A.

Objective of Macroeconomic
1.0 Economic Growth

Economic growth tends to be measured in terms of the rate of change of

real GDP (Gross Domestic Product). When the word real accompanies any
statistic, it means that the effects of inflation have been removed. GDP is
a measure of the annual output or income, or expenditure)of an economy.
Growth figures are published quarterly, both in terms of the change
quarter on quarter and as annual percentage changes.

Income is one of the most significant factors in measuring economic

performance, and gross domestic product (GDP) is the most commonly
used measure of a country's economic activity. In short, GDP reflects the
value of all final goods and services legally produced in an economy in a
given time period. The distinction between final goods and intermediate
goods is an important one. A tomato sold to a ketchup manufacturer
would not be included in the GDP number, while a tomato sold in a store
as produce would be included, as it represents the final use of that good.
It is also worth noting that trade in illegal goods and services are also
excluded from GDP figures.

There are two ways of approaching GDP the expenditure approach and the
resource cost-income approach. The expenditure approach totals the
amount spent on goods and services during a year, while the resource
cost-income approach adds up the payments made to suppliers of
resources and other inputs that go into goods and services. The
expenditure approach is arguably more common, and it breaks GDP into
four commonly watched components personal consumption, gross profit
domestic investment, government spending, and net exports to
foreigners. Personal consumption has long been the largest component of
GDP in the United States and is made of household spending on goods
and services. Domestic investment refers to spending on fixed assets
(capital expenditures) and additions made to inventories during the year.
By comparison, under the resource cost-income approach, compensation
paid to employees is the largest component of GDP, with depreciation,
indirect taxes, interest, corporate profits, and the income of the self-
employed following. Going a step further, there are other types of
analysis that can be applied to GDP. Real GDP is the broadest view of an
economy's output, and the one most widely used by economists. Real GDP
differs from nominal GDP in that it attempts to adjust for rising price levels
to determine what amounts to changes in the volume of activity in an
economy. Economists observe not only the absolute level of GDP, but its
growth over time. In fact, most discussions of GDP are undertaken in
terms of growth. Going another step further, it is often useful to examine
GDP in the context of its relationship to the number of participants in an
economy. GDP per capita often correlates to the standard of living and the
extent of economic development in a country. The U.S. and China, for
instance, have similar GDPs in absolute terms, but the per capita GDP in
each country is much different and reflects the much higher standard of
living in the United States. There are some drawbacks and limitations to
the use of GDP.

GDP excludes any unpaid activity as well as illegal activity, so it cannot

account for the value of all economic activity in a nation. GDP also fails to
account for reductions in quality of life and losses to natural disasters or
crime. The destruction wrought by an earthquake, for instance, would not
be accounted for in GDP accounting, but the rebuilding efforts would be
counted. Likewise, even per-capita GDP does not necessarily reflect the
wealth of the typical citizen, as a majority of low-earning citizens could be
offset by a small group of very high earners. For more there are other
significant measures of income to consider. National income refers to the
total income paid to owners of human capital (wages for labor) and
physical capital, and includes both domestic and foreign income. National
income can also be calculated as the sum of wages, interest, self-
employment income, rent and business profits. Personal income, in
contrast, is the income received by individuals; it excludes corporate
profits and social security taxes, but adds back transfer payments (like
Social Security), interest and dividend. Disposable income is personal
income that is actually available for spending or saving; it is personal
income net of personal income taxes.

While the large majority of economists basically agree with the use of
metrics like GDP and GDP per capita as measures of growth, there is
considerably less agreement in how to explain how economies grow over
time. Some models hold that growth is exogenous long-term growth is
determined by factors external to the economy. Other models post that
growth is endogenous long-term growth is determined by factors within
the system. More specifically, there are models like the Harrod-Domar
model that examine the consequences of fixed capital and labor ratios
and the propensities to save. This model highlights the problems of
rigidities in the capital/labor ratio and savings rate. By comparison, the
Solow model holds that growth in GDP is explained by population
increases, technical progress and increased investment. As with many
economic models, these are not so much predictive as explanatory;
seeking to identify the impact of certain variables and conditions.

While economic growth is clearly an important objective for most

governments, most economies do not operate at their full potential. Often
there is a gap between the amount of GDP actually produced and the
potential GDP that the economy could produce with full employment and
full resource utilization and this gap is called the output gap. For example,
in the New Strait Times online, regarding the implementation of The
Goods and Services Tax (GST) is an economic rescuer designed to help the
country stabilise its economy, said Prime Minister Datuk Seri Najib Razak.
GST was not introduced to burden the people, adding that the falling price
of crude oil would not affect the distribution of the 1Malaysia People's Aid
and the employment of civil servants.
2.0 Full employment

Full employment refers to a situation in which every able bodied person

who is willing to work at the prevailing rate of wages is, in fact, employed,
alternatively, it is a situation when there is no involuntary employment.
That is why full employment is also defined as a situation where there is
no involuntary unemployment. It needs to be noted that although full
employment means a situation where all resources in the economy land,
labour, and capital are fully employed but for simplifying meaning of full
employment is restricted to labour market only. For example, situation
where all able bodied persons who are willing to work at prevailing wage
rate find jobs. Every economy in the world aims at achieving the level of
full employment equilibrium where all its available resources are fully and
efficiently employed because it leads to maximum level of output. This is
conceptual meaning of the term full employment. In practice, the
concept of full employment generally refers to full employment of labour
force of a country.

Note the issue of active and inactive members of the population of

working age. Only those who are active are included in the working
population or labour force, which is defined as all those who are employed
or registered unemployed. But some of the inactive are in this category by
choice, for instance, students and those who retire early. For example,
according The Star online, Top-tier skilled talents in accounting, finance,
banking, human resources, IT, legal and compliance, supply chain,
procurement and engineering fields can still expect a 10% to 25% jump in
salary, the latest Robert Walters Global Salary Survey shows. Sally Raj,
managing director of the specialist professional recruitment firm in
Malaysia, says candidates with relevant, specific experience will be in
demand throughout the year, particularly sales and marketing
professionals and those with tax and cloud computing expertise.

Companies will even pay for candidates in their 20s if they have a solid
education, at least four years of experience in a reputable company, and
the potential to take on leadership roles, she says. With technology
growing rapidly, more firms will use digital channels to boost revenue so
they need IT specialists skilled in big data and e-commerce, she say. In
banking, regulatory and risk governance experts will be priority hires.
Malaysia, she says, remains the biggest player in the global Islamic
banking industry, which will drive more opportunities especially for Islamic
asset management professionals. As for accounting and finance industrys
growth is slower than previous years but there are vacancies, especially
for those who speak Japanese, Korean and Mandarin. Also, commercially-
minded accountants and tax professionals skilled in GST are scarce, so we
expect companies to consider candidates from other South-East Asian
countries.

Some 6% of foreign workers are in high-skilled jobs, Malaysian Employers

Federation executive director Datuk Shamsuddin Bardan shares. He
admits theres a need for more highly skilled expatriates to meet demand
for specialised skills, adding that there were 151,687 expatriates in
Malaysia from January to August last year.