Lesson Note on Economics SS3 First Term

SS3 Economics Lesson Notes – Edudelight.com

SUBJECT:  ECONOMICS                                                                                           CLASS: SS 3


  1. Economic Lessons from Asian Tigers.
  2. Human Capital Development.
  3. Petroleum and the Nigerian Economy.
  4. Manufacturing and Construction Industry.
  5. Services Industries.
  6. Agencies that Regulate the Financial markets.
  7. Functions and Role of Regulatory Agencies.
  8. International Trade I.
  9. International Trade II
  10. Balance of Payment.


  1. Amplified and Simplified Economics for SSS  by Femi Longe.
  2. Essential Economics for SSS by C.E Ande.
  3. SSCE Past Question pack.
  4. UTME Past Question.




  1. Economic History of the Asian Tiger and Japan(1960-2000).
  2. Review of the Development Strategies employed by the Asian Tiger.
  3. Lessons for the Nigerian Economy.


The term Asian Tiger refers to a group of countries in the south east of Asia which includes Hong Kong which is the administrative zone of China, Taiwan, Singapore, South Korea and Indonesia from 1960 to the year 2000, these Asia Economies did something miraculous hence they are popularly referred to as the Asian Miracles. There was this aggression to develop their economies. The south east Asia states have placed regional economic integration as a top priority. They formed Association of South East Asian Nations (ASEAN) with the ambition of becoming an official Economic Community in 2015.

In that short period of 40 years, those five Economies really became a big part of the workshop of the world. They were not just regional players expanding locally they were expanding globally.


The Japanese Miracle refers to Japan’s phenomenal economic recovery following the devastation of the World War II. Within short decades of its capitulation Japan had joined the community of prosperous nations.


  1. List the countries that constitute the Asian Tigers.
  2. Describe briefly the Economic History of the Asian Tigers.


  1. Investment in Skills
  2. Advancement in Technology.
  3. Engagement of special Agencies.
  4. Setting up the Pilot project.
  5. Involvement of some international.


The Nigerian Economy can indeed learn from the Asian Tiger in a number of ways these include;

  1. Formulation and implementation of deliberate government policies.
  2. Strengthening the development of Agriculture
  3. Encouraging Industrial development.
  4. Development of small and medium scale enterprise (SMEs).


  1. What are the lessons Nigeria will need to learn from the Asian Tiger’s Economy?
  2. What strategieswere employed by the Asian Tiger?


  1. Essential Economics textbook for SSS by C.E Ande  page 337-342.
  2. Amplified and Simplified Economics textbook for SSS by Femi Longe page 535-537.


  1. Distinguish between personal income and national income.
  2. Describe any four uses of national incomedata.
  3. Explain the method of measuring national income.
  4. What are the sources of government revenue?
  5. How does the government finance deficit budget?


  1. The group of countries in the South east of Asia whose economies are referred to as Asian Miracle is A. ASEAN B. Asian Tiger C. China D. America.
  2. What is needed to boost a country’s economy? A. Debt B. High savings rate C. Transfer payment D. Risk.
  3. Those five country’s Economies became really big within A. 20 years B. 35years C. 40years D. 100 years.
  4. Ikeda plan was unveiled in the year? A.1965 B. 1960 C. 1950 D. 1945.
  5. The period from 1960 to 1970 Japan experienced A. recession B. double digit growth C. inflation D. unemployment.


  1. Discuss the factors that account for rapid development of the Asia Tiger.
  2. What are the problems facing Small and Medium scale Enterprise in Nigeria?

SS3 Economics Lesson Notes – Edudelight.com




  1. Meaning
  2. Charateristic
  3. Factors affecting the efficiency of Human capital
  4. Differences between Human and physical Capital
  5. Brain Drain and its effect on the Nigerian Economy
  6. Arresting Brain Drain


Human Capital refers to the skills, training, experience, education, knowledge, technical know-how and competencies contributed by humans to production process.

Human capital is an important factor of production. It is the value that is added into a company by an employee which can be measured by the employee’s skills and competencies of Human capital.

Characteristics of human capital

  1. Human capital is mobile
  2. Human capital is skillful
  3. Human capital has feelings
  4. It requires innovation
  5. Human capital is not predictable
  6. Human capital is perishable
  7. Human capital is not fixed


Physical Capital refers to asset which themselves have manufactured and are used for production of goods and services. Examples include machinery, equipment, buildings etc.


  1. Define Human capital
  2. Define Physical capital


Human CapitalPhysical Capital
It is a human assetIt is a non-human asset
It includes skills, training, education etcIt includes asset manufactured and used in production process.
It is controlled by humansIt cannot be controlled by itself
It can appreciate through training, education, experience etcIt cannot appreciate in value
The reward is wages and salariesIt reward is interest


As an intangible asset,human capital the workforce a company employs. The following factors affect the efficiency of human capital;

  1. Education
  2. Experience
  3. Competence
  4. Personal attribute
  5. Increase in innovation
  6. Skills
  7. Health
  8. Training


  1. State three differences between Human capital and Physical capital
  2. Explain five factors affecting efficiency of Human capital.


It is also known as Human capital flight. It may be defined as the departure or emigration of individuals with technical skills or knowledge from organizations, industries or geographical region to another.

Brain drain is common among developing nations.


Brain drain is taking place at a very fast rate in developing countries. Nigeria is no exception. If we want to arrest Brain drain the following should be done;

  1. Provision of better job opportunities.
  2. Provision of attractive salaries.
  3. Promotion on merit.
  4. Improvement on adequate research facilities.
  5. Abolition of quota system.
  6. Improvement of power supply.
  7. Protection of the lives and property of citizens.
  8. Improvements on the universities.


  1. What is Brain Drain?
  2. How can Brain Drain be arrested in Nigeria?


  1. Essential Economics for SSS by C.E Ande page 348-350
  2. Amplified and Simplified Economics for SSS by Femi Longe page514-517.


  1. What is Economic planning?
  2. Outline the problems associated with planning.
  3. Differentiate between Economic growth and Economic development
  4. Give five Reasons for continued existence of OPEC.
  5. State five positive and negative contribution of crude oil to the Nigerian Economy


  1. The value that is added into a company by an employee is known as  A. human capital B. capital C. physical asset D. developmental capital.
  2. Physical capital is also known as A. human capital B. non-human capital C. labour D. humans.
  3. One of these is not the charateristic of human capital A. it is mobile B. It is tangible C. It has feelings D. It requires motivation
  4. The departure or emigration of individual with technical skills or knowledge from one country to another is known as A. mobility of labour B. brain drain C. travelling D. emigration
  5. All are factors responsible for brain drain except A. poor opportunity B. political instability C. marriage D. social environment.


  1. Briefly explain the factors affecting human capital
  2. Differentiate in a tabular form human capital and physical capital.

SS3 Economics Lesson Notes – Edudelight.com




1.   Historical development of petroleum in Nigeria.

2.   Positive Contributions of petroleum to Nigeria Economy.

3.   Negative Contributions of Petroleum to Nigeria’s Economy.

4.   NNPC – Formation and roles in production refining and marketing of oil.

Petroleum was discovered in commercial quantity in 1956 by shell BP at Oloibiri in the present River State.  Ever since 1976 till date, petroleum has remained the major source of government revenue in Nigeria.


1.         Petroleum serves as sources of revenue to the country.

2.         Employment generation e.g. petroleum engineers, geologists, chemical engineers etc.

3.         Improvement in the infrastructure of the country e.g. flyovers, airports roads development are linked to earning from petroleum.

4.         The major foreign exchange earnings in the country is crude oil.  Therefore petroleum serves as source of foreign exchange.

5.         Development of oil related industries e.g. oil servicing firm, petro chemical industry.

6.         Improvement of the living standard of the citizens of the country.

7.         Provision of wide range of products.

8.         Major source of fuel e.g. petrol, diesel, kerosene etc.

9.         Repositioning of the country in the global politics.


1.         Environment pollution e.g. Niger Delta area with land and air pollution.

2.         Inflation – since the discovery of oil in Nigeria prices of goods and services have been Skyrocketing.

3.         Neglect of Agriculture – prices of food stuff in the market are so dear due to neglect of agricultural sector which used to be the major source of revenue for the government.

4.         Increase in crime rate – emergence of advance fee fraud known as 419, Cybercrime, Armed robbery, pen robbery are traceable to emergence of oil.

5.         Civil Unrest – Breakdown of law and order in Niger Delta, coupled with kidnapping of oil workers for ransom had turned the country to a no go area.


  1. List four positive contributions of crude oil to the development of the Nigeria’s Economy.
  2. Discuss seven negative contributions of crude oil in the Nigerian Economy.                               

Other mineral resources in Nigeria

  1. Coal
  2. Iron Ore
  3. Tin and Columbite
  4. Limestone
  5. Lead and Zinc


The Nigerian National Petroleum Corporation (NNPC) was established in 1977 and was saddled with the responsibility of exploration production and refining of petroleum as well as distributing i.e. marketing of crude oil and petroleum products.


1.   Regulating the activities of the oil companies i.e. issuance of license for oil exploration, prospecting, operation of filling stations.

2.   Exploration and production of petroleum products.

3.   Refining and distributing the products for domestic use.

4.   Manpower development, this led to the establishment of the Petroleum Training Institute in Warri, Delta State.

5.   Implementing oil policies i.e. determining the prices of petroleum products.

6.   Employment generation.


1.   Outline five positive effects of petroleum to the economy of Nigeria.

2.   Is petroleum a problem or blessing to Nigeria Economy?


  1. Describe the methods of measuring national income.
  2. Discuss the economic activities.
  3. State five determinant of elasticity of demand.
  4. What is a supply schedule?
  5. State the reasons for holding money.


Amplified and Simplified Economics for SSS by Femi Longe page 464-470.

Essential Economics for SSS by C E Ande page 351-354.


1.   Where in Nigeria was petroleum first discovered in commercial quantity.

      A. Enugu B. Oloibiri C. Kaduna D.Ogoja

2.   Which company first discovered petroleum in commercial quantity in Nigeria.

      A.  Shell BP B. Agip C.  Gulf D. Butman

3.   Which of the following is not done by the NNPC?

      A.  Production of crude oil   B. Refining of crude oil     C. Exportation for crude oil

      D. Exploitation of crude oil       E.  Pricing of crude oil

4.   The major foreign exchange earner for Nigeria is _______

      A. Agriculture               B. sports          C. Tourism           D. Petroleum

5.   Mono product economies are those that produce  _________

            A. only inter mediate product   B.  agricultural product      C.  agricultural products    D. one man commodity


1.   Explain three positive and two negative contributions of petroleum to the Nigerian economy.

2.   Discuss the role of the Nigerian National Petroleum Corporation (NNPC)

SS3 Economics Lesson Notes – Edudelight.com




  1. Definition
  2. Types of Manufacturing Industries
  3. Contribution of Manufacturing and Construction Sector to Nigeria’s GDP
  4. Roles of Manufacturing and Construction in Economy Development.


Manufacturing refers to the turning of raw material into new products by mechanical or chemical processes at home or in the factory.

Manufacturing industry is concerned with the activities of those who engage in processing and turning raw material produced in the primary industries into finished product. Examples shoe making, food processing, plastic processing, textile processing etc


Construction Industry is concerned with all the activities of those who engage in assembling of goods manufactured into useable form.

Construction Industries engage in activities like construction of roads, bridges, Airports, furniture houses etc.


  1. Define Construction
  2. List four examples of construction industries.


Industrial sector has contributed greatly to the economic development of all nations in the following ways;

  1. Increase in the Gross National Products (GDP)
  2. Provision of Employment opportunities
  3. Stimulation of other sectors of the Economy
  4. Control Inflation due to mass production
  5. Infrastructural development
  6. Diversification of the economy
  7. Funding of educationand research
  8. Manpower Development.


  1. Explain four roles of manufacturing and construction industry to Economic development.
  2. Discuss the contribution of industrial sector to Economics development.


  1. Amplified and Simplified Economics for SSS by Femi Longe page 541-542.
  2. Essential Economics for SSS by C E Ande page 358-363


  1. Write short note on I saving     ii   Investment      iii Consumption
  2. Explain each of the following i Terms of Trade    ii  Balance of Terms.
  3. What is Taxation?
  4. Distinguish between  direct tax and indirect tax
  5. Why does the government impose taxes?


  1. The industry concerned with conversion of raw material into finished goods is A.  conversion B. manufacturing C. construction D. power
  2. An example of manufacturing industry is A. shoe making B. road construction C. service D. banking
  3. One of the contribution of construction industry to the development of the economy is A. decreasing the GDP B. unemployment of graduate C. Stimulation of other sectors D. shortage of infrastructure
  4. The sector where the manufacturing industry gets its raw material is in A. secondary  B. primary C. tertiary D. semi secondary
  5. One of the problems facing the manufacturing and construction industry in Nigeria is……..except  A. lack of skilled personnel B. high level of illiteracy C. lack of fund D. surplus fund.


  1. Outline any three problems which result from the concentration of manufacturing industries.
  2. Discuss five contribution of industries to the Economy

SS3 Economics Lesson Notes – Edudelight.com




  1. Meaning
  2. Examples
  3. Contribution of services industry to development


This is also known as the tertiary sector of industry.  It involves the provision of services to business as well as to the final consumers.Service involves doing something for the consumers, which could be personal or indirect services.


  1. Tourism attraction: This is concerned with all the activities of those who engage in creating tourist attractions in different tourist centerseg  guides in national park.
  2. Warehousing: The people involved are warehouse managers,clerks etc.They areconcerned with ensuring that goods produced are stored until they are needed for consumption.
  3. Communication: It includes all activities which promote rapid transmission of messages between sender and receiver or from one place to another eg courier service provided, telephone operator.
  4. Transportation: It is concerned with the movement of goods and services to where they are needed. Those engaged in these services include drivers, pilot and sailors.
  5. Advertising : It involves the business of providing information about the existence of a product to the potential buyers eg Advertising agents
  6. Banking: It involves people who assist others to have money for their daily needs. They also provide capital for those embarking on industrial activities and saving facilities eg bankers
  7. Insurance: It is concerned with the activities of people who undertake to protect individual or businesses against risk in their day to day activities eg Insurance broker, underwriters and agents


  1. Define service.
  2. Explain five examples of service industry.


The serviceindustry does contributegreatly to the economic development of Nigeria in the following ways:

  1. Generation of employment opportunities.
  2. Provision of aids to trade
  3. Generation of revenue to the government
  4. Diversification of the economy
  5. Infrastructural development
  6. Stimulation of other sectors of the economy
  7. Integration of different region in the economy


  1. Define service industry
  2. State and explain the roles of services industry to the economic development of Nigeria


  1. Amplified and Simplified Economics for SSS by Femi Longe page 542-543.
  2. Essential Economics for SSS by  C E Ande page 365-367.


  1. Explain the following  i) Gross Domestic Product  ii) Cost of living  iii) Per Capita income
  2. Who is a discriminating monopolist?
  3. Explain three advantages of monopoly.
  4. What is protective tariff?
  5. Outline any four reasons in favour of protective tariff.


  1. The service industry is also known as the ………industry   A. processing  B. tertiary  C. construction  D. mining
  2. There are …..types of services occupation a. A. five   B. two C. ten  D four.
  3. Indirect service  ……… except A. soldiers B. law makers C. civil servant D. housemaids
  4. Banking, transport, insurance etc are also refer to as ……..A. trade B. commerce C. auxiliaries to trade D. occupation
  5. All these are reasons for the growth of the service sector except   A.  urbanization B. privatization C. increase in demand D. decrease in urbanization


  1. What is service industry?
  2. List and explain the types of services industry.

SS3 Economics Lesson Notes – Edudelight.com




  1. Agencies that regulate money market.
  2. Tools/instruments used in money markets.
  3. Agencies that regulate capital market.
  4. Objectives of regulating capital markets.
  5. Tools/instruments used in capital markets.
  6. Significance of the agencies in the economy.

Agencies that regulate money market

  1. Central Bank of Nigeria (CBN)
  2. Nigeria Deposit Insurance Corporation (NDIC)


The central bank is the apex financial institution in a country which is responsible for the management, supervision and control of monetary affairs and financial institutions of the country.

Before independence of most of the British colonized countries of West African (Nigeria, Ghana, Sierra Leone, and Gambia), the West African Currency Board (WACB) with its headquarters in London was responsible for all monetary matters.

As soon as each country gained or approached political independence, it established herown central bank. A central bank was established in Ghana in 1957, in Nigeria in 1959, in Sierra Leone in 1964 and in Gambia in 1971.


  1. It serves as banker to the government: The Central Bank keeps all the revenue accounts of the government and makes payment out of it on behalf of the Government. More importantly, it leads to the government and also manages the National Debt i.e. the government’s external and internal borrowings.
  2. Issuing of Currency: The Central Bank is the only authority empowered by law to issue all paper money (banknotes) and coins in the country
  3. It is a bankers’ bank: The Central Bank serves as a bank to commercial banks, meaning that by law, the commercial banks are required to keep account (deposits) with the central bank
  4. The Central Bank serves as the clearing house for the settlement of interbank debts
  5. Lender of last resort: The Central Bank lends money to commercial banks in serious needs to enable them satisfy or settle their customers demand for cash
  6. Adviser to the Government: The Central Bank advises the government on monetary matters such as on methods of raising loans particularly foreign loans.
  7. Management of the National Debt: The arrangements for new borrowings as well as the servicing and rescheduling of existing debts are handled by the Central Bank
  8. Foreign Monetary Transactions: The Central Bank holds and manages the foreign exchange reserve and advises government on the trends.
  9. Carrying out or implementation of the government’s Monetary Policies.
  10. The Central Bank maintains close contact with other international financial institutions e.g. IMF, IBRD (World Bank), ADB etc.


  1. State four features of Central bank.
  2. Explain three functions performed by the central bank.


Monetary Policy is mainly concerned with varying the money supply in the economy.

The central bank uses some measures like the bank rate, open market operators, special deposits, directives, cash ratio, etc, all to regulate the volume of money in the economy; thereby checking inflation or deflation when necessary.


The government carries its monetary policy through the central bank. The central bank itself enforces the monetary policy through the various ways by which it controls the ability of the commercial bank to create credit

The central bank controls the commercial bank to implement government monetary policy through the following instruments

1.   Bank Rate / Discount Rate: This is the rate of interest the central bank charges commercial banks and other financial institutions for discounting their bills or the rate at which it lends money to them. The bank rate influences the other interest rates in the economy. A higher bank rate leads to higher interest rate. If there is inflation, the central bank will increase the bank rate. This will curtail the lending power of the commercial banks by making the cost of borrowings by bank customers to be very exorbitant

      If there is deflation in the economy, the Central Bank will reduce the bank rate thereby allowing the commercial banks to create more credit, thereby increasing the supply of money in the economy.

2.   Liquidity Ratio / Cash Reserve Ratio: This is a requirement by law to the commercial banks to keep certain percentage of their total cash / liquid assets or deposits with the central bank. In Nigeria for example the Liquidity Ratio is 20%. The central bank uses this ratio in increasing or decreasing the amount of money in circulation. Therefore the higher the cash reserve ratio, the lower the power of commercial banks to grant credit / loans to their customers. This policy of increasing the cash reserve ratio is therefore used to control inflation. The reverse is also true.

3.   Special Deposit: This is an instruction to the commercial banks to keep with the central bank special deposits over and above their statutory requirements thereby, curtailing the ability of the commercial banks to create credit. This instrument is used when the use of cash reserve ratio alone is not adequate to keep down the rate of inflation.

4.   Open Market Operations (OMO): This is the method of buying and selling of securities (Treasury Bills) to the public and the commercial banks by the central bank to alter the volume of money in circulation and also to vary the ability of the commercial banks to create credit.

      If the Central Bank feels that the money in circulation is too small and wants to increase it, it will buy securities in the open market paying with its own cheque. On the other hand, if the volume of money in circulation is too much and the Central Bank wants to reduce it, it will simply sell securities in the open market to the general public and the commercial banks thereby withdrawing a lot of money from the economy.

5.   Special Directives: These are special instructions which the central bank gives to commercial banks and other financial institutions regarding the size of loan to give and the areas (sectors of the economy) to which it should direct bank lending e.g agriculture, manufacturing etc.

6.   Moral Suasion: This is persuasion based on moral grounds not with the use of force of law by the central bank to the commercial bank as to the kind of lending policy they should adopt regarding the expansion or contraction of money supply. Failure to comply can thereafter necessitate force of law. Directives and moral suasions are widely used in developing countries.

7.   Funding: This is the conversion of short term government securities to long term securities.

For example Treasury Bills (of 91 days maturity) could be converted to bonds (long term securities). If the central bank feels that the conditions of the economy has not yet improved for the short term loans to be repaid eg if there is inflation, the short term securities may be converted to long term securities.


  1. Define Central Bank.
    1. Describe five instruments used by the Central Bank to control money supply.


The NDIC role is to administer the deposit insurance system in Nigeria and protect depositors.

The Corporation provides incentives for sound risk management in the Nigeria banking system and promotes as well as contributes to the stability of the financial system.


Section 2b of the Nigerian Deposit Insurance Corporation Act of 2006 stipulates the function for the corporation as follows:

  1. Issuing all deposit liabilities of licensed banks.
  2. Giving assistance to insured institutions in the interest of deposit in case of imminent.
  3. Guaranteeing payment to depositor
  4. Assistance monetary authoritiesd in formulating and implementing policies so as to ensure sound banking practicing and fair competition.
  5. Pursing any other measures necessary to achieve the function of the corporation provided measures.


  1. Give four functions of the central bank of Nigeria.
    1. Write short note on i) Cash ratio     ii) special deposit


Money market is a market where short term securities are traded in.  The market consistsof institutions or individuals who either have money to lend or wish to borrow on a short-term basis.


  1. Treasury Bill – This is issued by the central Bank.  It enables the government to raise capital for ninety days.
  2. Treasury Certificate – is also a means by which the government raises short – term loans. Unlike a treasury bill, however, a treasury certificate falls due for repayment in twelve to twenty-four months. Because of its longer maturation, it earns a higher rate of discount than the treasury bills
  3. Bill of Exchange – This is a promissory note where the debtor acknowledge his debt and intend to pay within ninety days (90days).
  4. Call money Funds – The surplus are often invested through a special arrangement in which participating institutions invest surplus money for their immediate requirement on an overnight basis with the interest and withdrawal on demand.  This enhances the liquidity of the money market.


i.    Central Bank

ii.    Commercial Banks

iii.   Acceptance House

iv.   Finance House

v.   Discount House

vi.   Insurance companies


1.   Money market helps to provide capital (working capital) for day to day running of the business.

2.   Through investing in call money extra income generated.

3.   Money market helps to mobilize savings.

4.   Money market helps to promote economic growth and development

5.   It enhances good saving habit by those having surplus funds

6.   Money invested in the money market are very easy to recall


1.   Write a short note on Money market Treasury bill Call money 

2.   Outline the functions of money market.


Funds are needed by entrepreneur, government and business firm on a long term basis. 

Money market cannot provide these needed funds.  Hence Capital Market bridges this gap.

Capital Market is a market where long term securities are traded.


Securities such as shares, stocks, development stock, bond, debenture

  1. Share- is a unit of capital measured by a sum of money which is an individual portion of the company’s capital owned by a shareholder. It is a means of raising long-term loans for company through the Stock Exchange Market.
  2. Stock- is the bundle of shares or mass capital which can be transferred in fractional amounts. Stocks are always fully paid, for example stocks can be quoted per N100 nominal value. They are collections of shares into a bundle. Stocks are not issued but converted from share issued.
  3. Development Stock- is a debt instrument through which governments get long-term loans or borrowing for a period of up to five years and above.
  4. Bond- is an interest bearing or discounted government or corporate security that obliges the issuers to pay the bondholder a specified sum of money annually at specific intervals and to repay the principal amount of the loan at maturity.
  5. Debenture- is an instrument or a loan certificate for raising a long-term loan from the public by a limited company. A debenture is a debt and a debenture holder is not a co-owner of the business but a creditor.


i.    Issuing houses

ii.    Insurance companies

iii.   Development Banks

iv.   Building Societies

v.   National Provident Fund (NPF)

vi.   Stock Exchange


1.   Capital market provides long term loan purpose of investment.

2.   Capital market serves a forum through which public sector takes part in running of the economy.

3.   Capital market helps to mobilize savings for investment purpose.

4.   It provides means through which merchant banks can grow and develop.

5.   It gives opportunity to the general public to participate in the running of the economy of the country.


1.   What is capital market?  Mention any three securities traded in the stock exchange.

2.   Outline three functions of capital market.


Amplified and Simplified Economics for SSS by Femi Longe page 527-531.

Essential Economics for SSS by C E Ande page 368-372.


  1. Highlight four objective of price control.
  2. Explain the concept of of diminishing marginal utility.
  3. What are those factors that can determine the size of a firm.
  4. Define Labour as a factor of production.
  5. Explain five characteristics of Labour.




1.   Definition and Types (Bilateral and Multilateral)

2.   Reasons for International Trade

3.   Barriers of International Trade

4.   Difference between Domestic and International trade.

One way by which we live better on earth today is because international trade permits national, regional or territorial division of labour to be practiced.  International trade also known as foreign trade or external trade involves the exchange of goods and services between two or more countries.


There are two major types of international trade.  These are:

  1. Bilateral International Trade – Bilateral international trade is a trade agreement in which two countries exchange goods and services.
    1. Multilateral International Trade – Multilateral international trade is a type of trade in which a country trades with many other countries. E.g. Nigeria trades with the USA, Britain and Japan.


1.   Uneven distribution of natural resources.  While some countries are naturally blessed, others have little or no natural resources.

2.   Differences in Climatic Condition – This variation gives rise to growth of different crops, hence the need for exchange.

3.   Differences in Technology – Some countries with advanced technology can produce some industrial product at reduced cost and sell to the less developed countries.

4.   Expansion of market for product.

5.   Desire to improve the standard of living


1.   What is Foreign Trade?

2.   Give five reasons for international trade.


1.   Language problem

2.   Problem of distance

3.   Numerous documents

4.   Differences or fluctuation in currency

5.   Tariff – This makes imported goods more expensive.

6.   Religion and cultural differences.

7.   Artificial barriers e.g. ban, quota, or the use of license

8.   Transport and Communication problem.

9.   Government policy.


A.   Common language is spoken in Domestic trade while in Foreign trade requires knowledge of new language.

B.   There are differences in system of weighing and measuring in one country vis-à-vis another.  A country has only one system of such weigh and measuring.

C.   Differences in transport cost due to distance between buyers and sellers, documentation requirement, need for insurance in respect of foreign trade distinguish foreign trade from home trade.

D.   There are also differences in legal systems and culture under international trade but the legal system are the same in domestic trade.

E.   In foreign trade, buyers and sellers use different currencies whereas buyers and sellers in home trade use the same type of currency.

F.   There is possibility of restriction – tarrifs, import duties, export duties quota embargoes – when goods are exchange across national boundaries while this does not occur in home trade.


1.   In what ways is foreign trade different from domestic trade (WASSCE) June 2003.

2.   Explain five ways Nigeria will benefit from trading with Britain.


  1. Amplified and simplified Economics for SSS by Femi Alonge chapter 30 page 397-400.
    1. Essential Economics for SSS by C E Ande page 374-377.


  1. Describe four problems of barter system.
    1. What is perfect competition?
    1. Differentiate between creeping inflation and hyperinflation.
    1. What is competitive supply?
    1. Differentiate between direct tax and indirect tax.


1.   International trade and domestic trade are similar in all aspect except that………….

      A.  Transportation by land, water and air is involved    B.  Goods are exchanged         

C. Services are exchanged        D.  The same currency is used as medium of exchange

E.  Specialization and increased consumption is encouraged.

2.   International trade is necessary mainly because………………

A. no country can live in economic isolation     B. different countries are endowed with the same natural and man-made resources   C. some countries have comparative cost advantage in the production of certain commodities D. the world demand for and supply of various categories of commodities is expanding very fast.  E.  Countries want to build up their foreign exchange reserves.

3.   International trade takes place because of differences in …… A.  production cost        B.  language     C.  currency           D.  government policy  D. international boundary

4.   The instrument used in many countries to restrict imports include: A.  high tariff        

B. price index   C. exercise duties D.bank rates E. subsidies

5.   The exchange of goods and services across different countries can be described as ………… A.  Bi-lateral trade    B.  multilateral trade    C. national trade           D. home trade


1.   State five benefits of international trade.

2.   Outline five obstacles to effective trade among countries in the world.




1.   Advantages and disadvantages of international trade.

2.   The law of comparative (cost) advantage.

3.   Instruments of trade protection.

4.   Reasons for trade protection.

International trade has enormous advantages among which are:

1.   International trade generates the exchange of goods and services among the nations of the world to mutual advantages of all participating countries.

2.   Promotion of economic development.

3.   International trade provides employment opportunities.

4.   It enhances international specialization.

5.   It leads to increase in world output.

6.   International trade promotes friendship among nations of the world.

7.   International trade increases the standard of living.

8.   It fosters – equitable distribution of national resources.

9.   Countries are able to acquire skills and ideas.


1.   International trade can lead to dumping of goods into less developed countries by multinational companies from the developed nations.

2.   This development above affects infant industries adversely.

3.   International trade if not checked can destroy the cultural values of a country.  E.g use of mini skirt from America is anti-cultural and against our social norms.

4.   Through international trade, harmful or dangerous goods can be imported into a country by unscrupulous business men.

5.   Deficit may arise, which affects the country adversely.

6.   Where dumping is highly prevalent, it may lead to unemployment.

7.   Reduction of effort to attain self-reliance.

8.   The developed countries may use their position to exploit the less developed ones.


1.   State five advantages of International Trade.

2.   Give four arguments against International Trade


The theory or principle of comparative cost advantage states that countries derive mutual benefit from trade when they specialize in the production of those commodities in which they have greatest comparative cost advantage over others and exchange them for other commodities which have comparative cost disadvantage.

A country has a comparative advantage over others in the production of a commodity in which it has the lowest opportunity cost than others.  Therefore, it is the real cost of producing a commodity (in terms of other commodities forgone) that is taken into consideration.  This theory was propounded by David Ricardo in the 19th century.


This principle or theory is based on the following assumptions:

1.   There are only two countries.

2.   Only two items are produced with the available resources.

3.   There is free flow and mobility of factors of production.

4.   There is no transport cost

5.   Constant costs prevail.

6.   Technology is constant.

7.   Labour is the only factor of production.

In line with the above assumptions, Nigeria and the United States of America (USA) for example, are producing and consuming rice and wheat.  The pre-specialisation production position is shown in schedule A below.

Schedule A                   Rice                  Wheat

Nigeria                          100 bags          50 bags

USA                              50 bags            100 bags

TOTAL              150 bags          150 bags

Schedule B is an estimated opportunity cost of producing the two commodities by the two nations.

Schedule B

Rice                                          Wheat

Nigeria   50 = ½  i.e.               100 =  2  i.e.

  1. 50

1 bag of rice = ½                    1 bag of wheat

bag of wheat                            bags of rice

Rice                              Wheat

USA      100  =  ½                    50  =  ½  i.e.


1 bag of rice 2 bags                 1 bag of wheat ½ bag of rice.

of wheat

By the Law of Comparative Cost Advantage. Nigeria should specialize in the production of rice while USA should specialize in the production of wheat.


The principle of absolute advantage was propounded by Adam Smith and it states that a country should specialize in the production of a commodity or commodities and services in which it has absolute advantage over other countries.  According to Adam Smith, a country has an absolute advantage over other countries if she can produce a commodity or service which other countries cannot produce.  Again, given the same unit of resources, a country has absolute advantages where she can produce the two commodities concerned at the least cost.


1.   Using the United States of America and Nigeria as an example, show how the two countries will gain by specializing and trading on the basis of the theory of comparative cost advantage (NECO June, 2003).

2.   Outline five assumptions of the theory of comparative advantage.


The government of any country control or restrict trade through the following instrument.

1.   Import duties or tariffs:  This is a tax imposed on imported goods to reduce the amount of trade.

2.   Foreign Exchange Control: This is the control that is exercised by the state, and usually through the Central Bank on all dealings, in gold and foreign exchange i.e. foreign currencies.

3.   Import licensing – Under import licensing, no commodity may be imported except on the basis of individual licences issued by the government of a country.

4.   Devaluation – This is a deliberate reduction in the value of a country’s currency in terms of the values of the currencies of other countries of the trading world.  Devaluation is used as a tool of correcting an imbalance in a country’s balance of payments.

5.   Quota – An import quota is a quantitative restriction imposed on commodities entering a country for a specified period of time.

6.   Embargo – This is the prohibition or outright ban placed on some imported goods.


The following points are advanced in support of trade protection.

i.    Maintenance of full employment at home.

ii.    Protection of infant industries.

iii.   Development of import substitutes at home

iv.   To correct or remove any imbalance in Balance of payment Account.

v.   To raise revenue e.g. tax

vi.   Prevention of dumping.

vii.  Prevention of harmful and non-essential goods.

viii. Government may protect trade for strategic reasons – e.g. in retaliation against a foreign state.


1.   What are the arguments for protection in international trade?

2.   Mention any five instruments of Trade protection.


  1. Amplified and simplified Economics for SSS by Femi Longe  page 401-412.
    1. Essential Economics for SSS by C E Ande page 378-384.


  1. What is Crop farming?
    1. Outline any four measures that can be adopted to increase crop production.
      1. Highlight five differences between public limited liability company and private limited liability company.
      1. Define specific duty.
      1. What is a normal channel of distribution?


1.   Which of these does not relate to the law of comparative advantage?

      A. the law of comparative advantage was propounded by David Ricardo    B. the law stresses  the importance of relative efficiency.     C.  in order to specialize a country must have absolute advantage   D. the principle if followed, should increase total world output.

2.   Devaluation means       A. reduction in the value of the national currency   B. a reduction in the purchasing power of foreign currencies  C. a reduction in the value of domestic currency relative to foreign currencies  D. a decrease in the purchasing power of foreign currencies.

3.   Dumping in economics means the selling of goods in a foreign market ………….

      A.  at a price below that received in the home market   B. at a price that receive in the home market  C. at a price equal to the cost price in the home market   D. in order to encourage indigenous producers  E. at a price equal to selling price in the home market.

4.   Foreign Exchange control in Nigeria is enforced by the ………….

      A.  Commercial banks    B.  Merchant banks    C.  Mortgage bank        D. Central bank

      E.  Agricultural Development Bank

5.   Exchange Control is a weapon used in regulating …………. A.  Internal trade   B. stock exchange        C.  Foreign trade     D.barter trade            E. exchange of per sound property


  1. Why do countries impose restrictions on international trade?
  2. Justify government restriction of trade with foreign countries.




  1. How to finance deficit balance of payment.
  2. Devaluation of currency – meaning and effect.
  3. Economic Integration – definition, objective and problems.
  4. Balance of trade definition and measurement.
  5. Terms of Trade – definition and measurement.
  6. Balance of payment (current A/c, capital A/c and monetary movement A/c).


Balance of Trade – This is the comparison of a country’s total visible exports with her total visible imports.  When visible exports with her total visible imports in monetary terms are equal we have Balance of Trade.  A positive or favourable Balance of Trade – means that a country is exporting more in monetary terms than it is importing while a negative or unfavourable balance of trade means that a country is importing more in monetary terms than it is exporting.


Balance of payment may be defined as a statement or record showing the relationship between a country’s total payments to other countries and its total receipts from them in a year.  A country’s Balance of payment is grouped into three parts.

1.   Current Account

2.   Capital Account

3.   Monetary movement Account

A.   Current Account: The Current Account is made up of receipts and payments for visible and invisible services.  The visible comprises tangible products such as cars, computer, clothing materials, electronics etc. While the invisible services are: insurance, banking, transport, interest payment and tourism.

B.   Capital Account: For a country to set up business in other countries, and for other countries to set up business in its country, there is need for inflow and outflow of capital both in long and short term; this is contained in the capital account.  This is in the form of investments, loans and grants.

C.   Monetary Movement Account: There is need for differences in Current Account and Capital Account to be settled.  This is done in the monetary movement Account.


Write short note on (a) Balance of trade.         (b)Balance of payment.


Term of trade is the rate at which a country’s export is exchanged for her import.  It is expressed as arelationship between the prices a country receives for its exports and the prices it pays for import.

            Terms of Trade (TOT) = Index of import price   x   100

                                                Index of import price1

The terms of Trade are favourable if the average price of exports is higher than the average price of imports. The terms of Trade are unfavourable, if the average import price is higher than the average export price, which results in more expensive import than exports and this situation makes the Terms trade to deteriorate.  When the Terms of Trade are unfavourable, the index is less than 100.  This will reduce the real national income.


A country’s import price index by 1995 was 50 and her index of export prices was 70. Calculate the terms of trade (UME) 2000.


The index of Terms of trade;

            Price index of visible exports  x 100

            Price index of visible imports    1


Substitute=  70  x  100   =    140%

                     50                   1

The Balance of payment of a country can either be favourable or unfavourable, in most cases it could be balance.  A country’s Balance of payment is said to be favourable when the receipts from invisible and visible export trade becomes greater than payment to other countries on invisible and visibleimports.  A credit balance can be used to increase investment or to add to a country’s gold reserve. 

In other hand, unfavorable balance of payment is said to occur when the payments on visible and invisible import is greater than receipts on visible and invisible exports.  This is also known as adverse or deficit balance.


Different Options opened to a country seeking to correct her adverse balance of payment.  The following options could be considered;

1.   A country can borrow from foreign financial institutions e.g. World Bank, Paris Club.

2.   Assistance could be sought from international financial institutions

3.   Foreign investment could be disposed off to offset the debt (if any).

4.   Gold could be exported (if any).

5.   The national economy could be deflated through monetary and fiscal measures.

6.   Import substitution – This could be in form of curtailment of imports and export stimulation.

7.   The country’s currency could be devalued, this would encourage export and discourage import.

8.   Gifts and aids from friendly countries can be used to settle the indebtedness.

9.   The interest rates can be raised to encourage inflow of foreign capital.

10. Export promotion.


1.   Suggest any five ways a country can finance Deficit Balance of Payment.

2.   Distinguish between favourable and unfavourable Balance of Payment


A country devaluation of currency is a deliberate policy through which the value of one country’s currency is reduced in relation to other country’s currency.  It can also be defined as a fall in the exchange value of a country’s currency in relation to the currencies of other countries.


1.   The exports of the country whose currency is devalued becomes cheaper.

2.   As a reverse to the above, the import too becomes expensive.

3.   Since the exports become cheaper, more would be sold abroad.

4.   Balance of payment improvement – as said earlier, when more are sold abroad, foreign exchange accruing to the nation can be used to improve the Bop of the nation.

5.   There is increase in number of industries which will lead to increase in employment.



1.   The demand for import must be elastic.  Increase in prices of imports, as a result of devaluation will lead to fall in demand for import.

2.   The country’s export must be elastic i.e. It should be able to response to foreign demand.

3.   Other countries must not devalue their own currencies.

4.   There must be no increase in wages and other incomes.


The rate at which a country exchanges her currency for other countries currencies is known as “Exchange rate”.

Example I

Assuming that Nigeria in willing to buy or sell cocoa at N800 per ton and the USA is willing to buy or sell at $100, then the value of the two currencies can be fixed as ………..

N800  =  $100

N8      =  $1

Example II

If the exchange rate of naira to dollar is as follow:

If Nigeria devalues her Currency by 100%, the new exchange will be …. If formerly

N100  =  $1

=   100   x   100   =  N100

     100   x     1

N100  +N100  =  N200

Hence   N200  =   $1


1.   State five effects of currency devaluation.

2.   Illustrate how currency devaluation can help to correct adverse balance of payment.


Every country in the world strives to achieve economic growth and development.  This is better achieved when countries pull their resources together to achieve greater efficiency.  This give rise to Economic Integration.  Economic integration may be defined as a form of international cooperation among nations to foster their economic interests.  A good example of an economic integration in Africa is the Economic Community of West African States (ECOWAS).  Other economic integration includes: European Economic Community (EEC), African Development Bank (ADB), the Chad Basin Commission, InternationalMonetary Fund (IMF).


The following are the objectives of Economic Integration:

1.   To enlarge market that will encourage large scale production.

2.   Economic integration enhances efficiency that reflects in production units.

3.   It enhances greater resources mobility.

4.   To encourage specialization among countries coming together.

5.   To empower each country to participate effectively in the World market.

6.   To create job opportunities.

7.   To improve the living standard of member nations.

8.   To accelerate economic development in the region.


1.   Free trade area.

2.   Common Market

3.   Economic union e.g. ECOWAS

4.   Customs union


1.   The smaller countries always nurse fear of big countries’ domination.

2.   The formula to adopt in sharing the revenue generated by the groups often generate more heat than light.

3.   Differences in economic and political ideology often make the countries to disagree.

4.   Member nations speak different languages.  This slows down decision making.

5.   Member nations are unwilling to surrender their sovereignty to bigger countries.

6.   Frequent changes in government of member nations often affect decision making.

7.   Some of the members of economic union e.g. ECOWAS are still tied to the apron of their colonial masters.

8.   Inadequate capital – e.g. ECOWAS cannot meet their plan due to the fact that some countries within the union could not pay their subscription.


1.   Define Economic Integration.

2.   State any five objectives of Economic Union.

3.   Outline any five problems facing Economic Integration.


  1. What is Current Account Balance?
  2. Study the following information carefully and use it to answer questions.  As a result of the improvement in terms of trade of two of a country’s major export commodities, the totalforeign exchange receipts increased by over 10% above that of the previous years, 1997.  Nevertheless, thiswas not sufficient to balance the country’s current account.  The government therefore took a shortterm loan of $100 million from the international Monetary Fund (IMF).

The following table summarizes the position of the country at the end of 1998

Export ($ million)                                       Imports ($ million)

Minerals                              640                  Machines                                  560.50

Timber                               146.50             Spare parts and accessories      280.00

Shipping and                                  55                    Pilgrimage                                220.00

Air transport                                                           Oil and Lubricants                    150.00

Cocoa                                 240.50             Food, Tobacco

Tourism                              105.20             and drink                                  360.50

  • Calculate the balance of trade.
  • Compute the balance on the invisible account.
  • What is the value of the balance on capital accounts?
  • What was happening to the prices of country’s major exports?


1.   Amplified and Simplified Economics for SSS by Femi Longe  page 426-446.

2.   Essential Economics for SSS by C E Ande page 386-395.


  1. What is Trade Union?
    1. Describe any four functions of Trade Union.
      1. What are Infant Industries?
      1. Outline four objectives of price control policy.
      1. Describe three functions of money.


1.   The rate at which a country’s export is exchanged for her import is known as ………..

      A.  Terms of Trade       B. Balance of Trade      C. Current balance        D. Visible balance

2.   Invisible trade refers to trade in ……… A. services        B. good and services        C. tangible goods       D. short term and long term capital    E. capital goods that cannot be seen

3.   Balance of Trade can be defined as ………. A. the value of imports in relation to the value of a country’s exports       B.  the price ratio of imports as against that of exports.   C  Equality in the total receipts and payments of a country in a year      D. percentage value of imports over percentage value of exports       E. price of exports versus prices of imports.

4.   A summary of all the receipt and payment of a country in international transacts is called..…… A.  Terms of trade            B. Balance of payment C. Balance of payment adjustment

      D.  Capital Account

5.   Invisible trade refers to trade in………… A. services      B.  goods and services     C.  tangible goods     D. Crude oil


1.   If the united kingdom buys gold for ₤60 ounce and Nigeria buys the same ounce for N500, what will be the United Kingdom’s exchange rate with Nigeria.

2.   Distinguish between Balance of Payment and Balance of Trade.

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