STUDENT INFORMATION

Name: PHẠM THỊ NGỌC YẾN Roll number: HS163317

Room No: Class: IB1612

FOR TEACHER ONLY

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ECO121_Test 01_Individual Assignment 01

Question1. (2 points)
1. a. What is defined as absolute advantage?
Absolute advantage is a concept used to describe the situation where a country is able to
produce a larger amount of output than other countries with similar inputs.
b. What is defined as comparative advantage?
Comparative advantage is the advantage of a country that can produce a certain good at a
lower cost than another country when participating in international trade.
c. Case 1: Output approach
Two commodities and two countries
Given the resources, Singapore and Malaysia can produce the following products –
television sets and cars (see Table 01)
Countries TV sets Cars (units)
Singapore 100 50
Malaysia 60 40
Table 01
+ Which country has the absolute advantage in the production of both TV sets and
Cars over the other?
=> Singapore has the absolute advantage in the production of both TV sets and cars. Because
Singapore can produce more both TV sets and cars than Malaysia, with 100 TV sets and 50
cars compared to 60 TV sets and 40 cars of Malaysia.
+ Which country has the comparative advantage either in the production of TV sets
or in the production of Cars over the other?
- Singapore has a comparative advantage in TV sets because:
+ The opportunity cost of 1 TV sets in Singapore is 0,5 cars.
+ The opportunity cost of 1 TV sets Malaysia is 0.67 cars.

- Malaysia has a comparative advantage in cars because:

+ The opportunity cost of 1 cars in Singapore is 2 TV sets.
+ The opportunity cost of 1 cars in Malaysia is 1.5 TV sets.
 d. Case 2: Input approach
Two commodities and two countries
Give the resources, America and England can produce one unit for both Steel and Coal
in terms of number of working hours shown as follows:
Countries One unit of Steel One unit of Coal
required required
America 80 man-hours 90 man-hours
England 120 man-hours 100 man-hours
Table 02
+ Which country should specialize in the production of Steel?
- The opportunity cost of 1 unit of steel:
In America: 80:90= 8/9 unit of coal
In England: 120:100=1.2 unit of coal
=> America should specialize in the production of Steel.
+ Which country should specialize in the production of Coal?
- The opportunity cost of 1 unit of coal:
In America: 90:80=9/8 unit of steel
In England: 100:120=5/6 unit of steel
=> England should specialize in the production of coal.

e. Case 3: Input approach

Two countries but multiple commodities
The following Table 03 shows the numbers of man – days taken to produce an
equivalent amount of six commodities in each of the two countries – Switzerland and
Sweden.
Countries Coal Cotton Wool Iron Wheat Maize
Switzerland 120 60 70 100 140 80
Sweden 100 25 35 90 90 20
Table 03
+ Assuming that there are no other costs of production. Which two commodities is
Sweden most likely to import from Switzerland?

Question 2 (3 points):
Suppose there is an economy that produces only two goods: tequila and peyote. In 2008, the
economy produced 100 litres of tequila and 200 peyote plants. The unit prices (per litre or per
plant) in 2008 were $100 and $500. 1000 people were employed in the tequila sector, and the
peyote sector employed 500.

In 2009, the weather was particular sunny and hot, which is good for tequila production but
bad for the cultivation of peyote. As a result, the economy produced 120 litres of tequila but
only 191 peyote plants in 2009.

The tequila and peyote sold for $90 per litre and $550 per plant that year. 1100 people were
employed in the tequila sector, while only 450 people worked in the peyote sector.

Answer the following questions:

a. How much is Nominal GDP in 2008 and 2009? What is the percentage change?
GDP 2008= 100 x $100 + 200 x $500 = 10000 + 100000 = $110000
GDP 2009= 120 x $90 + 191 x $550 = 10800 + 105050 = $115850
% GDP=(115850－110000) /110000 ≈ 5.32 %

b. How much is Real GDP in 2008 and 2009, by considering 2008 as the base
year? What is the percentage change?
GDP 2008= 100 x $100 + 200 x $500 = 10000 + 100000 = $110000
GDP 2009= 120 x $100 + 191 x $500 = 12000 + 95500 = $107500
% GDP = (107500－110000)/110000 ≈ 2.27%
c. How much is the GDP deflator in the two years? By what percentage does the
price level change from the base year to 2009?
The GDP deflator is the ratio of nominal GDP to real GDP. In the base year, nominal GDP
equals real GDP, so the GDP deflator is 1. In 2009 it is approximately 1.08, so the price level
rose by about 8%.
d. What was the growth rate of average labour productivity for the whole
economy between 2008 and 2009?
The average labour productivity in 2008 was 110000/(1000+500)= $73.33 per worker
while in 2009, it was 107500/ (1100 + 450) = $69.35 per worker. Hence, its growth rate is
(69.35－73.33) / 73.33 = －5.43%.

Question 3 (2 points) In the country of Kwaki, people produce canoes, fish for salmon, and
grow corn. In one year they produced 5000 canoes using labor and natural materials only, but
sold only 4000, as the economy entered a recession. The cost of producing each canoe was
$1000, but the ones that sold were priced at $1250. They fished $30 million worth of salmon.
They used $3 million of the salmon as fertilizer for corn. They grew and ate $55 million of
corn. What was Kwaki's GDP for the year?
Answer: Inventories are valued at the cost of production, so the 1000 canoes in inventory
were valued at $1000 each for a total of $1 million. Four thousand canoes at $1250 each
totaled $5 million. Salmon as a final good were worth $27 million and corn worth $55 million
was grown. So total GDP was $88 million.
Question 4. (3 points)
+ What are the benefits/gains from international trade?
Write an essay with 500 words and provide your answers with real example in the context of
Vietnam international trade relations

International trade has negatively impacted Vietnam:

- Strengthening the productive forces, contributing to the growth rate, thereby changing the
face of society and improving people's lives. The production capacity of the national economy
is enhanced by taking advantage of external forces to promote the process of industrialization
and modernization, whereby material and technical foundations are improved, labor
productivity is improved. social action. The economy has more accumulation for the process
of reproduction to expand and improve social welfare for the people. People's living standards
are gradually improved and they have access to development achievements, advanced goods
and services from abroad.

- Create the ability to offset development resources; Promote the transfer of science -
technology, management experience and wisdom. Vietnam can approach developing countries
and economic centers around the world in order to attract many practical resources for the
Vietnamese economy such as capital, science and technology, intelligence, high-quality goods,
etc The open economy creates many opportunities for social actors and individuals to access
external development resources, on that basis, to combine external and internal resources to
create a growth engine for the Vietnamese economy.

- Creating short-term development possibilities of following countries. The shortened

development model has been proven through the successful shortened industrialization of
some countries such as NICs, including Korea, Taiwan, Singapore, etc. In theory, a shortened
development opportunity is a reality for Vietnam if we know how to take advantage of the
internal comparative advantages and wisely take advantage of the external factors of the
globalization era.

- Renovating the State's economic thinking in domestic economic governance and foreign
economic activities. Through scientific exchange, academic research, training and education,
Vietnam can improve the quality of human resources in all areas of the economy, including
human resources involved in the planning process. policy making and public administration.
Vietnam can learn many theories, theories of development, social governance to manage the
development of Vietnam according to the chosen goal. The leadership team can improve
capacity, strengthen scientific knowledge of management, avoid empiricism in socio-
economic management of Vietnam in the process of comprehensive integration into global
life. Thinking in the style of "economic people" is nurtured in each individual, company and
management institution; This makes an important contribution to the development of market
thinking in approaching policies and operating development policies in the context of global
integration.

+ What are the disadvantages of international trade?

Write an essay with 500 words and provide your answers with real example in the context of
Vietnam international trade relations

- The distribution of wealth becomes unequal, the gap between rich and poor widens between
countries and regions around the globe. Globalization unevenly distributes benefits and
development opportunities to countries. In the competitive playing field, developed countries
have a great advantage because their products have competitive advantages in price and
quality while developing countries like Vietnam are at a disadvantage because of costs. and
the quality of goods and services, such as products containing a lot of raw labor, less gray
matter, and less refined raw materials, so the added value of Vietnamese exports is much
lower. much more than the value-added of exports of advanced countries. This situation
creates a large disparity in the interests of international trade globally.

- The amount of material wealth produced by mankind has increased many times over the
previous century (in the 20th century alone, world GDP increased by about 15 times, the
industry increased by 35 times) but the number of poor people did not decrease. The more the
world economy develops, the deeper the gap between the rich and the poor within each
country and between countries on a global scale.
These things raise the question of how can Vietnam rise to avoid falling further behind other
countries in the global competitive playing field? The strategic requirement is to improve
national competitiveness, change the export structure in the direction of increasing the
proportion of refined products, containing gray matter, and reducing raw exports.
-Integrating deeply into all aspects of the globalization process affects state power, national
identity, and traditional values. Vietnam's integration into the world community is associated
with a high-level market economy, so Vietnam has to adjust itself to adapt to the outside
world. Therefore, we must adjust our legal system to be in line with international laws and
practices, many public governance standards must be adjusted to improve democracy,
openness, and transparency by general regulations. of international institutions.
Integrating into the global spiritual and cultural life, the phenomenon of cultural interference
easily takes place. Vietnamese people going abroad can learn positive values from other
civilizations, conversely, foreigners can also learn positive values from the Vietnamese
people. In such an integration process, some new values from abroad can be borrowed into
Vietnam and accepted by everyone, otherwise, some old values that are no longer relevant will
be discarded. As a result, behavioral adjustment and some value changes take place in
Vietnamese society and communities.
-The risk of being hurt is great when somewhere in the world economy is unstable. The
inevitable logic is that globalization brings countries closer together in all aspects, on the other
hand, this process also makes countries more dependent on each other. Each economy
becomes a link in the global economic system, so once a certain stage is unstable, it affects
neighboring links, causing a global domino effect. The weakest links will face the greatest risk
of instability.