1. Using the table below:Answer the following questions and ensure your show workings calculations .

a) Which country has absolute advantage in rice? In cloth?

b) Which country should specialize in producing rice? In Cloth?

c) What is world output of rice and cloth after specialization?

d) What are the favorable terms of trade for both countries

Commodity	Tons of Rice	Bolts of Cloth
UK	550	750
US	900	900
Total Output	1450	1650

2. What is the Real GDP increase after price adjustments ? [ 5]

2016 Qty produced 2016 Price per 2017 Qty 2017 Price per unit produced unit Milk 17 million gallons $11 20 million $12 gallons Eggs 6.000 $5 5000 $60North-West economy LRAS SRAS P1 E1 AD Y1 YE . Real GDP potential output