Suppose the following are national accounting data for a given year for Malaysia (hypothetical data).
(Billions of RM)
Consumption of fixed capital
Gross private domestic investment
Government consumption expenditures
Government investment expenditures
Household consumption expenditure
Net property income paid overseas
(2.5 marks each part)
Using the aggregate demand – aggregate supply (AD-AS) diagram, show how the four economic events would affect economic activity, the price and employment levels. (Note: use a separate AD AS diagram for each event)
(a) Describe three problems of using fiscal policy to achieve a precise level of GDP. (3 marks)
(10 marks total – 5 marks each part)
(2.5 marks for 2 demand-pull causes and 2.5 marks for 2 cost-push causes)
(4 marks, ie. 1 mark each)
The Keynesian and Monetarist schools of thought differ somewhat.
The following diagram shows a demand curve and supply curve of the Australian Dollars against the Japanese yen.
¥ I A $ 1 10
Q of A ustra lia n d o lla rs
(2 marks each)