PART A - CASE STUDY MALAYSIA EXTERNAL TRADE INDICES, MAY 2021 Exports The export unit value index posted a positive growth of 0.7 per cent in May 2021 as compared with the previous month, driven by the increases in the index of animal & vegetable oils & fats (+3.1%), mineral fuels (+1.3%) and machinery & transport equipment (+0.2%), On the other hand, the export volume index recorded a decline of 13.2 per cent in the same month. The decline was reflected by the decreases in the index of mineral fuels (-20.9%), machinery & transport equipment (-15.4%) and miscellaneous manufactured articles (-13.1%). The seasonally adjusted export volume index registered a decrease of 12.8 per cent from 163.6 points to 142.6 points. When compared to the previous year, both the export unit value and volume indices rose 10.7 per cent and 33.1 per cent, respectively. Imports The import unit value index increased 0.9 per cent in May 2021 as compared with the previous month. The increment was contributed by the growths in the index of mineral fuels (+7.1%), miscellaneous transactions & commodities (+3.0%) and manufactured goods (+0.9%). Meanwhile, the import volume index showed a different trend, decreased 8.6 per cent in May 2021 as compared to the preceding month. The downward trend in the import volume index was attributed to the deterioration in the index of mineral fuels (-34.4%), manufactured goods (-4.4%) and machinery & transport equipment (-2.3%). The seasonally adjusted import volume index in May 2021 declined 10.3 per cent from 166.1 points to 149.0 points. On a year-on-year basis, both the import unit value and volume indices expanded 3.8 per cent and 44.8 per cent, respectively. Terms of trade Malaysia's terms of trade recorded a decline of 0.2 per cent month-on-month from 103.7 points to 103.5 points in May 2021. On a year-on-year basis, Malaysia's terms of trade performance remained positive at 6.6 per cent from 97.1 points in May of previous year. (Source: Department of Statistics Malaysia, July 2, 2021) Question From the above article, it is stated that "The export unit value index posted a positive growth of 0.7 per cent in May 2021 as compared with the previous month..." Required: Critically explain how an increase in export unit value index can result in a trade surplus for Malaysia. Support your answer with literature review. The article above stated that "Malaysia's terms of trade recorded a decline of 0.2 per cent month- on-month from 103.7 points to 103.5 points in May 2021." Required: Critically examine the importance of terms of trade for a country. What is the consequences if Malaysia continues to record a decline in terms of trade? Justify with relevant economics literature review to support your answer. (50 marks)