TMA2 year 2014

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Part A
a) Referring to the first paragraph, explain the term twin deficit (5 marks)

b i) Referring to the third paragraph, MIER has urged for an active monetary policy. What does an active monetary policy mean? (6 marks)

ii) In order to combat a volatile exchange rate and moderate inflation, what form of monetary policy should be used? (5 marks)

iii) Using an appropriate diagram, explain the impact on Malaysia‟s Ringgit using the choice of monetary policy in (ii) above. (8 marks)

c) As explained in the article, Malaysia has embarked on a series of fiscal consolidation moves. Explain TWO (2) of the moves (8 marks)

d) In the last paragraph, it is stated that Putrajaya aims to reduce the budget deficit to 4 per cent and gradually to 3 per cent by 2015. Discuss the pros and cons of a budget deficit. (8 marks)


Part B
Question 1
a) Explain how the TWO (2) concepts national income and national expenditure can have identical values; even though measure in different ways. (10 marks)


b) How useful are measures of GDP for indicating changes in living standards within a country? (10 marks)


Question 2
What are the likely effects on a housing developer if the government implements
a) Expansionary monetary policy (10 marks)

b) The government faces a budget deficit (10 marks)


Question 3
Using an AD-AS diagram, show and explain the changes for the following scenario:
a) Bank Negara decreases money supply. (5 marks)

b) A new technology is developed that reduces electricity costs. (5 marks)

c) More labour training and education in the country (5 marks)

d) A drop in the value of RM relative to other currencies. (5 marks)