Answer to Question #153682 in Macroeconomics for NG WAN TING

Question

1)    Assume that Proton and Perodua will be working together through research and development in a joint project to produce an all-electric-vehicle for the Malaysians market. Suppose the project include building a new assembly plant based in Malaysia. Show on a graph the effect of Proton or Perodua going to the loanable funds market to finance the new assembly plant. Explain the effect on the real interest rate, private saving, and investment.

(8 marks）

2)    What determines the demand for loanable funds?

(4 marks)

3)    What affect the demand curve of loanable funds and how does it change?

(4 marks)

4)    What determines the supply of loanable funds?

(4 marks)

5)    What affect the supply curve of loanable funds and how does it change?

(4 marks）

6)    Explain the meaning of purchasing power parity. Give an example of what will happen when purchasing power parity does not hold in two economy.

7)    What actions might the Bank Negara Malaysia take to stimulate business investment even more?

(4 marks)

8)    Assume the economy has a natural rate of unemployment of 5%. Graphically illustrate when the actual inflation is 4% and expected inflation is 2%. What will happen to the economy when expected inflation adjust to the actual inflation in the long-run?

(4 marks)

Answer 1

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