WORKN ON CALCULATION IN THE QUESTION REQUIRED

Therationale for tradecan be aconveniencebut also anecessity. It is for convenience, as supported byconventional economic theory, when trade promotes economic efficiency by providing a wider variety of goods, often at lower costs. This is because of specialization, economies of scale, and the related comparative advantages. Trade is a necessity when it enables a nation to acquire goods that would otherwise not be available in a national economy such as energy, raw minerals, or even some food. However, the benefits of trade can be subject to contention with several theoretical foundations of international trade have been articulated to explain its rationale:

• Mercantilism. A trading system where a nation tried to impose a positive trade balance (more exports than imports, particularly value-wise) on other nations to favor the accumulation of wealth. This system was prevalent during the colonial era and often undertaken bycharter companiesreceiving a monopoly on trade. Mercantilism represents the antithesis of free trade since trade relations are controlled and aligned to benefit one partner at the expense of others. Still, mercantilism established the foundations of a global trading system, albeit an unequal one.
• Neomercantilism. A more recent trade system, which like mercantilism, leans on establishing a positive trade balance to meet economic development goals. Export-oriented strategies can be considered a form of neomercantilism, particularly if a government puts forward an incentive and subsidy system (e.g. free trade zones), which confers additional advantages to the factors of production. Neomercantilism can also be a response by some governments to the competitive and disruptive consequences of free trade, particularly if the trade partners are engaged in neo-mercantilist strategies. The outcomes are tariff and non-tariff measures regulating trade and protecting national commercial sectors that are perceived to be subject to unfair competition. Therefore, neo-mercantilist strategies can be controversial and subject to contention.
• Absolute advantages. Based on a nation (or a firm) able toproduce more effectivelyin an economic sector while using fewer resources (e.g. capital, labor) than any other potential competitors. It, therefore, has an absolute advantage. Global efficiency can thus be improved with trade as a nation can focus on its absolute advantages, trade its surplus, and import what it lacks. The drawback of this perspective is that, in theory, nations having no absolute advantages should not be involved in trading since they may have little to gain from it. Absolute advantages tend to be anenduring characteristic, particularly for resources such as energy, where large producers keep an advantage as long as a resource is available or has a market.
• Comparative advantages. Even if a nation (or a firm) has absolute advantages over a wide array of economic sectors, it canfocus on the sectorsit has the highest comparative advantages (the difference of its production costs and those of its competitors) and import goods in sectors it has less comparative advantages. The comparative productivity increases the total production level since even if a nation (or a firm) has no absolute advantages, it can focus on sectors where the total productivity gains are the most significant. Comparative advantage can also be the outcome of economies of scale applied to a product or sector where the resulting lower costs provide competitiveness. Comparative advantages tend to be atemporary characteristic, that can change with the evolution of labor costs and technology.

Therationale for tradecan be aconveniencebut also anecessity. It is for convenience, as supported byconventional economic theory, when trade promotes economic efficiency by providing a wider variety of goods, often at lower costs. This is because of specialization, economies of scale, and the related comparative advantages. Trade is a necessity when it enables a nation to acquire goods that would otherwise not be available in a national economy such as energy, raw minerals, or even some food. However, the benefits of trade can be subject to contention with several theoretical foundations of international trade have been articulated to explain its rationale:

• Mercantilism. A trading system where a nation tried to impose a positive trade balance (more exports than imports, particularly value-wise) on other nations to favor the accumulation of wealth. This system was prevalent during the colonial era and often undertaken bycharter companiesreceiving a monopoly on trade. Mercantilism represents the antithesis of free trade since trade relations are controlled and aligned to benefit one partner at the expense of others. Still, mercantilism established the foundations of a global trading system, albeit an unequal one.
• Neomercantilism. A more recent trade system, which like mercantilism, leans on establishing a positive trade balance to meet economic development goals. Export-oriented strategies can be considered a form of neomercantilism, particularly if a government puts forward an incentive and subsidy system (e.g. free trade zones), which confers additional advantages to the factors of production. Neomercantilism can also be a response by some governments to the competitive and disruptive consequences of free trade, particularly if the trade partners are engaged in neo-mercantilist strategies. The outcomes are tariff and non-tariff measures regulating trade and protecting national commercial sectors that are perceived to be subject to unfair competition. Therefore, neo-mercantilist strategies can be controversial and subject to contention.
• Absolute advantages. Based on a nation (or a firm) able toproduce more effectivelyin an economic sector while using fewer resources (e.g. capital, labor) than any other potential competitors. It, therefore, has an absolute advantage. Global efficiency can thus be improved with trade as a nation can focus on its absolute advantages, trade its surplus, and import what it lacks. The drawback of this perspective is that, in theory, nations having no absolute advantages should not be involved in trading since they may have little to gain from it. Absolute advantages tend to be anenduring characteristic, particularly for resources such as energy, where large producers keep an advantage as long as a resource is available or has a market.
• Comparative advantages. Even if a nation (or a firm) has absolute advantages over a wide array of economic sectors, it canfocus on the sectorsit has the highest comparative advantages (the difference of its production costs and those of its competitors) and import goods in sectors it has less comparative advantages. The comparative productivity increases the total production level since even if a nation (or a firm) has no absolute advantages, it can focus on sectors where the total productivity gains are the most significant. Comparative advantage can also be the outcome of economies of scale applied to a product or sector where the resulting lower costs provide competitiveness. Comparative advantages tend to be atemporary characteristic, that can change with the evolution of labor costs and technology.

QUESTION 20.

1. Suppose a country produces four goods: rice, cloth, cement and cars. The production of the four commodities in the year 2013- 14 was 1000 units, 5000 units, 2000 units and 500 units respectively. The per unit price of the four commodities is SR 10, SR 20, SR 50 , and SR 2,00,000 respectively. Find out the GDP at market prices.

2. Suppose the gross domestic product at market prices of Saudi Arabia in 2012- 13 was SR 85,000 crores and net factor income from abroad was (-) SR 430 crores. Calculate GNPMP.

3. Suppose we are provided with the following information: (i) GNPMP = SR 35,800 Crores (ii) Consumption of fixed capital = SR 1,670 Find out Net National Product at market price.

4. Given the following data, calculate net domestic product at market prices: (i) Gross National Product at market prices = SR 85,000 Crores; (ii) Consumption of fixed capital = SR 3,000 Crores (iii) Net factor income from abroad = SR 2,000 Crores.

5. Given the following information, calculate net domestic product at factor cost: (i) Net domestic product at market prices = SR 25,000 Crores (ii) Indirect taxes = SR 1500 Crores (iii) Subsidies = SR 500 Crores.

6. : Given the following information about an economy, calculate net domestic product at factor cost: (i) Gross domestic product at market prices = SR 12000 Crores (ii) Consumption of fixed capital = SR 1500 Crores (iii) Subsidies = SR 300 Crores (iv) Indirect taxes = SR 1000.

7. Given the following data, calculate GDPFC: (i) Net domestic product at factor cost = SR 25000 Cr (ii) Consumption of fixed capital = SR 3000 Cr

8. Given the following information, calculate GDPFC: (i) NNPMP = SR 3200 Cr (ii) NFIA = SR 200 Cr (iii) Consumption of fixed capital = SR 1000 Cr (iv) Indirect taxes = SR 500 Cr (v) Subsidies = SR 300 Cr