Cover Sheet

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acknowledment
Table of content

List of tables
1) Task 1 - PPC & Comparative Advantage

1.A) PPC Drawing

Maximum USA (A) China (B)
Outputs
Computers 6 5
Rice 2 1

1.B) Comparative advantage

In here, United States of America has the absolute advantage when it come to producing both
products using only labor as an input, When discuss Computer producing it has comparative
advantage too because USA is relatively better at producing them. USA is 2 time better at Rice.
USA have greatest advantage and the widest gap lies with Rice production, hence USA should
specialize in producing Rice.
2) Task 2 - Monetary Policy To Control Inflation

The Central Bank normally conducts monetary policy in line with a flexible inflation targeting
(FIT) framework (Economic and Price Stability, 2022). Goods become more expensive quicker
than anticipated, monetary policy will tighten by raising and increasing interest rates or
implementing and monitoring other aggressive actions. Higher interest rates lead to increase the
cost of borrowing, which ultimately reducing either spending and investment projects, which
together depend largely on borrowing. Similarly, if inflation and country’s good production
decrease or reduce, owner interest rates make borrowing more affordable, as can a variety of
other potential policy options.
Adjustments in the monetary base are regarded as the key causative variables influencing price
stability In principle, while assessing financial dynamics, Two basic meanings of monetary
aggregates are taken into account. The first is reserve money, which consists of Central Bank
issued money and commercial banks holdings well with central bank. It’s also known as base
money, because commercial banks may make deposits depending on reserve money, and that is a
piece of a comprehensive meaning of money supply, as part of their loan and reserve creation
process. The next is wide finance, which is related to the amount of public currency plus public
deposits with commercial bank. According to research, the wide money supply is the most
relevant monetary measure for analyzing the link between both the supply of money and the
overall price level. Nevertheless, with increasing volatility in the money multiplier and velocity,
as well as a softening connection between inflation level and money supply, the position of
financial aims as a benchmark rate became unknown, complicating the Central Bank’s
communication plan and forcing it to enhance its monetary policy.
The goal of rising prices is to keep prices stable. All monetary policy tools, including open
market operations and discounted borrowing, can be implement and used in an overall inflation-
controlling approach. Inflation targeting deviate from tactics aimed at other indicators of
economic performance, including such currency movements, rates of unemployment or the rate
of nominal GDP growth.
3) Task 3 - Four Market Models

Perfect Competition, supply & demand factors influence the volume and size of services and
products produced, along with market pricing processes established by participants (Zeder,
2020).
Monopolistic Competition, the least potential cost of manufacturing is not assumed. That minor
charge in description allows for significant change and variances in whether the firms function in
the market. Corporations with a monopolistic Competition system provide extremely identical
services and products with minor variances and differences which serve as the foundation or
base for their marketing and promotion. In this model high number of small sellers sell very
much similar goods. Cap’n Crunch, Apple Jacks are example for this type of market structure
(Zeder, 2020).
Monopoly and perfect or totally competitive marketplaces normally at opposite ends or side of
the market structure spectrum. In here few corporations or organizations dominate the entire
market place. In monopolistic marketplaces, where there are numerous or many rivals and
competitors, however in this monopoly system, there is only one vendor. In monopoly structure
organization tend to do anything which lead to their profit maximization and set the price
margins because monopoly firms know their is no on one to compete with them due to high entry
barriers. (Gitman et al., n.d.).
Oligopoly not every business aspires to be a solitary structure in a metropolis. Companies that
cooperate or work together to reduce competition and control a distinct market or sector form
oligopolies. Companies operating within oligopolistic market arrangements might be tiny or
huge. However rather then compete these organizations set agreements to collaborate with each
other. By setting these kind of arraignments lead to increase the market power and profit.
Nevertheless, the corporations normally this much tough frequently have patents, cash, liquidity
and physical resources to build and create hindrance for entry level new enterprises (retail-
insider, 2021).
 Basis Perfect / Total Monopoly Monopolistic Oligopoly
Competition Competition
Number of Extremely Solitary Huge Several High
sellers of goods High
and services
Product Homogeneous No Similar Closely linked Homogeneous in
Characteristics Products but varied Pure Oligopoly
and varied in
Distinguished
Oligopoly
Firm Access and Liberty of Access new Liberty of Limitations on
Exit Access enterprises & Access new company
depart old ones in admission
constrained
Demand Curve Extremely Downgrade Slant Downgrade Indeterminate
Pliable Slant
Pricing Every business Every Company is Partly price Exactingness
is a price-takera price-maker & ceiling owing to due to fear of a
Price Gouging is product variety price
conceivable competition
Cost of Good No Selling Just informational Large Selling Massive Selling
Cost Selling Cost Cost Cost
Knowledge Ideal Inadequate Inadequate Inadequate
Level Knowledge Knowledge Knowledge Knowledge
Example Personal Care Sri Lankan Restaurants Television
Products Railway
(Gitman et al., n.d.)

Like above table, market systems are classified into 4 types according to competition level., such
as pure competition, monopolistic, oligopoly, and monopoly. Pure competition render a system
in which a lot of the smaller firms or companies battle with identical and similar items.
Conversely monopolistic competition relates to a market dynamic in which a lot of the smaller
organizations or enterprises battle with each other selling similar products however which are
having slight variances and differences. An Oligopoly is a structure of market which is having
limited or small number of enterprises competes or collaborate with each other. Finally, a
monopoly is a market structural arrangement in which a single or one business lead and
dominates the whole entire market.
4) Task 4 - Significant Of International Trade To Sri Lanka

Sri Lanka’s Foreign currency reserves are nearly depleted. For its first point in recorded history,
it lost to pay the balance on its external debt this year. The government blames the Covid
epidemic, which harmed Sri Lana’s tourism business, that is one of the country’s largest foreign
currency earnings. It further claims that a string of devastating terrorist assaults on churches in
2019 have scared visitors away. Some specialist, believe that economic incompetence is to
responsible. By March 2020, this had dropped to &1.93 billion and the government said that it
only has &50 million remaining (Desai, 2022).
The government also has amassed massive debts with nations like as China (Chung, 2022) in
order to support what opponents call needless construction projects. Among the International
Trade theories, Absolute advantages, comparative advantage and etc.
The Civil war which lasted for 26 years had a tremendous influence on the foundations of Sri
Lanka’s domestic economy The 2008 global financial crisis depleted the country’s currency
reserves, and financial failure by successive administrations resulted in the dual difficulties of
budget shortfalls and Balance of Payments deficits. The country’s rising foreign indebtedness,
combined with increased government expenditure to implement COVID-19 alleviation efforts,
have fundamentally damaged the local economy. Sri Lanka is a textbook example of the ‘twin
deficits’ idea, which stated that an economy’s current account develops in the same path as its
fiscal account.
The theory of absolute advantages arose in response to the protectionism mercantilist ideas on
global commerce. It argued that free trade was the only way to ensure trade expansion. And the
country must only develop things in which it has a clear edge. International divide was facilitated
by free trade. Producers with differing relative advantages could always obtain a benefit over
producers in distance via specialization and division of labor. It underlined the important of
manufacturing what a country specializes in order to create more at a lesser cost than other
countries. According to this theory, a country must be exporting a commodity for which it has a
competitive edge (saylordotorg, n.d.).
Miscellaneous manufactured articles, manufactured goods classified chiefly by materials, food
and live animals and machinery and transport equipment are the 4 main export categories in Sri
Lanka (Hettiarachchi, 2018). The main goods with a comparative advantage in SL are Tea and
mate, vegetable textile fibers, spices, meal and flour of wheat and flour of meslin, and women’s
or girls’ knit or crochet garments. The findings highlighted that tea and mate provide the most to
SL export income, but their TBI value is insignificant. This implies that, while tea and mate do
not generate considerable foreign money, they may fight in the world market All through the
research period, export and imports of electric power machinery, ships, boats and motor cycles
are less than unity. Also after 35 years of freedom, the framework of SL exports and hence its
economy is indeed a long way off.
Sri Lanka can improve its competitiveness and specialization in the export of Vegetables
planting materials, woven, fruit, vegetable products and also food preparations. If wood pulp,
and fibrous cellulose material Sri Lanka has did lost its export specialization and competitiveness
in plaster, asbestos, Stone, mica, cement, carpets and other textile floor coverings, bird skin,
ceramic products, copper and articles, feathers, human hair, artificial flowers and pearls. If Sri
Lanka’s export department concentrated in these type of export, we can able to bridge the
Balance of Payment deficit gap in near future.
References
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<https://www.cbsl.gov.lk/en/monetary-policy/about-monetary-policy> [Accessed 20 June
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 Desai, P., 2022. Sri Lanka: Why Is The Island Country In An Economic Crisis?. [online]
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 Zeder, R., 2020. The Four Types of Market Structures - Quickonomics. [online]

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 Retail-insider. 2021. The Four Types Of Markets and Structures. [online] Available at:
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[Accessed 14 July 2022].

 saylordotorg, n.d. What Is International Trade Theory?. [online] Saylordotorg.github.io.

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 Chung, D., 2022. Sri Lanka Faces Unsustainable Debt and Balance of Payment
Challenges. [online] worldbank.org. Available at:
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unsustainable-debt-and-balance-of-payment-challenges> [Accessed 19 July 2022].
identified as unwanted

 World Bank. 2022. Sri Lanka Faces Unsustainable Debt and Balance of Payment Challenges.
[online] Available at: <https://www.worldbank.org/en/news/press-release/2022/04/13/sri-
lanka-faces-unsustainable-debt-and-balance-of-payment-challenges> [Accessed 14 June
2022].
Plagarisum report