SUGGESTED SOLUTIONS

CHAPTER
International
16 Economics

Section A
  1 D 2 A 3 D 4 A 5 D
  6 B 7 A 8 B 9 A 10 C
11 D 12 C 13 A 14 A 15 A
16 C 17 B 18 C 19 A 20 B

Section B
1 (a) Vietnam
(b)
Countries Cocoa Rubber
Indonesia 3.63 0.28*
Vietnam 0.68* 1.47
(c) Cocoa – Vietnam
Palm oil – Indonesia
(d)
Countries Cocoa Rubber
Indonesia 0 (550 y 0.28) 1 2,000
5 3,964.3
Vietnam (750 y 0.68) 1 1,100 0
5 2,200.9
(e) Terms of trade: 1 ton of cocoa
5 (3.63 1 0.68) y 2 5 2.16

2 (a) Singapore
(b)
Countries Television Computer
Malaysia 0.79* 1.27
Singapore 0.89 1.13*
(c) Malaysia has comparative advantage on producing televisions, while Singapore has
comparative advantage on producing computers.
 Suggested Solutions
2

(d) Singapore
(e) Terms of trade 5 (1.27 1 1.13) y 2
1 computer 5 1.2 television
3 (a) Rice – Thailand
(b) Opportunity cost of producing 1 ton of rice:
Thailand: 1 ton of rice 5 150 y 500 5 0.3*
Indonesia: 1 ton of rice 5 150 y 300 5 0.5
(c) Thailand
(d) With international trade, the world production increases and the consumption in both
countries will be higher.
4 (a) Balance of services 5 –4,055 1 93 1 655 1 1,550
5 –1,957
(b) Current account balance
5 (95,750 – 98,230) 1 (–1,957) 1 350 1 (–5,525)
5 –9,612
(c) Basic balance 5 –9,612 1 630
5 –8,982
(d) Capital account 5 630 1 3,215 1 9,200
5 13,045
(e) Overall balance 5 –9,612 1 13,045 1 750
5 4,183
(f) BNM reserves 5 –4,183
5 (a) RM450
(b) RM210
(c) RM258
(d) RM465