MAKROEKONOMI

INTRODUCTIONS TO MACROECONOMICS

Macro, the Greek word for large or long. Micro means small or short. Economics is the study
of human behaviour related to unlimited needs based on limited resources. if the microstudy the behaviour of individual economic, macro will examine the behaviour of a
combination all individuals / firms which means study aggregate.
In both micro- and macro- economic research, theory focus more on factors determinants of
demand and supply. Microeconomic studies of demand and supply will determine the balance
between price and quantity of output the firm. On the floor equilibrium, the consumer will
maximize satisfaction and firms will minimize production costs.
While in the study of macroeconomics, aggregate demand and aggregate supply will
determine the balance between the general price level and national output ( or income
countries) . At the equilibrium level , policy makers ( state ) will trying to maximize the use
of existing resources to maximize production economic growth ( national income ) and at the
same time trying to minimize the increase in the general price level ( inflation ) ,
unemployment, deficit ( decrease) in balance of payments and the fall in the exchange rate .
In the macroeconomic effects occur when change aggregate demand or supply will be more
comprehensive. Changes in of macroeconomic variables will cause other variables
macroeconomic changes. Any changes will be positive and negative to the national economy.

National Income
National income is the total income received by factors of a country for a year. It covers rent,
net interest, wages, profits, and income of private enterprises.
Gross National
National Product is the total value of final goods and services produced by a country in one
year. It is a tool for measuring the performance of the country's economic activity.

Importance of the Study National Income / Gross National

1. Indication of the standard of living of the people.
2. Indicators of economic growth.
3. Indication of the effectiveness of the government's economic policy.
4. It is a tool for measuring the performance of the country's economic activity.
Provides an overview of

employment conditions

how to use the factors of production

unemployment rate

levels of welfare and standard of living.

Enable economic planning unit take follow-up actions.

MALAYSIA ECONOMIC POLICY OBJECTIVES

Three Malaysian macroeconomic policy goals are:
1. Achieving full employment level
Full employment level is reached when the unemployment rate is less than 5 %, which only
occurs only frictional unemployment in the economy. In this situation, economic activity will
increase as production factors are fully utilized. Increase national output and an increase in
economic growth . When full employment is reached, real GDP equal to potential GDP.

2. General price level stability

Stability of the general price level means that the economy is not facing the problem of rising
prices or falling prices of less than 4 %. Purchasing power of consumers to be more stable
and this will improve the living standards and social welfare .Increasing economic activity
due to low inflation and interest rate stability occur in the market.
3. Increase economic growth
Economic growth means increasing economic activity. This will increase employment and
reduce unemployment. Next, living standards and social welfare increased

Malaysian Goverment Role

Government influence in the country with the goal of macroeconomic activity end to
overcome the economic problems of the end of inflation or unemployment . Inflation problem
occurs due to an increase in the price level general as a result of an increase in aggregate
demand or a decrease in aggregate supply . The increase in aggregate demand can occur as a
result from an increase in domestic consumption due to the increase in aggregate income .
While unemployment can occur as a result of fall in aggregate demand as a result of the fall
in income aggregate .
Government intervention through fiscal policy and monetary policy . Fiscal policy and
This financial policy is divided into two expanded or contracted . This expands or contracts
directly refers to the changes that will happens to aggregate demand . Expanded to refer to
the policy goals for increase aggregate demand ( to activate economic activities ) and contract
refers to the policy objective to reduce aggregate demand . Fiscal policy tool is divided into
two, namely government spending and taxes . fiscal policy expands or contracts directly
affect aggregate income .
Increase in government spending ( expansionary fiscal policy ) will increase aggregate
income and the reduction of government spending ( contractionary fiscal policy ) will reduce
aggregate income . While increasing taxes ( fiscal policy contract ) will reduce aggregate
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income and tax reduction ( policy expansionary fiscal ) will increase aggregate income .
changes in This aggregate income will in turn affect aggregate demand .
Expansionary or contractionary monetary policy will directly affect domestic money supply
( currency in circulation ) . Money supply will further influence interest rates, the interest rate
will affect the level of investment and the next level of investment will determine the
aggregate income . Policy tools the key financial ratios is the determination of the statutory
reserve and to sell / buy bonds / securities in the market.
In short , government policies will affect aggregate income . Examples such as fiscal policy changes in government spending will affect change aggregate income . While monetary
policy - changes in the reserve ratio will will influence changes in interest rates , interest rates
influence the level investment and ultimately affect substantially the investment level of
aggregate income .
Aggregate income in turn will determine the next use will determine aggregate demand .
Then aggregate demand and supply will determine the general price level . If the increase in
aggregate demand aggregate supply conditions do not change, the general price level and
inflation rate will also increase. If the aggregate demand increase , followed by an increase
Aggregate supply increases, then the level of unemployment is reduced. this because , in
order to increase aggregate supply , labor demand must be increased and when the demand
for labor increased , the unemployment rate will decline

ECONOMIC GROWTH AND LIVING STANDARD OF MALAYSIA

Malaysia's economic development changed with the times until the launch of the New
Economic Policy in 1970, and then has the goal of economic development and workforce
system.
a. Development before independence:
When this is the pattern of colonial development with specialization on the production
of rubber and tin commodity.
b. 1957 - 1969

Development at this point more emphasis on infrastructure development and

economic growth .

First Malaya Plan to the First Malaysia Plan outlines the national aspirations of
improving the living standards of the rural population , creating highway jobs,
diversify and expand industrial and social infrastructure .

Planning policy at this stage is to encourage the participation of rural people in the
government's development program .

The government's plan at this point is also promoting economic growth through the
development of domestic industries are expected to overwhelm the space for the poor
to participate in the economy.
c. 1970-1990 - The New Economic Policy .

Bias previous government policies have been reviewed and given a new lease through
the implementation of the New Economic Policy which emphasizes poverty and
efforts to restructure society.

During this period , the Second Malaysia Plan , Third, Fourth and Fifth has had a
consistent goal to atah eradication of poverty and restructuring society.

This is achieved through a more intensive program of development of agriculture and

rural development , mobilization of human resources in a more effective and
distribution facilities in equal development between regions and strata of the
population. New policy in this era emphasized :

i . Development of more intensive rural

ii . Citizen participation in the planning and development
iii . Facilitate education opportunities , health , housing, the aliasing
iv . Increased employment opportunities in the private sector and government
v.The existence of commodity-based agencies, recipients and regions with a
predetermined target groups .
vi . Increased economic growth through trade and industry.
d. 1991-2000 National Development Policies
Implementation Outline Perspective Plan ( OPP ) of the Second National
Development Policy has been formulated to make Malaysia a developed nation by
2020 and it is following the OPP First of the New Economic Policy is more geared
towards eradicating poverty and restructuring society to eliminate the economic
function by race.
e - Development 2001-2010

Emphasis 21st century development continued in Long Term Outline Plan covering
the years 2001 to 2010 third opp . OPP 3 include the National Development Policy
which outlines a number of strategies to bring Malaysia into a developed country in
the 21st century .

It is in aid by the Eighth Malaysia Plan 8 with the goal of achieving NDP objectives
towards sustainable economic growth accompanied by the formation of strong and
united Malaysian society and enjoy equal development .

Framework 9MP made to attain developed nation status and ability molds itself to
enable the ability to compete globally , strengthen unity and reduce racial polarization
and create a balance of income and wealth
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f- RMK- 9

Achieve Vision 2020 agenda towards Developed Countries . Framework 9MP made to
attain developed nation status and ability molds itself to enable the ability to compete
globally , strengthen unity and reduce racial polarization and create a balance of
income and wealth .

An important aspect in the 9MP is human capital development .

Requires the ability and personality of the community

Not only have the ' First Class infrastructure but Third Class ' mentality ' - produce
first class mentality ' community ' .

emphasis on human capital to acquire knowledge and skills , high ethical values,
progressive mindset and cultural awareness .
5 Core 9MP :
i.

Moving the Economy in the value chain . ( 6-6.5 GDP per year) .

ii.

Increasing capacity for knowledge and innovation and nurture ' first class
mentality' .

iii.

( System of Education , higher education institutions and R & D

Addressing the ongoing socio-economic inequalities constructively and

productively . ( Zero hardcore poor )

iv.

To improve the standard and sustainability of quality of life. ( Dimension

environment and public safety )

v.

Strengthen the institutional and implementation . ( KPI )

Living in Malaysia is far cheaper than most Western countries and some other Asian
countries such as Japan, Hong Kong and Singapore. Housing, communications, transport
(including taxis), local food, holiday accommodation, airfares, clothing, medical expenses,
entertainment and recreation are cheaper than most expats have experienced.
Cars, international schools, alcohol and imported foods are more expensive. However, expats
on a foreign salary should find it fairly easy to save money during their assignment and still
enjoy a good lifestyle. Even those working on a good local salary should do well. Prices for
groceries are also fairly reasonable, depending on where you shop. Malaysia has many
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supermarkets and hypermarkets and you can also buy food at the various outdoor markets at
very attractive prices. As an example the current estimate on basic items are about RM3 for a
loaf of bread, RM3 to RM6 for a litre of milk, and about RM50 to RM95 for a kilogram of
premium imported steak.
A maid will cost you somewhere between RM650 (for an Indonesian maid) and RM1,000 for
a Filipina. If you pay for your own electricity you will need to keep a watch on the airconditioning costs. Fuel costs about RM1.80 a litre which makes Malaysia one of the
cheapest countries in the world. Cigarettes are cheaper than most western countries costing
around RM8.00 a packet.
Food in restaurants is relatively cheap and if you are happy to experiment by eating in one of
the many food stalls and local non air-conditioned restaurants you can eat your fill for under
RM10 a head.The most expensive items in Malaysia compared to many western countries are
motor vehicles and alcoholic beverages because of the heavy import duties on both these
items. A locally produced car starts about RM30,000 and imported cars start at around
RM70,000. As an indication of luxury car prices a Volvo S80 costs around RM240,000.
Alcohol is heavily taxed but is widely available. It is hard to find any wines priced under
RM20 and for that price it will be pretty basic. A mid-range wine will cost around RM35 to
RM40. Australian wines are very popular and probably the best value. In an air-conditioned
restaurant the price is usually doubled - many hotels will triple the price. A can of locally
produced beer such as Anchor or Carlsberg will cost around RM8 in a supermarket and a
glass of beer in a restaurant will run around RM16. Cocktails in restaurants and night clubs
are around RM20 each.

UNEMPLOYEMENT IN MALAYSIA
Although manufacturing -based economy over the past year showed some growth , but the
unemployment rate is still inevitable. With the economic recovery and job opportunities are
relatively cheap laborers , many foreign countries began to look at countries such as
Vietnam , Indonesia , Cambodia and China to serve as a place to invest . Influx of foreign
direct investment or FDI in these countries since the global economy started recovering saw
last year did away with some hope of driving regional funds in securing our country new
international capital .
The foreign investors are concerned with the situation and label Malaysia as unsafe as the
unstable political climate and issues such as social rights , the right information and delay the
process of democratic transformation in the country. Nevertheless, the political chaos in
Thailand less impact on foreign investors to open their trade there. This is because the cost of
doing business and the cost of labor is much lower than in Malaysia.
Nevertheless, companies are more and more Malaysian joint venture with foreign trade.
Malaysian companies are willing to spend more money to invest outside the country with the
same reason of low labor costs. Maybe the government should do something so that they are
back open factories in Malaysia with better local incentives to fill the factories abandoned by
foreign investors.
Upon the occurrence of this condition, with the unemployment rate only takes into account
the number of workers laid off by an employer because of a business slowdown, it does not
reveal how much tense situation. The rates do not take into account the number of graduates
over the last 2 years said that still failed to obtain a job and do not reflect the number of
people who quit his job to work on a voluntary basis but failed to find new jobs.
Among the main reasons why many graduates are unemployed is because of the proliferation
of centers of higher learning that offer certificate programs, diploma and degree whether the
government and private sectors. By taking simple admission that does not seem like 15 years
ago, many of their SPM no difficulty in obtaining a diploma or certificate. Distinguishes them
is whether they are public or private university graduates. If 12 years ago, to institutions of
higher learning, the country only has 10 public universities but only overnight and the next 3
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years, the number increases more than doubled. Not only that, the total consumption is
increasing every year. The effect of the presence of these graduates do not see in the mid2000s. This is because employment opportunities in the public and private sector can accept
these graduates.
But in 2007, when the national and regional economies into recession, the impact is
beginning to see and acknowledged as many recent graduates find employment in the
industry is cutting jobs while because no resources and business opportunities. Some consider
it all started when the graph student approval in simplified or reduced SPM results to show
the people that every year the SPM level rise. As a result more and more students who created
'smart' can fill the empty space entry into institutions of higher learning, particularly private
IPT.
For those who quit his job and trying to find new jobs were also affected by this problem.
Unemployed who stopped working there in the past 3 years but still failed to get a permanent
job today despite having knowledge and experience in the work. Some even have a Bachelor
or Master.
Because employers can not afford to pay the high wage demands by these groups, employers
have seen that it's better to take the younger graduates and importantly with a lower salary
just to reduce operating costs. Fortunately, the situation can still help unemployment among
graduates but experienced or skilled workers continue to be marginalized simply pay issue
although they are able to provide best services to the industry with knowledge and
experience. Naturally, employers need to see that they do not need a lot of money to train
young graduates employed if they recruit skilled workers.

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Unemployement rates in Malaysia

Labour Force Participation rate

INFLATION IN MALAYSIA
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The inflation rate in Malaysia was recorded at 2.60 percent in September of 2013. Inflation
Rate in Malaysia is reported by the Department of Statistics Malaysia. Malaysia Inflation
Rate averaged 3.72 Percent from 1973 until 2013, reaching an all time high of 23.90 Percent
in March of 1974 and a record low of -2.40 Percent in July of 2009. In Malaysia, the most
important categories in the consumer price index are Food and non-alcoholic beverages (30
percent of total weight) and Housing, water, electricity, gas and other fuels (23 percent of
total weight). Others include: Transport (15 percent); Communication (6 percent); Recreation
and culture (5 percent) and Furnishings, household equipment and routine household
maintenance (4 percent). The remaining components are Restaurants and hotels at 3.2 percent
and miscellaneous goods and services at 6.3 percent.

In September of 2013, Malaysian annual inflation rate accelerated to 2.6 percent, its highest
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rate since January of 2012, boosted by higher transport cost. During the month, the
government cut fuel subsidies, leading to fuel price hikes.
Transport prices recorded the highest growth rate (up by 4.6 percent, from 0.6 percent in
August). Food prices accelerated to 3.9 percent (from 3.6 percent in the previous month) and
cost of alcohol and tobacco rose 4.5 percent. Cost of housing, water, electricity and other
fuels remained unchanged at 1.8 percent, while cost of furnishings and health decelerated to
1.3 percent and 1.7 percent, respectively.
When compared with the previous month, the CPI for September increased by 0.8 percent.
Increases were for main groups transport (+ 4.8 percent); alcoholic beverages and tobacco (+
0.5 percent); restaurants and hotels (+ 0.4 per cent); food and non-alcoholic beverages;
clothing and footwear and health by 0.3 percent respectively.
What factors contributed to the rise in inflation?

Food and non-alcoholic beverages

Transportation and housing,

Water, electricity, gas and other materials,

On the whole it has contributed to 2.5 percentage points to the increase in the Consumer Price
Index (CPI).
In addition to the supply factors, rising inflation also contributed partly to the rationalization
of subsidies for some consumer essentials including sugar, RON97 petrol and electricity
tariffs.
Malaysia's inflation rate based on the reference pages Trading Economics is among the
lowest in Southeast Asia (3.3%) compared to other countries such as Singapore (5.7 per cent),
the Philippines (4.29 per) and Thailand (3.27peratus).

CONCLUSION
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Macroeconomics is an analysis of a countries economic structure and performance and the

governments policies in affecting its economic conditions. Economists are interested to
know the factors that contribute towards a countries economic growth because if the
economy progresses, it will provide more job opportunities, goods and services and
eventually raise the peoples standard of living. Macroeconomics can progress as it tests a
particular theory to see how the overall economy functions, whereby the theory is used to
forecast the effects of a particular policy and event that was carried out.
Since a century ago, developed nations have achieved a high rate of economic growth which
in turn raised their people standard of living. Macroeconomics examines the reasons behind
the speedy economic growth in the developed nations and understands the reason why this
growth is different between the various countries.
Any economy will surely go through decline and growth. In relation to this, macroeconomics
will look at the causes of these changes in the economy and the government policies that can
be implemented to overcome an economic problem.
Rate of unemployment means there is an available work force that wants to work but has no
jobs. The rate of unemployment will increase when there is a decline in the economy, but
unemployment also happens when the economic situation is good. Macroeconomics will
examine the reasons for unemployment, types of unemployment and ways to overcome
unemployment.
Inflation is an increase in the general price level which is usually measured by changes in the
Consumer Price. What are the factors affecting inflation? Why does inflation rate differ from
time to time? Why does inflation rate differ from one country to another? What are the
factors affecting inflation? Why does inflation rate differ from time to time? Why does
inflation rate differ from one country to another? This are the question that in
macroeconomics analysis.

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