necessary to raise living standards in developing countries. Use examples to support your argument.

(10 marks)

b. Imagine that the Indonesian government decides to repeal a tax credit for firms that built new factories in the country. Analyze and discuss the effects of the government's decision in the market for loanable funds. Diagram/s is required.(7 marks)

c. Mr. Chong worked as an Economist in 1985 and earned RM12,000 a year. His daughter Linda just graduated in 2020 and was offered RM210,000 a year as an Economist with World Bank. The price index was 17.6 in 1985 and 184 in 2020.(3 marks)

i) Calculate Mr. Chong's 1985 income in 2020 dollars (workings are required).

ii) Calculate Linda Chong's 2020 income in 1985 dollars (workings are required).