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 this case, USA has the absolute advantage in producing both products using only labor as an
input, but it has a comparative advantage in Computer because it 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 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 interest rates or implementing other
aggressive actions. Higher interest rates increase the cost of borrowing, reducing either spending
and investment, which together depend largely on borrowing. Similarly, if inflation and
economic production decrease, 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 money supply and inflation, 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 used in an overall inflation-targeting
approach. Inflation targeting differs from tactics aimed at other indicators of economic
performance, including such currency movements, rates of unemployment or the rate of nominal
GDP growth.
Task 3 - Four Market Models

Perfect Competition, supply & demand factors influence the volume of products and services
produced, along with market pricing established by market participants (Zeder, 2020).
Monopolistic Competition, the least potential cost of manufacturing is not assumed. That minor
charge in description allows for significant variances in whether the firms function in the
marketplace. Organizations with a monopolistic Competition system provide extremely identical
items with minor variances that serve as the foundation for their marketing and promotion. Cap’n
Crunch, Apple Jacks are example for this type of market structure (Zeder, 2020).
Pure Monopoly and totally competitive marketplaces are at opposite ends of the market structure
spectrum. Nevertheless, either expense and revenue must be minimized. In monopolistic
marketplaces, where there are numerous rivals in perfect competition, there is only one vendor.
High barriers to entry to the monopolistic market leave a “mono” or lone business surviving,
resulting in no pricing competition (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. Nevertheless, the strongest corporations frequently have patents, cash and physical
resources such as raw material control that create obstacles to entry for new enterprises (retail-
insider, 2021).

Basis Perfect Pure 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-taker a 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.)

Market systems are classified into 4 types, such as pure competition, monopolistic competition,
oligopoly, and pure monopoly. Pure competition depicts a market system in which a lot of the
smaller companies battle with similar items. Conversely monopolistic competition relates to a
market dynamic in which a lot of the smaller enterprises battle with distinct products against one
another. An Oligopoly is a market arrangement in which a limited number of enterprises
competes with one another. Finally, a monopoly is a market arrangement in which a single
business dominates the whole market.
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, yarns, felt, twine, nonwovens, wadding, fruit, vegetable products nes, nut
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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I identified as unwanted

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