International Business Enviornment
International Business Enviornment
International Business Enviornment
c) The Reserve Account : In principle this is no different from the capital account in as much as it also relates to financial assets and liabilities. However, in this category only reserve assets are included. These are the assets which the monetary authority of the country uses to settle the deficits and surpluses that arise on the other two categories taken together. Go to www.mdu.li to get lots of stuff for free :)
(13) ______________________________________________________________________________________ These notes are only for guidance purposes and should not be used as substitutes of textbooks. The students are strictly advised to study prescribed textbooks comprehensively to develop thorough understanding of the subject.
(14) ______________________________________________________________________________________ These notes are only for guidance purposes and should not be used as substitutes of textbooks. The students are strictly advised to study prescribed textbooks comprehensively to develop thorough understanding of the subject.
(15) ______________________________________________________________________________________ These notes are only for guidance purposes and should not be used as substitutes of textbooks. The students are strictly advised to study prescribed textbooks comprehensively to develop thorough understanding of the subject.
In the absence of trade: - Bangladesh will be able to produce 5 kg of rice and 2.5 kg of wheat. Pakistan will produce 5 kg of wheat and 2.5 kg of rice. But when trade is possible between the two countries: - Bangladesh will produce only rice and exchange a part of rice output with wheat from Pakistan. Pakistan will produce only wheat and exchange a part of the wheat output with rice from Bangladesh which was producing 7.5 of food grains in the absence of trade, will now produce 10 kg of food grains. Similarly in Pakistan 10 kg of food grains will be produced instead of 7.5 kg. This theory of absolute cost advantage explains how trade helps increase the total output in the two countries. (Though it fails to explain whether trade will exist if any of the two countries produces both the goods at lower cost). (ii) Theory of Comparative Cost Advantage: - This theory explains that a country should specialize in the production and export of a commodity in which it possess greatest relative advantage. Ricardo focuses not on absolute efficiency but on relative efficiency of the country for producing goods. This is why his theory is known as theory of comparative cost advantage. In a two-country, two-commodity model, he explains that a country will produce only that product which it is able to produce efficiently. Suppose: - Bangladesh and India, each of has 100 units of labour. One half of the labour force is used for the production of rice and the other half for the production of wheat, In Bangladesh: - 10 units of labour are required to produce either 1 kg of rice or 1 kg of wheat. In India: - 5 units of labour are required to produce 1 kg of wheat and 8 units of labour are required to produce 1 kg of rice. Amount of output in absence of trade Rice Wheat 1. Bangladesh 5 kg 5 kg Go to www.mdu.li 2. India
6.25 kg
(16) ______________________________________________________________________________________ These notes are only for guidance purposes and should not be used as substitutes of textbooks. The students are strictly advised to study prescribed textbooks comprehensively to develop thorough understanding of the subject.
(26) ______________________________________________________________________________________ These notes are only for guidance purposes and should not be used as substitutes of textbooks. The students are strictly advised to study prescribed textbooks comprehensively to develop thorough understanding of the subject.