Question 2

The primary goal of effective macroeconomic policies is to reduce uncertainty and risk in

economic decision-making and maintain healthy levels of economic growth and minimize

price changes.

What would be the response by the government for the following events and

why?

a) In March 2021, the inflation rate for Malaysia was 1.7 %. The inflation rate of Malaysia

increased from -2.9 % in April 2020 to 1.7 % in March 2021 growing at an average

annual rate of 149.69%. (3 Marks)

b) The labour market is expected to remain pressured in the near term on the back of

surging COVID-19 cases and the reimposition of nationwide Movement Control Order

(MCO 3.0). (3 Marks)

c) The survey shows that 84.5% of small and medium enterprises (SMEs) will be

significantly affected by MCO 3.0. If the same type of measures that were enacted during

MCO1.0 are exacted in MCO 3.0, more than 40% of SMEs will be in dire financial straits

and two million jobs will be lost. (3 Marks)

d) Many small and medium enterprises (SMEs) proprietors have long stopped taking

salaries, curtailed operating expenditure and reduced staff to the minimum to ensure

their survival. (3 Marks)