{"id":3768,"date":"2023-10-05T18:48:10","date_gmt":"2023-10-05T18:48:10","guid":{"rendered":"http:\/\/localhost\/ecole9ja\/?p=3768"},"modified":"2023-10-05T18:48:40","modified_gmt":"2023-10-05T18:48:40","slug":"week-10-ss3-first-term-economics-notes","status":"publish","type":"post","link":"https:\/\/ecolebooks.com\/nigeria\/posts\/week-10-ss3-first-term-economics-notes\/","title":{"rendered":"Week 10 – SS3 First Term Economics Notes"},"content":{"rendered":"

\u00a0WEEK TEN
\n<\/strong>DEFICIT BALANCE OF PAYMENT
\n<\/strong>CONTENT
\n<\/strong><\/p>\n

    \n
  1. How to finance deficit balance of payment.\n<\/li>\n
  2. Devaluation of currency \u2013 meaning and effect.\n<\/li>\n
  3. Economic Integration \u2013 definition, objective and problems.\n<\/li>\n
  4. Balance of trade definition and measurement.\n<\/li>\n
  5. Terms of Trade \u2013 definition and measurement.\n<\/li>\n
  6. \n
    Balance of payment (current A\/c, capital A\/c and monetary movement A\/c).\n<\/div>\n

    \u00a0<\/li>\n<\/ol>\n

    BALANCE OF TRADE
    \nBalance of Trade \u2013 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 \u2013 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.<\/p>\n

    \u00a0BALANCE OF PAYMENT
    \nBalance 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.
    \n1.\u00a0\u00a0\u00a0\u00a0Current Account
    \n2.\u00a0\u00a0\u00a0\u00a0Capital Account
    \n3.\u00a0\u00a0\u00a0\u00a0Monetary movement Account<\/p>\n

    \u00a0A.\u00a0\u00a0\u00a0\u00a0Current 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.
    \nB.\u00a0\u00a0\u00a0\u00a0Capital 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.
    \nC.\u00a0\u00a0\u00a0\u00a0Monetary Movement Account: There is need for differences in Current Account and Capital Account to be settled. This is done in the monetary movement Account.<\/p>\n

    \u00a0EVALUATION
    \n<\/strong>Write short note on (a) Balance of trade.\u00a0\u00a0\u00a0\u00a0(b)Balance of payment.<\/p>\n

    \u00a0TERMS OF TRADE
    \nTerm 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.
    \n\u00a0\u00a0\u00a0\u00a0Terms of Trade (TOT) = Index of import price x 100
    \n\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Index of import price1<\/p>\n

    \u00a0The 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.<\/p>\n

    \u00a0Example
    \nA country’s import price index by 1995 was 50 and her index of export prices was 70. Calculate the terms of trade (UME) 2000.<\/p>\n

    \u00a0Solution
    \nThe index of Terms of trade;
    \n\u00a0\u00a0\u00a0\u00a0Price index of visible exports x 100
    \n\u00a0\u00a0\u00a0\u00a0Price index of visible imports\u00a0\u00a0\u00a0\u00a01<\/p>\n

    \u00a0Workings
    \nSubstitute= 70 x 100 = 140%
    \n\u00a0\u00a0\u00a0\u00a0 50\u00a0\u00a0\u00a0\u00a0 1<\/p>\n

    \u00a0The 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. <\/p>\n

    \u00a0In 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.<\/p>\n

    \u00a0HOW TO FINANCE DEFICIT BALANCE OF PAYMENT
    \nDifferent Options opened to a country seeking to correct her adverse balance of payment. The following options could be considered;
    \n1.\u00a0\u00a0\u00a0\u00a0A country can borrow from foreign financial institutions e.g. World Bank, Paris Club.
    \n2.\u00a0\u00a0\u00a0\u00a0Assistance could be sought from international financial institutions
    \n3.\u00a0\u00a0\u00a0\u00a0Foreign investment could be disposed off to offset the debt (if any).
    \n4.\u00a0\u00a0\u00a0\u00a0Gold could be exported (if any).
    \n5.\u00a0\u00a0\u00a0\u00a0The national economy could be deflated through monetary and fiscal measures.
    \n6.\u00a0\u00a0\u00a0\u00a0Import substitution \u2013 This could be in form of curtailment of imports and export stimulation.
    \n7.\u00a0\u00a0\u00a0\u00a0The country’s currency could be devalued, this would encourage export and discourage import.
    \n8.\u00a0\u00a0\u00a0\u00a0Gifts and aids from friendly countries can be used to settle the indebtedness.
    \n9.\u00a0\u00a0\u00a0\u00a0The interest rates can be raised to encourage inflow of foreign capital.
    \n10.\u00a0\u00a0\u00a0\u00a0Export promotion.<\/p>\n

    \u00a0EVALUATION
    \n<\/strong>1.\u00a0\u00a0\u00a0\u00a0Suggest any five ways a country can finance Deficit Balance of Payment.
    \n2.\u00a0\u00a0\u00a0\u00a0Distinguish between favourable and unfavourable Balance of Payment<\/p>\n

    \u00a0DEVALUATON OF CURRENCY
    \nA 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.<\/p>\n

    \u00a0EFFECTS OF DEVALUATION OF CURRENCY
    \n1. The exports of the country whose currency is devalued becomes cheaper.
    \n2.\u00a0\u00a0\u00a0\u00a0As a reverse to the above, the import too becomes expensive.
    \n3.\u00a0\u00a0\u00a0\u00a0Since the exports become cheaper, more would be sold abroad.
    \n4.\u00a0\u00a0\u00a0\u00a0Balance of payment improvement \u2013 as said earlier, when more are sold abroad, foreign exchange accruing to the nation can be used to improve the Bop of the nation.
    \n5.\u00a0\u00a0\u00a0\u00a0There is increase in number of industries which will lead to increase in employment.<\/p>\n

    \u00a0CONDITIONS IN WHICH DEVALUATION CAN IMPROVE A COUNTRY’S BALANCE OF
    \n<\/strong>PAYMENT
    \n<\/strong>1.\u00a0\u00a0\u00a0\u00a0The demand for import must be elastic. Increase in prices of imports, as a result of devaluation will lead to fall in demand for import.
    \n2.\u00a0\u00a0\u00a0\u00a0The country’s export must be elastic i.e. It should be able to response to foreign demand.
    \n3.\u00a0\u00a0\u00a0\u00a0Other countries must not devalue their own currencies.
    \n4.\u00a0\u00a0\u00a0\u00a0There must be no increase in wages and other incomes.<\/p>\n

    \u00a0MATHEMATICAL APPROACH TO CURRENCY DEVALUATION
    \nThe rate at which a country exchanges her currency for other countries currencies is known as “Exchange rate”.<\/p>\n

    \u00a0Example I
    \nAssuming 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 \u2026\u2026\u2026..
    \nN800 = $100
    \nN8 = $1<\/p>\n

    \u00a0Example II
    \nIf the exchange rate of naira to dollar is as follow:
    \nIf Nigeria devalues her Currency by 100%, the new exchange will be \u2026. If formerly
    \nN100 = $1
    \n= 100 x 100 = N100
    \n 100 x 1
    \nN100 +N100 = N200
    \nHence N200 = $1<\/p>\n

    \u00a0EVALUATION
    \n<\/strong>1.\u00a0\u00a0\u00a0\u00a0State five effects of currency devaluation.
    \n2.\u00a0\u00a0\u00a0\u00a0Illustrate how currency devaluation can help to correct adverse balance of payment.<\/p>\n

    \u00a0ECONOMIC INTEGRATION
    \nEvery 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).
    \nOBJECTIVES OF ECONOMIC INTEGRATION
    \nThe following are the objectives of Economic Integration:
    \n1.\u00a0\u00a0\u00a0\u00a0To enlarge market that will encourage large scale production.
    \n2.\u00a0\u00a0\u00a0\u00a0Economic integration enhances efficiency that reflects in production units.
    \n3.\u00a0\u00a0\u00a0\u00a0It enhances greater resources mobility.
    \n4.\u00a0\u00a0\u00a0\u00a0To encourage specialization among countries coming together.
    \n5.\u00a0\u00a0\u00a0\u00a0To empower each country to participate effectively in the World market.
    \n6.\u00a0\u00a0\u00a0\u00a0To create job opportunities.
    \n7.\u00a0\u00a0\u00a0\u00a0To improve the living standard of member nations.
    \n8.\u00a0\u00a0\u00a0\u00a0To accelerate economic development in the region.<\/p>\n

    \u00a0FORMS OF ECONOMIC INTEGRATION
    \n1.\u00a0\u00a0\u00a0\u00a0Free trade area.
    \n2.\u00a0\u00a0\u00a0\u00a0Common Market
    \n3.\u00a0\u00a0\u00a0\u00a0Economic union e.g. ECOWAS
    \n4.\u00a0\u00a0\u00a0\u00a0Customs union<\/p>\n

    \u00a0PROBLEMS OF ECONOMIC INTEGRATION IN WEST AFRICA
    \n1.\u00a0\u00a0\u00a0\u00a0The smaller countries always nurse fear of big countries’ domination.
    \n2.\u00a0\u00a0\u00a0\u00a0The formula to adopt in sharing the revenue generated by the groups often generate more heat than light.
    \n3.\u00a0\u00a0\u00a0\u00a0Differences in economic and political ideology often make the countries to disagree.
    \n4.\u00a0\u00a0\u00a0\u00a0Member nations speak different languages. This slows down decision making.
    \n5.\u00a0\u00a0\u00a0\u00a0Member nations are unwilling to surrender their sovereignty to bigger countries.
    \n6.\u00a0\u00a0\u00a0\u00a0Frequent changes in government of member nations often affect decision making.
    \n7.\u00a0\u00a0\u00a0\u00a0Some of the members of economic union e.g. ECOWAS are still tied to the apron of their colonial masters.
    \n8.\u00a0\u00a0\u00a0\u00a0Inadequate capital \u2013 e.g. ECOWAS cannot meet their plan due to the fact that some countries within the union could not pay their subscription.<\/p>\n

    \u00a0EVALUATION
    \n<\/strong>1.\u00a0\u00a0\u00a0\u00a0Define Economic Integration.
    \n2.\u00a0\u00a0\u00a0\u00a0State any five objectives of Economic Union.
    \n3.\u00a0\u00a0\u00a0\u00a0Outline any five problems facing Economic Integration.<\/p>\n

    \u00a0EVALUATION<\/strong><\/p>\n

      \n
    1. What is Current Account Balance?\n<\/li>\n
    2. \n
      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).\n<\/div>\n

      \u00a0The following table summarizes the position of the country at the end of 1998
      \nExport ($ million)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Imports ($ million)
      \nMinerals\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0640\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Machines\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0560.50
      \nTimber\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0146.50\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Spare parts and accessories\u00a0\u00a0\u00a0\u00a0280.00
      \nShipping and \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a055\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Pilgrimage\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0220.00
      \nAir transport\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Oil and Lubricants\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0150.00
      \nCocoa\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0240.50\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Food, Tobacco
      \nTourism\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0105.20\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0and drink\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0360.50\n<\/li>\n

    3. Calculate the balance of trade.\n<\/li>\n
    4. Compute the balance on the invisible account.\n<\/li>\n
    5. What is the value of the balance on capital accounts?\n<\/li>\n
    6. What was happening to the prices of country’s major exports?\n<\/li>\n<\/ol>\n

      \u00a0READING ASSIGNMENT
      \n<\/strong>1.\u00a0\u00a0\u00a0\u00a0Amplified and Simplified Economics for SSS by Femi Longe page 426-446.
      \n2.\u00a0\u00a0\u00a0\u00a0Essential Economics for SSS by C E Ande page 386-395.<\/p>\n

      \u00a0GENERAL EVALUATION
      \n<\/strong><\/p>\n

        \n
      1. What is Trade Union?\n<\/li>\n
      2. Describe any four functions of Trade Union.\n<\/li>\n
      3. What are Infant Industries?\n<\/li>\n
      4. Outline four objectives of price control policy.\n<\/li>\n
      5. \n
        Describe three functions of money.\n<\/div>\n

        \u00a0WEEKEND ASSIGNMENT
        \n<\/strong>1.\u00a0\u00a0\u00a0\u00a0The rate at which a country’s export is exchanged for her import is known as \u2026\u2026\u2026..
        \n\u00a0\u00a0\u00a0\u00a0A. Terms of Trade\u00a0\u00a0\u00a0\u00a0B. Balance of Trade\u00a0\u00a0\u00a0\u00a0C. Current balance\u00a0\u00a0\u00a0\u00a0D. Visible balance
        \n2.\u00a0\u00a0\u00a0\u00a0Invisible trade refers to trade in \u2026\u2026\u2026 A. services\u00a0\u00a0\u00a0\u00a0B. good and services\u00a0\u00a0\u00a0\u00a0 C. tangible goods D. short term and long term capital E. capital goods that cannot be seen
        \n3.\u00a0\u00a0\u00a0\u00a0Balance of Trade can be defined as \u2026\u2026\u2026. 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.
        \n4.\u00a0\u00a0\u00a0\u00a0A summary of all the receipt and payment of a country in international transacts is called..\u2026\u2026 A. Terms of trade\u00a0\u00a0\u00a0\u00a0B. Balance of payment C. Balance of payment adjustment
        \n\u00a0\u00a0\u00a0\u00a0D. Capital Account
        \n5.\u00a0\u00a0\u00a0\u00a0Invisible trade refers to trade in\u2026\u2026\u2026\u2026 A. services\u00a0\u00a0\u00a0\u00a0B. goods and services\u00a0\u00a0\u00a0\u00a0 C. tangible goods\u00a0\u00a0\u00a0\u00a0D. Crude oil<\/p>\n

        \u00a0THEORY
        \n<\/strong>1.\u00a0\u00a0\u00a0\u00a0If the united kingdom buys gold for \u20a460 ounce and Nigeria buys the same ounce for N500, what will be the United Kingdom’s exchange rate with Nigeria.
        \n2.\u00a0\u00a0\u00a0\u00a0Distinguish between Balance of Payment and Balance of Trade.\n<\/li>\n<\/ol>\n","protected":false},"excerpt":{"rendered":"

        \u00a0WEEK TEN DEFICIT BALANCE OF PAYMENT CONTENT How to finance deficit balance of payment. Devaluation…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1,292],"tags":[],"class_list":["post-3768","post","type-post","status-publish","format-standard","hentry","category-posts","category-first-term-ss3-economics"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/ecolebooks.com\/nigeria\/wp-json\/wp\/v2\/posts\/3768","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ecolebooks.com\/nigeria\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ecolebooks.com\/nigeria\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ecolebooks.com\/nigeria\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/ecolebooks.com\/nigeria\/wp-json\/wp\/v2\/comments?post=3768"}],"version-history":[{"count":1,"href":"https:\/\/ecolebooks.com\/nigeria\/wp-json\/wp\/v2\/posts\/3768\/revisions"}],"predecessor-version":[{"id":3769,"href":"https:\/\/ecolebooks.com\/nigeria\/wp-json\/wp\/v2\/posts\/3768\/revisions\/3769"}],"wp:attachment":[{"href":"https:\/\/ecolebooks.com\/nigeria\/wp-json\/wp\/v2\/media?parent=3768"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ecolebooks.com\/nigeria\/wp-json\/wp\/v2\/categories?post=3768"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ecolebooks.com\/nigeria\/wp-json\/wp\/v2\/tags?post=3768"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}