Question

Question 1

1. Table 2 below shows the national income accounting data for the year 2020 in Country A.
2. (include any tables and graphs, if any)

Items	RM (Million)
Depreciation	560
Gross private domestic investment expenditures	5980
Imports	9900
Exports	3000
Federal government expenditures	7900
State and local government expenditures	1653
Personal consumption expenditure	8960
Transfer payments	300
Receipts of factor income from the rest of the world	930
Payments of factor income to the rest of the world	1890

Using expenditure approach, calculate the following values:
(i)	Gross domestic product (GDP)
(ii)	Net domestic product (NDP)
(iii)	Net national product (NNP)
(iv)	Real GDP (assume the price index is 115)
(v)	GDP per capita (assume the population is 4 million)

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2. For each of the following situations, determine whether the money supply will increase, decrease, or remain unchanged.

(i)          Depositors heard that some banks are going bankrupt

(ii)       The BNM lowers the required reserves ratio.

(iii)The BNM sells RM200 million of bonds to CIMB Bank Berhad.  

Answer 1

(Question 1)

(i)

GDP (RM million) = Personal consumption expenditure + Gross private domestic investment expenditures + Federal government expenditures + State and local government expenditures + Export - Import

= 8960 + 5980 + 7900 + 1653 + 3000 - 9900

= 17593

(ii)

NDP (RM million) = GDP - Depreciation

= 17593 - 560

= 17033

(iii)

NNP (RM million) = NDP + Receipts of factor income from the rest of the world - Payments of factor income to the rest of the world

= 17033 + 930 - 1890

= 16073

(iv)

Real GDP = (GDP / Price index) x 100

= (17593 / 115) x 100

= 15298.26

(v)

GDP per capita = GDP / Population

= 17593 / 4

= 4398.25

(Question 2)

(i)

Depositors losing confidence on banking system will keep more money as cash with them and will deosit less with bank. The banks will get less amount of reserves which they can lend, which will decrease money supply.

(ii)

Lower required reserve ratio will increase the amount of reserves which banks can lend, which will increase money supply.

(iii)

Open market sale of bonds by central bank will decrease the amount of reserves which banks can lend, which will decrease money supply.