1.1 The information in the table below shows the number of cars and tractors that two countries produce on average in a given period; use the information to answer the questions that follow:

Country Cars (units) Tractors (units)

Country A

160 cars

65 tractors

Country B

900 cars

300 tractors

1.1.1 Which country has an absolute advantage in the production of cars? Explain your answer with reference to the definition of 'absolute advantage'. (3)

1.1.2 Define 'comparative advantage' and explain which of the two countries has comparative advantage in the production of cars and tractors respectively.

Note: show your workings. (8)

1.1.3 Mention and explain any four (4) reasons why it would be advantageous for countries to specialise in one product. (4)

1.2 Use a diagram to illustrate the effect of a credit rating downgrade by Moody's on the dollar/rand exchange rate. (10)

1.3 Explain the effects of an appreciation of the rand on the current account of South Africa. (5