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CONFIDENTIAL BM/APR2006/ECO415

UNIVERSITI TEKNOLOGI MARA FINAL EXAMINATION

COURSE COURSE CODE EXAMINATION TIME

ECONOMICS EC0415 APRIL 2006 3 HOURS

INSTRUCTIONS TO CANDIDATES 1. This question paper consists of two (2) parts: PART A ( 2 Questions) PART B ( 4 Questions)

2.

Answer ALL questions in PART A and only three (3) questions from PART B in the Answer Booklet. Start each answer on a new page. Do not bring any material into the examination room unless permission is given by the invigilator. Please check to make sure that this examination pack consists of: i) ii) the Question Paper an Answer Booklet - provided by the Faculty

3.

4.

DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO

This examination paper consists of 4 printed pages
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BM/APR2006/ECO415

PART A QUESTION 1 SARAWAK PINEAPPLE INDUSTRY HIT BY SHORTAGE Investors have expressed an interest to establish a pineapple cannery in Sarawak but there is a snag - the state is short of the fruit. Agriculture and Agro-based Industry Minister Tan Sri Muhyiddin Yassin said pineapples in Sarawak are cultivated by smallholders mainly in Kota Samarahan, Kalaka and Saribas. Muhyiddin said the Malaysian Pineapple Industry Board that was revived last year would be entrusted to develop pineapple cultivation on a large scale in Sarawak. He said a shortage of the fruit in Peninsular Malaysia had almost jeopardized the canning industry but the situation was saved with the import of pineapples from Indonesia. Malaysia was once a major producer of canned pineapples in the world but now occupied the 12th position because many of the pineapple farms had given way to oil palm plantations, he said. Muhyiddin also said that the Federal Government would allocate RM102 miilion under the Ninth Malaysia Plan (2006-2010) for infrastructure development in the farm, livestock and fisheries sectors in Sarawak and Sabah this year. "The Federal Government is aware that the cost of infrastructure development in the agriculture sector is high," he added. He said the ministry was seeking ways to minimize the cost of providing agriculture infrastructure through the use of the latest technology. Adapted from the NST, 16 January 2006

a)

Based on the above article, what are the factors that led to the shortage of pineapples? Illustrate the situation using a diagram. (5 marks) Suggest two (2) ways of reducing the shortage of pineapples. (5 marks)

b)

c)

With the aid of a diagram, explain the effects of a decrease in the supply of pineapples on its price and quantity. (5 marks) Is the supply of pineapples price elastic or inelastic? Justify your answer. (5 marks)

d)

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CONFIDENTIAL QUESTION 2

BM/APR 2006/ECO415

Malaysian Budget Speech 2006 Prime Minister Datuk Seri Abdullah Ahmad Badawi in his second Malaysian Budget address as the Finance Minister, unveiled a caring budget for Malaysians with plenty of immediate and specific measures to further perk up the economy in view of the escalating oil prices in his 2006 budget speech. With the government's target of lowering the budget deficit to 3.5 percent of the Gross Domestic Product (GDP) in 2006 from an estimated 3.8 percent in 2005 and 5.6 percent in 2002, the government would have a greater flexibility to focus on development efforts to sustain Malaysia's growth momentum. "We are fortunate that within a short period of seven years after the 1997 financial crisis, the (Malaysian) economy has fully recovered to achieve sustainable growth. GDP grew at an annual average rate of 5.4 percent during the period. Despite the less than favorable external environment, growth is estimated at 5 percent for 2005." He said the strong economic performance and fundamentals had enabled Malaysians to enjoy higher income and purchasing power. The theme of the 2006 Budget is "Strengthening Resilience, Meeting Challenges", which outlines several strategies to enhance national resilience and the country's ability to meet emerging external challenges, especially from escalating oil prices, higher interest rates and increasing global competition. With more money in its coffers, the government will spend more to enhance the well-being of the people and their quality of life while implementing pro-active measures to accelerate economic development in the country. He said the strong economic performance and fundamentals had enabled Malaysians to enjoy higher income and purchasing power. Adapted from Malaysian Budget Speech, 30 September 2005

a)

What is a government budget? Explain the type of budget policy that is being implemented in the year 2006. (5 marks) Explain the possible effects of the above type of budget on the Malaysian economy in 2006. (5 marks) Explain two (2) macroeconomic objectives mentioned in the article. (5 marks)

b)

c)

d)

Identify and explain two (2) external factors which may affect our economy in 2006. (5 marks)

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PARTB QUESTION 1

a)

"Tax burden on consumers and sellers depends on the price elasticity of demand". Discuss. (10 marks) With the aid of appropriate diagrams, explain the objectives and effects of price controls. (10 marks)

b)

QUESTION 2 a) Using examples, differentiate between microeconomics and macroeconomics. (6 marks) b) With the aid of a diagram, explain why firms in a perfectly competitive industry are not able to maintain supernormal profit in the long run. (6 marks) Using an appropriate diagram, explain the shape of the long-run average cost curve (LRAC). (8 marks)

c)

QUESTION 3 a) Using an appropriate example, show how the unemployment rate can be calculated. Explain three (3) types of unemployment. (8 marks) Elaborate the cost push inflation. Discuss three (3) monetary instruments that may be implemented to reduce inflation. (12 marks)

b)

QUESTION 4 a) Explain two (2) possible reasons for imposing barriers on international trade and discuss any two (2) possible instruments to protect local industry. (12 marks) Describe two (2) effects of balance of payment deficit. (8 marks)

b)

END OF QUESTION PAPER

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