ECO121 Macroeconomics

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Term: Fall2021
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Student Information
Name: LÊ HỒNG ÁNH Roll number: HS1606557
Room No: MKT1608 Class: ECO121

FOR TEACHER ONLY

MARK MARKED BY Signature of Proctor
(NAME AND SIGNATURE)

Individual Assignment 01

Question1. (2 points)

a. What is defined as absolute advantage?

Absolute advantage: the ability to produce a good using fewer inputs than
another producer.
b. What is defined as comparative advantage?
Comparative advantage: the ability to produce a good at a lower opportunity
cost than another producer
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?
Answer: Singapore has the absolute advantage in the production of both TV set and
Cars over Malaysia.
 + Which country has the comparative advantage either in the production of TV sets
or in the production of Cars over the other?
Singapore: instead of producing 1 TV set, they can produce 0.5 car The opportunity
cost of 1 TV set in Singapore is 0.5 car. Malaysia : Instead of producing 1 TV set,
they can produce car.
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
America: + Steel: 80/90 = 0,89
+ Coal: 90/80= 1,13
England: +Steel: 120/100 = 1,2
+ Coal 100/120 = 0.83
+ Which country should specialize in the production of Steel?
- As we can see from the above: The opportunities cost of Steel in America is lower
in England (0,89 < 1,2)
=> America has the comparative advantage in production of Steel than England
=> Therefore, America should specialize in the production of Steel than England
+ Which country should specialize in the production of Coal?
- As we can see from the above: The opportunities cost of Coal in England is lower
in America (0,83 < 1,13)
=> England has the comparative advantage in production of Coal than America
=> Therefore, England should specialize in the production of Steel than England
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?
 Coal
 Wheat
Question 2 (2 points):
Given the following annual information about a hypothetical country, answer the following questions
(Expenditure Approach to GDP)
 Billions of Dollars
Personal consumption expenditures $200
Personal taxes  50
Exports 30
Depreciation  10
Government purchases 50
Gross private domestic investment  40
Imports   40
Government transfer payments  20

a. What is the value of GDP? $280

b. What is the value of net domestic product? $270
c. What is the value of net investment? $30
d. What is the value of net exports? $-10

Question 3 (2 points):
Given the following annual data, answer the following questions;

Billions of Dollars
New residential construction $500
Purchases of existing homes 250
Sales value of newly issued stocks and bonds 600
New physical capital 800
Depreciation 200
Household purchases of new furniture 50
Net change in firms’ inventories 100
Production of new intermediate goods 700

a. What is the value of gross private domestic investment? 1700

a. What is the value of net investment? 1500
b. Are any intermediate goods included in the measure of gross investment?
No intermediate goods cannot be counted in gross investment.
Question 4 (2 points)

Refer to the information provided in Table 6.1 below to answer the questions that follow.

a. Personal consumption expenditures in billions of dollars are 1500

b. The value for gross private domestic investment in billions of dollars is 940
c. The value for net exports in billions of dollars is -100
d. The value of gross domestic product in billions of dollars is 3690
 e. The value of government spending in billions of dollar 1350

Question 5. (2 points)

+ What are the benefits/gains from international trade?

One of the top advantages of international trade is that you can increase your number of
potential customers. Each country you add to your list can open up a new avenue to grow
your business and increase revenue.
Selling products to foreign markets can extend the life of existing products. Getting paid
upfront can be one of the hidden advantages of international trade. When dealing
internationally, it's common practice to ask for payment in advance, while at home you may
have to be more creative in managing your cash flow while you wait to get paid. Expanding
your business abroad can help you better manage your cash flow.
One of the significant advantages of international trade is market diversification. Focusing
only on the domestic market can expose you to a lot of risk due to economic downturn,
political factors, environmental events and other risk factors. Becoming less dependent on
one market can help you reduce the potential risk in your core market.
Those who add international trade to their portfolio can also benefit from currency
fluctuations. For example, when the Vietnamese dong is not very valuable, you can export
more because foreign customers benefit from a favorable exchange rate.
You can also benefit from currency conversion. Let's say you do business in Japan and the
Japanese yen rises sharply against the Vietnamese currency. Your company's profits from
Japan will be in yen. When you convert yen payments to a weak dollar, it means more
money for your Vietnam headquarters — a welcome boost to your bottom line. Friend. This
alone could be one of the most valuable advantages of international trade.
One of the other advantages of international trade is that you can take advantage of export
capital.
One of the advantages of international trade is that you can have an outlet to dispose of
excess goods that you cannot sell in your domestic market.
Doing business in other countries can enhance your company's reputation. Success in one
country can influence success in other neighboring countries, which can elevate your
company in a niche. It can also help increase your company's reputation, both overseas and
domestically. This is one of the advantages of international trade that can be difficult to
quantify and therefore easy to overlook.
International markets can open the way to a new line of services or products. It can also
give you the opportunity to specialize in another area to serve that market. Exposure to the
realities of the world outside of your home base can even create innovations, upgrades, and
efficiencies for your products and services. We never know what will happen when we
open our minds to ideas, feedback, and experiences that come from outside our country's
borders.
Over the past years, Vietnam's process of international economic integration has reached a
new height, making an important contribution to socio-economic development and
improving national competitiveness. Although the economic situation in the world and the
region has complicated and unpredictable developments, Vietnam still persists in the policy
of comprehensive international economic integration and considers international economic
integration and liberalization. Trade is an inevitable and objective trend.
Overcoming discrimination in international trade. Promote Vietnam's trade and relations
with countries around the world. Vietnam will benefit from improved dispute settlement
system when it has relations with major trading powers.
Vietnam will have conditions to attract capital, management experience and new
technology... from foreign countries. Improve competitiveness and efficiency in the
economy, while creating a fair competitive environment for Vietnamese enterprises.
Facilitate the expansion of international market share for Vietnamese products and promote
commercial development.
+ What are the disadvantages of international trade?
The global economy has made it easier to ship a product or sell a service almost anywhere
in the world. Overnight shipping, e-commerce, language translators and established
international markets have made this accessible to businesses of all sizes. However, there
are some disadvantages of international trade that you may need to overcome if your
company is to be truly successful in these markets.
Cons of Taxes and Customs of International Shipping. International shipping companies
make it easy to ship packages to almost anywhere in the world. However, one of the
downsides of international trade is that most customs authorities of these destination
countries charge extra fees for items shipped to them. Although each government defines
duties and taxes differently, it is usually charged on the value of the product being shipped
(item, insurance plus shipping). The item description can also affect these fees based on
what it is made or used for. In addition to the cost of their products, a company needs to
understand what the end consumer will be charged by the international shipping company.
This is sometimes referred to as "landing costs". Larger shipments sent through these
carriers may not be cost effective. Companies can look for freight forwarders to help save
more money or to handle complex documents required.
Despite the availability of online translators, language remains one of the major drawbacks
of international trade. While translation tools can be used to build instructions and
communications in another language, they are still far away. The market is flooded with
examples of poorly translated products with misinterpreted names in another language. To
get around this, consider using a marketing agency in the targeted country or region to
review all company documents prior to launching a product or service.
One of the great disadvantages of international trade is that many times cultural differences
are never recognized. There are unwritten rules about domestic trade that are difficult to
discover and possibly even harder to deal with.
For example, the word "yes" in Western culture usually means agree. In some cultures,
however, it can mean that the person understands what you're saying, but doesn't
necessarily agree. When you travel to India, you will find that people will turn their heads
to the sides to mean "yes" and up and down to mean "no" - the opposite of what those
gestures mean in culture. westernization.
After international customers make a purchase, how will they be served when they are far
away? Again, language and cultural differences need to be considered in order to overcome
one of the major drawbacks of international trade.
Your company needs to prepare in advance to communicate with these customers in
different time zones, preferably in their own language. If you can't serve employees 24/7,
you need to set expectations in advance about when to get a reply.
Since not all international customers will be satisfied with the company's products, a return
and refund process must be in place.
The front end of the equation has become easier through credit cards and online financial
tools, but returning physical goods can be as complicated and expensive as it may seem at
first.
A company needs to think about how a product will be returned and who will pay the cost
of shipping it back. In some cases, companies will refund customers and not ask for a return
because the cost is too high. I advise every company to think ahead about their return
policy.
The more widely distributed a product is, the more likely it is to be illegally copied by a
competitor. This can be in the form of proprietary information or market marks.
With cross-border borders, it is very difficult to prosecute a company. Some countries also
have copyright and private label protections that can be filed to protect companies selling
products in their countries.
Finally, there is always political risk in international trade. Governments and their policies
change over time, and sometimes companies can get stuck in the middle with different
regulations that can target their sales and customers. This is why it can be good to market a
product to a geographic area, rather than a country, to help balance a company's risk.
In Vietnam, the economic integration still faces some difficulties such as competition
becoming more fierce, putting great pressure on many businesses. Especially businesses
that are used to the support of the State, those with weak financial and technological
potential. International economic integration with the free movement across borders of
elements of the process of reproduction of goods and services has many potential risks,
including social risks. Our country's economic institutions are still too complicated and
cumbersome, making investors afraid to invest in Vietnam. The state management staff and
business team are not strong enough to manage the economy. International economic
integration leads to security and cultural cooperation. At the same time, the opening of the
market and the expansion of exchanges in the context of the current information explosion,
besides many good aspects, also imported bad ones, causing negative effects on
Vietnamese cultural traditions.