CONFIDENTIAL BM/MAR 2011/MTC099/ECO099

UNIVERSITI TEKNOLOGl MARA

FINAL EXAMINATION
COURSE
COURSE CODE
EXAMINATION
TIME
: ECONOMIC ISSUES AND PROBLEMS /
INTRODUCTION TO ECONOMICS
: MTC099/ECO099
: MARCH 2011
: 2 HOURS
INSTRUCTIONS TO CANDIDATES
1 . This question paper consists of three (3) parts : PART A (20 Questions)
PART B (4 Questions)
PART C (3 Questions)
2. Answer ALL questions from Part A and Part B. Answer any one (1) question from Part C.
i) Answer PART A in the Objective Answer Sheet.
ii) Answer PART B and PART C in the Answer Booklet. Start each answer on a new
page.
3. Do not bring any material into the examination room unless permission is given by the
invigilator.
4. Please check to make sure that this examination pack consists of :
i) the Question Paper
ii) an Answer Booklet - provided by the Faculty
Hi) an Objective Answer Sheet - provided by the Faculty
iv) a graph paper - provided by the Faculty
DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO
This examination paper consists of 10 printed pages
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CONFIDENTIAL 2 BM/MAR 2011/MTC099/ECO099
PART A
1. Economics is all about
A. demand.
B. resources.
C. scarcity.
D. wants.
2. The opportunity cost of spending three hours studying an economics review book the
night before the MTC099 final exam would be
A. a higher grade in the exam.
B. missing three hours of TV.
C. the cost of the economics review book.
D. the knowledge gained from studying.
3. Malaysia is practising mixed economic system because
A. there are a private sector and a public sector.
B. there are domestically produced goods as well as imported goods.
C. we consume both goods as well as services.
D. we produce palm oil and petroleum.
4. A supply schedule is a table showing the relationship between
A. income and the quantity of the good supplied.
B. the determinants of supply and the quantity supplied.
C. the price of a good and the quantity buyers are willing and able to purchase.
D. the price of a good and the quantity sellers are willing and able to supply.
5. Assuming that housing and factories can be built on the same piece of land, an
increase in the price of housing, other things being equal, causes a
A. downward movement along the supply curve for factories.
B. leftward shift in the supply curve for factories.
C. rightward shift in the supply curve for factories.
D. upward movement along the supply curve for factories.
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CONFIDENTIAL 3 BM/MAR 2011/MTC099/ECO099
6. The following are macroeconomic objectives except
A. economic stagnation.
B. full employment.
C. positive balance of payments.
D. stable prices.
7. Which of the following is a macroeconomic statement?
A. It is cheaper to fly by budget carriers like Air Asia.
B. Net books are becoming more affordable due to lower prices.
C. The inflation rate of our country is expected to stay above 3 per cent until the
second quarter of this year.
D. The retail price of chicken has stabilized since the joint Raya festival.
Questions 8 and 9 are based on the data given in the figure below:
i
c
0
/
/
C = Y
/
/
/
/
* ' ^- "
/^ *
Ye
- C = RM100 + 0.6Y million
Y
8. The value of the equilibrium level of income, Ye is
A. 0.
B. RM100 million.
C. RM166.67 million.
D. RM250 million.
9 What is the value of savings at Ye?
A. 0.
B. RM100 million.
C. RM250 million.
D. cannot be determined from the available information.
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CONFIDENTIAL 4 BM/MAR 2011/MTC099/ECO099
10. Given the consumption function, C = 180 + 0.68Y, what is the marginal propensity to
save (MPS)?
A. 0.32.
B. 0.68.
C. 180.
D. 180.68.
11. When we use money to determine the relative worth of goods and services, it is
functioning as a
A. medium of exchange.
B. unit of account.
C. standard of deferred payment.
D. store of value.
12. Which of the following would be the best definition of money?
A. Anything that is normally accepted by banks.
B. Anything that can be exchanged for gold at a fixed rate.
C. Anything that is acceptable as payment for goods and services.
D. Anything that is produced by the government.
13. Which of the following is not included when computing M2?
A. Al-Wadiah savings deposits at Bank Islam.
B. Checkable deposits at CIMB Bank.
C. Fiat money in circulation.
D. Fixed deposits at Bank Simpanan Nasional.
14. Monetary policy is widely used by government to influence economic outcomes. Listed
below are the tools of monetary policy except
A. buying or selling of government securities by their respective central banks.
B. cash and liquidity reserve requirements.
C. government spending and taxation.
D. interest and discount rates.
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15. At times of low demand and low output, the government will be carrying out
A. both contractionary fiscal and monetary policies.
B. both expansionary fiscal and monetary policies.
C. only contractionary fiscal policy.
D. None of the above is correct.
16. Demand-pull inflation is caused by
A. energy cost increases.
B. exhaustion of resources.
C. increases in production costs.
D. realisation of full-employment.
17. Who would not be included in the labour force?
A. Mat Rock, who is recently laid-off by the workshop he worked for.
B. Misha, who does not have a job, but keep looking for one.
C. Pak Busu, who is working as a security guard at a construction site.
D. Pak Uda, who has retired and is not looking for work.
18. Free trade theory suggests that when trade takes place
A. both nations will be worse off.
B. both nations will be better off.
C. one nation will gain and the other nation will be neither better nor worse off.
D. one nation will gain at the expense of the other nation.
19. Which of the following is not a benefit of international trade?
A. An ability to control domestic and world prices.
B. An increased in variety of goods and services.
C. Improvement in quality through increased in competition.
D. Lower cost through economies of scale.
20. Suppose the exchange rate changes so that fewer Malaysian ringgit (RM) are required
to buy a US dollar. We can conclude that
A. Malaysian exports to US will rise.
B. Malaysian imports from the US will fall.
C. the RM have appreciated.
D. the RM have depreciated.
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PARTB
QUESTION 1
a) The table below shows an efficient combinations of two types of goods, luxuries and
necessities that an economy can produce.
Combinations
A
B
C
D
E
Luxuries
0
1
2
3
4
Necessities
140
120
90
50
0
Opportunity Cost
-
i) Complete the table by calculating the opportunity cost for each unit of increasing
luxuries.
(2 marks)
ii) What type of opportunity cost is the economy facing?
(1 mark)
b) The table below shows the price, the quantity demanded for and the quantity supplied
of venison meat.
Price
(RM)
10
30 j
50
i
70
Quantity Demanded
(kilogram)
49
47
45
43
Quantity Supplied
(kilogram)
34
42
50
58
i) Using a graph paper, draw a diagram showing the demand and supply curves.
Label the diagram accordingly.
(3 marks)
ii) Based on the graph drawn, determine the equilibrium price and quantity?
(2 marks)
iii) List two (2) factors that may cause the demand curve to shift to the left.
(2 marks)
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QUESTION 2
A consumption function is given as C = 100 + 0.8 Y where C is total consumption and Y is
disposable income.
Y
200
400
600
800
C S APC APS MPS
a) Based on the consumption function given, complete the table accordingly
b) Find the break-even income.
c) If investment is 200, find the equilibrium national income.
d) Find the savings at the equilibrium national income.
(5 marks)
(2 marks)
(2 marks)
(1 mark)
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QUESTION 3
a) The table below shows the monetary aggregates released by Bank Negara Malaysia
for the month of May, 2010.
Monetary
Aggregates
RM million
Currency in
Circulation
45,295.7
M1
208,685.1
M2
1,002,448.5
M3
1,032,614.0
Based on the data given above, calculate the value of:
i) Demand/current deposits of the private sector.
(1 mark)
ii) Narrow near money.
(1 mark)
iii) Deposits placed with other financial institutions.
(1 mark)
b) The following table shows the balance sheet of Bank A.
Liabilities
(RM million)
Customers' deposits
Total
500
500
Assets
(RM million)
Cash
Loans
Total
100
400
500
i) What is the cash ratio observed by Bank A?
(1 mark)
ii) Show the credit creation process by completing the table below
Bank A
BankB
BankC
Deposits
(RM million)
i ZJoo
Cash
(RM million)
100
Loans
(RM million)
400
(6 marks)
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QUESTION 4
a) The following table shows the production possibilities of two countries, Agaria and
Industria before trade.
Country
Agaria
Industria
Quantity of Product Simple
15,000
18,000
Quantity of Product Advance
5,000
9,000
i) Based on the above information, calculate the opportunity cost to produce both
products in Agaria and Industria.
(2 marks)
ii) Based on the theory of comparative advantage and the result of your
calculations, which country should specialize in the production of Product Simple
and Product Advance? Give reasons for your answer.
(2 marks)
iii) List down two (2) advantages of engaging in international trade.
(2 marks)
b) The table below shows selected entries from the Balance of Payments of Malaysia for
the year 2007, 2008 and 2009.
Year
Overall Balance
Reserve Assets
2007
(RM million)
45,296
-45,296
2008
(RM million)
-18,250
18,250
2009
(RM million)
13,831
-13,831
i) Which year's Balance of Payments is unfavourable? Why?
(2 marks)
ii) How do you classify an overall Balance of Payments that is positive in value?
What does it shows?
(2 marks)
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PART C
QUESTION 1
a) What is a mixed economy? Give one (1) example of a country practising mixed
economy system. Discuss four (4) areas where the government is likely to intervene
and participate.
(10 marks)
b) With the aid of diagrams differentiate between change in quantity demanded and
change in demand.
(10 marks)
QUESTION 2
a) List any two (2) macroeconomic objectives and explain why a country wants to achieve
these objectives.
(6 marks)
b) What is fiscal policy?
(4 marks)
c) Describe how the fiscal policy can be used to solve the problems of inflation and
unemployment.
(10 marks)
QUESTION 3
Write notes on the following:
a) Maximum Price Regulations.
(5 marks)
b) Keynesian Consumption Function.
(5 marks)
c) Expansionary Monetary Policy.
(5 marks)
d) Privatisation.
(5 marks)
END OF QUESTION PAPER
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