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Macroeconomics

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  • 1. ECO1023 PRINCIPLE OF ECONOMICS ECO1013 ELEVENIE JOHN BAPTIST (13012236) FELYSITA BT SAMUDIN (13012246) JACQULYN ANNABELLA JAMILUS (13012256)
  • 2. INTRODUCTION  ‘GDP’ is a Gross Domestic Product where is the total money value of the all final goods and services produce by factors of production in a country over a given period of time.  One the primary indicators used to gauge the health of a country’s economy.  Represented the total Malaysian Ringgit (RM) value of all goods and services produced over a specific time period.  Measured at current prices or constants prices and method to measure the GDP. GDP at market prices is C+I+G+(x-m). Personal consumption(C): Includes Investment(I): The purchase of capital goods: by firms for use in the purchase of goods and services, production and also change in the individuals or households. firms’ inventories. Net exports (x - m): The differences Government (G): Spending is the between what a countries earns by expenditures made by federal, exporting goods and services to other state and local government for countries and what it pays for goods and services that are importance from final goods and services. other countries.
  • 3. WHAT IS CONSUMER PRICE INDEX IS TRYING TO MEASURE AND HOW IT IS CONSTRUCTED 
  • 4. CALCULATION GDP PER CAPITA FOR THE PAST 5 YEARS 
  • 5. SECTOR / YEAR 2008 2009 2010 2011 2012 Agriculture 50 50.1 51.3 54.3 54.8 Mining & Quarrying 71 66.4 66.2 62.6 63.4 Manufacturing 167.1 152.2 170.3 178.2 186.7 Construction 18.2 19.3 21.5 22.5 26.5 Services 325.7 335 359.8 385.2 410 GDP 639.6 629.9 676.7 711.4 751.5 POPULATION 27.6 28.1 28.6 29.0 29.3 PERCAPITA 23.17 22.41 23.66 24.53 25.64
  • 6. (I). GDP (GROSS DOMESTIC PRODUCT)  The Malaysia’s economy registered growth of 18.76 percent in 2008 as shown in chart 1, spearheaded by the services and manufacturing sectors. The GDP in constant terms posted a value of RM 636.9 billion. In 2009 the Malaysia’s economy decreased by 0.28 per cent which the total GDP for the year is 18.48 percent. The total GDP for 2009 is RM629.9 billion. For the next year in 2010, the GDP for the year is increase by 22.19 per cent. In 2012, the Malaysia economic registered of GDP is RM 751.5 billion.  Transfer payments received by social security beneficiaries, though income in    their hands, do not represent new value addition but part of the already counted value addition by others, transfer payments cannot be added as part of GDP or National Income and National Expenditure. The expenditure by the social security beneficiaries are included.
  • 7. (II). CPI (CONSUMER PRICE INDEX)  The Malaysia inflation rate has a different from past 5 years. Inflation is issue of highly price continuously in economy issues. Consumer Price Index is give influence to price index, in 2008, this influence happen in amount 5.4% is the highest consumer price index (CPI) in past 5 years. In 2009, this price almost falls to 0.6%.  Output sectors are divided into three sectors. Primary sector consists of primary goods production sectors. The second sector consists of the production of goods, manufacturing and construction. Third sector is the service sector, it allows people higher incomes and a greater quality of life as a result.  Often associated with low levels of unemployment and steady rates of inflation, government will collect more money from tax such as income tax and other tax which can then be spent on public services which benefit everybody.
  • 8. II) DESCRIBE THREE WAYS GOVERNMENT POLICYMAKERS CAN TRY TO RAISE THE LIVING STANDARD IN A SOCIETY? The government plays an important role in the realization of these macroeconomic goals. The government manages the economy by implementing three kinds of policies.  Fiscal Policy- Gorvernment policy regarding taxes and expenditure.  The purpose of a fiscal policy is to stabilize the economy.  There are two types of fiscal policies: Contractionary Fiscal Policy  The government can use this policy to bring the economy out if inflation by increasing taxes and decreasing government expenditure. This measure slows own growth. Expansionary fiscal policy  The government implements this policy by reducing taxes and increasing government expenditure. These measures will increase the disposable income which will, in turn, lead to an increase in consumption.
  • 9.  Monetary Policy- Refers to the tools used by the government through the central bank to control the supply of money.  Maintain the overall price level, to achieve higher economic growth, to remove fluctuations in production and to achieve full employment. Contractionary Monetary Policy – The government can use this policy to curb inflation where the amount of money supplied will be reduced. Expansionary Monetary Policy- This policy is implemented when there is deflation or recession where in government will increase the supply of money.  Growth Policy- A government policy should focus on stimulating the potential growth of aggregate output and income or in other words, stimulating the aggregate supply and aimed in increasing the growth rate.
  • 10. (III) ARE THERE ANY DRAWBACKS TO THESE POLICIES?    A government’s main objectives are to achieve full employment, price stability, economic growth and equitable distribution of income. Impossible for a government to achieve all these four macroeconomic goals at the same time. The macroeconomic goals will conflict each other when a government try to implement both goals at the same time. To achieve full employment and maintain price stability  The government will use expansionary policy by reducing interest rates, decreasing taxes and increasing government spending.  Will reduce the unemployment rate and increase the wage rate as a result of higher demand for labor.  The government will control inflation by increasing interest rates and taxes as well as decreasing government spending.  Consumer spending will decrease and investment also will decrease. Then, the unemployment rate will increase.
  • 11. To achieve economic growth and maintain price stability  Government should encourage investment by reducing interest rates and increasing government spending, a rise in investment level will create more job opportunities for the society and increase the national output.  To keep the price stable, the government would increase the interest rate and reduce the government spending  Then, consumer spending and investment level will decrease. To achieve economic growth and equilibrium in balance of payments  When the economy is growing very fast, consumers tend to spend more on goods and services.  The value of export for that country.  The possible way a government can adjust a deficit in balance of payment is by lowering the economic growth.
  • 12. E) IS GDP A GOOD MEASURE OF ECONOMIC WELL-BEING?  The best single measure of the economic well-being of a society.  GDP per person tells us the income and expenditure of the average person in the economy.  GDP is a good measure of economic well-being because people prefer higher to lower incomes.
  • 13. CONCLUSION  Economic growth can be measured in nominal terms, which include inflation, or in real terms, which are adjusted for inflation.  The Gross Domestic Product can be determined using three different approaches: the product, the income, and the expenditure technique, which should give the same result.  The income technique works on the principle that the incomes of the productive factors must be equal to the value of their product, and determines GDP by finding the sum of all producers' incomes.

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