1.

Introduction to Macroeconomics In general, economics is the study of how agents (people, firms, nations) use scarce resources to satisfy unlimited wants. Macroeconomics is the branch of economics that concerns itself with market systems that operate on a large scale. Where microeconomics is more focused on the choices made by individual actors in the economy (individual consumers or firms, for instance), macroeconomics deals with the performance, structure and behavior of the entire economy. When investors talk about macroeconomics, discussions of policy decisions like raising or lowering interest rates or changing tax rates are discussed. Some of the key questions addressed by macroeconomics include: What causes unemployment? What causes inflation? What creates or stimulates economic growth? Macroeconomics attempts to measure how well an economy is performing, understand how it works, and how performance can improve. While the term "macroeconomics" is not all that old (going back to Ragnar Frisch in 1933) many of the core concepts in macroeconomics have been the focus of study for much longer. Topics like unemployment, prices, growth and trade have concerned economists almost from the very beginning of the discipline, though their study has become much more focused and specialized through the 1990s and 2000s. Likewise, it is difficult to name any sort of founder of macroeconomic studies. John Maynard Keynes is often credited with the first theories of economics that described or modeled the behavior of the economy, elements of earlier work from the likes of Adam Smith and John Stuart Mill clearly addressed issues that would now be recognized as the domain of macroeconomics. Although microeconomic ideas like game theory are clearly quite significant today and the decision-making process of individual agents like firms is still an important field of study, macroeconomics has arguably become the dominant focus of economics. 1.1 Definition Study of the behavior the whole (aggregate) economies or economic systems instead of the behavior of individuals, individual firms, or markets (which is the domain of Microeconomics). Macroeconomics is concerned primarily with the forecasting of national income, through

theanalysis of major economic factors that show predictable patterns and trends, and of their influence on one another. These factors include level of employment/unemployment, gross national product (GNP), balance of payments position, and prices (deflation or inflation). Macroeconomics also covers role of fiscal and monetary policies, economic growth, and determination of consumption and investment levels. 1.1.1 Issues in Macroeconomic There are five issues related to macroeconomic analysis are as follows: (a) Since a century ago, developed nations have achieved a high rate of economic growth which in turn has raised their peoples standard of living .Macroeconomics examines the reasons behind the speedy economic growth in the developed nations understands the reason why this growth is different between the various countries. (b) The average lab our productivity or the output of a single worker is important to determine the standard of living. Macroeconomics will inquire into the factors that decide on the growth rate of employee productivity. (c) Any economy will surely go through decline and growth. In relation to this, macroeconomics will look at the cause of these changes in the economy and the government policies that can be implemented to overcome an economic problem. (d) Rate of unemployment 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 .Macroeconomic will examine the reason for unemployment, types of unemployment and ways to overcome unemployment. (e) Inflation is an increase in the general price level and is usually measured by looking at change in the consumer price index.

1.2 Macroeconomic Policies Malaysia is an open economy that is strongly dependent on trade and therefore heavily influenced by global economic forces in its performance. To manage the economy, the government uses macroeconomic policy to ensure high employment, low inflation, sustainable economic growth rates and a healthy balance of payments. The key tools used to achieve these goals are fiscal policy and monetary policy. Since the 1970s, policy thrusts have emphasized improvement of economic resilience, enhancement of competitiveness and the promotion of foreign private investment while keeping in mind the attainment of socioeconomic distributional objectives. New sources of growth such as high value-added and knowledge-based manufacturing and services have been developed since the 1990s.

Fiscal prudence and responsibility is the cornerstone of the nations fiscal policy. This strong fiscal discipline has ensured that the fiscal deficit and debt levels remain sustainable and easily financed. With the Privatization Policy of 1983, the relative size of the public sector shrank. Nevertheless, fiscal deficits were common, mainly due to the governments commitments toward development and measures to counter economic slowdowns. Government expenditure is primarily financed through taxation and borrowing. Directas opposed to indirecttaxation has traditionally been the major source. Revenue from import and export duties continues to decline in line with trade liberalization. Monetary policy complements fiscal policy in maintaining stable prices, stable exchange rates and a healthy balance of payments position. The trend towards domestic, as opposed to foreign, borrowing in the form of government bonds and private debt securities grew as a result of post-liberalization policies such as the centralizing of the regulation of financial markets in 1999. Overall, Malaysias exchange rate has been emerge determined by market forces, till the Asian financial crisis of 199798 when a fixed exchange rate regime with selective capital controls wasadopted, and the Ringgit was de-internationalized. However, in July 2005, the Ringgit was de-pegged from the US dollar and now trades within a managed float system. Malaysias government has also been actively using investment incentives to draw foreign direct investment as the economy industrializes. These have ranged from the introduction of Pioneer Status in the 1950s, when the focus was on promoting new industries and industrialization, to the incentives under the Multimedia Super Corridor in the 1990s which were used to draw more high-technology investments. At the same time, domestic investments have begun to grow and the role of the private sector as a source of domestic investment is expanding. The widening of the rangeavailable will also draw more savings from the private sector. 1.4 Macroeconomic Objectives Macroeconomics is a field of study devoted to understanding the behavior of economies on a large scale and using that understanding to inform economic policies. The objectives of

macroeconomics are manifold, but they usually involve determining how best to encourage economic growth while preventing economic decline. Some individuals who studies macroeconomics work to develop ways to get out of recessions or depressions while others focus on maintaining nonstop growth while preventing dramatic crises. The practical objectives of macroeconomics involve making decisions and enacting policies that have positive effects on an economy, which can be difficult given the often-unpredictable responses of economies to change. Still others study macroeconomics with the objective of predicting the behavior of economies in order to make good business or finance decisions. The primary objectives of macroeconomics, practical or theoretical, usually involve elucidating the various factors that contribute to economic change. A complex web of factors governs the behavior of an economics. Changing one can potentially alter the effects of any of the other factors and have a significant effect on an economy. Building a satisfactory model of this complex web in order to determine how factors affect each other and the particular economy as a whole is one of the most important and valuable objectives of macroeconomics. Most macroeconomic models allow theorists to examine only a few factors at a time.

2. Economic Growth and Living Standard in Malaysia The GDP Growth Rate shows a percentage change in the seasonally adjusted GDP value in the certain quarter, compared to the previous quarter. Because of climatic conditions and holidays, the intensity of the production varies throughout the year. This makes a direct comparison of two consecutive quarters difficult. In order to adjust for these conditions, many countries calculate the quarterly GDP using so called seasonally adjusted method. The Gross Domestic Product can be determined using three different approaches: the product, the income, and the expenditure technique, which should give the same result. In sum, the product technique sums the outputs of every class of enterprise. The expenditure technique works on the principle that every product must be bought by somebody, therefore the value of the total product must be equal to people's total expenditures in buying products and services. The income technique works on the principle that the incomes of the productive factors must be equal to the value of their product, and determines GDP by finding the sum of all producers' incomes.