Importance of the Macroeconomics Objectives Towards the Malaysia Economic Performance.

Topics: Inflation, Economics, Unemployment Pages: 6 (1575 words) Published: March 23, 2011
Diploma in Business Administration

M. Jane Chong
3rd March , 2011

| Title| Page|
1.0| Introduction| 3|
2.0| Macroeconomic Objectives| 4|
3.0 * 3.1 * 3.2| Economic GrowthThe ImportanceExample| 556| 4.0 * 4.1 * 4.2| UnemploymentThe ImportanceExample| 778| 5.0 * 5.1 * 5.2| InflationThe ImportanceExample| 9910| 6.0| Conclusion| 11|

7.0| References| 12|
8.0| Appendix| 13|

This assignment is to discuss the importance of the Macroeconomics Objectives towards the Malaysia economic performance. There are four main Macroeconomics Objectives, but in this assignment I will be explaining any three Macroeconomics Objectives, such as Unemployment, Inflation and Economic Growth with relevant example.

2.0Macroeconomics Objectives
Macroeconomics studies the whole performance of economy which opposed to the level of a specific subgroups or individual. Microeconomics looks at the individual piece of the economic puzzle while macroeconomics fits the pieces together to get the big picture. The factors studies on success or failure of government policy by the changes of inflation, unemployment, economic growth and balance of payment. (McEachern W.A., 2003)

3.0 Unemployment
Unemployment is an important measure of the economy's strength. The low rate of unemployment shows the economic is in good condition. It means most of the people are able and willing to work. In contrast, the higher rate of unemployment means most of the labour force that is without jobs. It might affect the condition of national economy. The most worrisome is the rise in the share of the long-term unemployed. (Investor Glossary, 2011)

(Vodopivec, Raju M., Dhushyanth, 2004)
3.1The Importance of Unemployment
Unemployment is increasingly pressing problem in many parts of the world. When unemployment happens in a country, the employees feel unsecure in their job and not satisfy with their salary, they also won’t leave their unsatisfied job. In fact, economic crisis has led unemployment and poverty of large proportions because former socialist countries have to face the enormous task of efficiently reallocating workers and jobs across sectors and firms. Most official data from censuses and surveys rely upon the labor force is below 10% in most developing countries which also including Malaysia. (Vodopivec, Raju M., Dhushyanth, 2004)

Refer to appendix 1; youth who aged 15 to 24 years formed the highest proportion of the unemployed between 1995 and 1998 for both sexes. In 1998, they formed 64.6% of the unemployed. While another age group is lower than youth group as aged 25 to 54 is 33.3% and aged 55-64 is 2.1%. The high proportion of youth among the unemployed is due to the relatively high retrenchment rate of young workers due to their lack of seniority as well as the generally lower retrenchment compensation they receive. In order to address unemployment in Malaysia, the Government has reversed its policy on the employment of foreign workers, once pursued due to a shortage of labour in the country. The Employment Act of 1955 was amended to include the introduction of flexible working hours and the formalization of part-time work, in an effort to increase the utilisation of local labour. These actions are expected to encourage more women, as well as people living in rural areas, to join the labour market, thus reducing the dependence on foreign workers. (Hirschman C., 1982, Vol. 30)

Inflation is defined as the prices of most goods and services keep rising. It is normally measured by the Consumer Price Index (CPI). (Amadeo K, 2011)
4.1The Importance of Inflation
Money is introduced in the budget constraint in a model of human capital accumulation. An increase in the rate of inflation negatively affects both consumption and labor supply leading to a lower growth rate. Inflation effects on accumulation of physical...

References: 2. Hirschman C. 1982, Economic Development & Cultural Change, Vol. 30
2. Mankiw N.G., 2004, Principle of Economics, 3rd edition, Harvard University.
2. Amadeo K., 2011, What is Inflaction?,,
3. Investor Glossary, 2011, Unemployment, <>
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