SCHEME OF WORK ECONOMICS

THIRD TERM – SS2

WEEKS TOPICS CONTENTS
1. Re-opening Compound cleaning & kick off test
2 Elementary treatment of Meaning of public finance and fiscal
fiscal policy policy
- Objectives of public finance
- Sources of government revenue
- Revenue allocation and resource
control
- Structure of public expenditure
3 Taxation - Meaning, types, importance
- Qualities of good tax system
- Advantages and disadvantages of
each tax system
- System of direct taxation
- Incidence of taxation
4 Budget - Meaning, types: balanced,
surplus, deficit
- Ways of financing deficit budget
- Concept of national or public debt
- Role of budget
- Reasons for public debt (why
govt. borrow)
5 Element of national - Meaning of national income
income accounting - Concepts: N.I, GDP, NNP etc.
- Methods of measuring national
income: - output, income,
expenditure
- Uses of national income
accounting

6 Element of national - Problems of computing

income accounting national income
Contd. - Limitations of national
income estimates
- Trend and structure of
National income in Nigeria

7 Types of financial - Meaning of money market, their

institution and their institutions and functions
functions - Operation of the stock exchange
 market
- Primary secondary markets
8 Demand for money and - Meaning of demand and supply of
supply of money money
- Determinants of demand and
supply of money
- Motives or reasons why we
demand for money
9 Demand for money and - Elementary quantity theory of
supply of money Contd. money
- Value of money, how price level
affects the value of money
10 Demand for money and Factors affecting the value of money
supply of money Contd. - Concept of cost of living &
standard of living
11 Inflation and deflation - Meaning & types of inflation
- Causes, effects and control of
inflation / deflation
- Inflation in Nigeria
12 Revision Revision & Examination
13 Examinations Examination, Recording & Closure

Lesson Note: THIRD TERM SS2 ECONOMICS

WEEK 1
Topic: ELEMENTARY TREATMENT OF FISCAL POLICY

Lesson Objectives:

By the end of this lesson, students should be able to:

1. Define Public Finance and Fiscal Policy.

2. State the objectives of public finance.
3. List and explain the sources of government revenue.
4. Explain revenue allocation and resource control.
5. Describe the structure of public expenditure.

1. Meaning of Public Finance and Fiscal Policy:

 Public Finance refers to the study of how the government collects and spends money.
It involves all the financial activities of the government, including budgeting,
taxation, borrowing, and expenditure.
 Fiscal Policy is the use of government revenue collection (taxation) and expenditure
to influence the economy. It is a tool used by the government to control inflation,
reduce unemployment, and promote economic growth.

2. Objectives of Public Finance:

 Resource Allocation: Ensures effective distribution of resources in the economy.

 Income Redistribution: Reduces income inequality through taxation and welfare
schemes.
 Economic Stabilization: Helps in maintaining price stability and controlling
inflation.
 Provision of Public Goods and Services: Funds education, healthcare, defense, etc.
 Promotion of Economic Growth: Encourages development through investment in
infrastructure.

3. Sources of Government Revenue:

 Taxes: Direct (income tax) and indirect (VAT, sales tax).

 Loans: From domestic or international sources (e.g., IMF, World Bank).
 Grants and Aid: Financial assistance from other countries or international
organizations.
 Revenue from Government Enterprises: Profits from government-owned
companies.
 Fees and Fines: Charges for services like licenses, court fines, etc.
 Royalties: Payments from companies extracting natural resources.
4. Revenue Allocation and Resource Control:

 Revenue Allocation is the distribution of financial resources among different levels

of government—federal, state, and local. This is often guided by constitutional
arrangements or fiscal commissions.
 Resource Control refers to the power to manage and benefit from resources found
within a region. It is often debated in countries with uneven distribution of natural
resources.

5. Structure of Public Expenditure:

Public expenditure can be categorized into:

 Recurrent Expenditure: Regular spending such as salaries, maintenance,

administrative costs.
 Capital Expenditure: Long-term investments like construction of roads, hospitals,
and schools.
 Transfer Payments: Payments made without any service in return (e.g., pensions,
subsidies).
 Debt Servicing: Payments made to repay loans and interests.

Evaluation:

1. Define public finance.

2. Mention three objectives of public finance.
3. List four sources of government revenue.
4. Explain the term “revenue allocation”.
5. Differentiate between recurrent and capital expenditure.

WEEK 2
Topic: Taxation
Lesson Objectives
By the end of the lesson, students should be able to:

1. Define taxation.
2. Identify and explain types of taxes.
3. Outline the importance of taxation.
4. State the qualities of a good tax system.
5. Discuss the advantages and disadvantages of each tax system.
6. Describe the systems of direct taxation.
7. Explain the incidence of taxation.

1. Meaning of Taxation
Taxation is the process by which a government collects money from individuals and
businesses to finance public expenditures. It is a compulsory levy imposed by the government
on income, goods, services, and property.

2. Types of Taxes
Taxes can be broadly classified into two major types:

a. Direct Taxes

These are taxes imposed directly on individuals or organizations and cannot be shifted to
others.
Examples:

 Personal Income Tax

 Company Income Tax
 Capital Gains Tax
 Property Tax

b. Indirect Taxes

These are taxes levied on goods and services and can be passed from the producer to the final
consumer.
Examples:

 Value Added Tax (VAT)

 Customs Duties
 Excise Duties
 Sales Tax
3. Importance of Taxation
 Revenue Generation: Major source of government income.
 Redistribution of Income: Promotes equity through progressive taxation.
 Control of Inflation: Taxes can reduce excessive spending.
 Encouragement of Local Industries: Tariffs on imported goods protect domestic
businesses.
 Provision of Public Goods: Funds infrastructure, education, healthcare, etc.

4. Qualities of a Good Tax System (Canons of Taxation)

Proposed by economist Adam Smith:

 Equity: Everyone should pay according to their ability.

 Certainty: Taxpayers should know how much, when, and how to pay.
 Convenience: Tax payment should be easy and comfortable.
 Economy: The cost of collection should not exceed the revenue collected.

5. Advantages and Disadvantages of Each Tax System

a. Direct Taxes

Advantages:

 Promotes equity and fairness.

 Revenue is predictable.
 Encourages accountability from the government.

Disadvantages:

 Can discourage hard work and investment.

 Evasion is common.
 May lead to double taxation (e.g., dividend and income taxes).

b. Indirect Taxes

Advantages:

 Easy to collect.
 Hard to evade.
 Encourages savings as taxes are on consumption.

Disadvantages:
  Regressive in nature (affects the poor more).
 Increases prices, leading to inflation.
 Revenue may be unstable (depends on consumption patterns).

6. Systems of Direct Taxation

a. Progressive Taxation:

Tax rate increases as income increases.

 Fair and redistributive.

 May discourage productivity.

b. Proportional Taxation:

Same tax rate for all income levels.

 Simple and consistent.

 May not promote equity.

c. Regressive Taxation:

Tax rate decreases as income increases.

 Places higher burden on low-income earners.

 Seen as unfair.

7. Incidence of Taxation
This refers to the person who bears the actual burden of a tax. It can be:

 Formal Incidence: Person on whom the tax is legally imposed.

 Effective Incidence: Person who ultimately bears the cost (after the tax has been
shifted).

For example, in indirect taxes, the producer (formal incidence) may shift the burden to the
consumer (effective incidence) through higher prices.

Assignment
1. Differentiate between direct and indirect taxes with examples.
 2. List and explain four qualities of a good tax system.
3. Explain with examples the difference between progressive and regressive taxation.

WEEK 3
Topic: Budget

1. Meaning of Budget

A budget is a financial plan that estimates revenue (income) and expenditure (spending) for a
specific period, usually one year. It is used by individuals, businesses, and governments to
manage finances and allocate resources effectively.

In the context of government, a national budget outlines how the government plans to raise
and spend money to meet the country's economic and social goals.

2. Types of Budget

There are three main types of government budgets:

a. Balanced Budget

 This occurs when government revenue equals its expenditure.

 It shows financial discipline and economic stability.
 Example: If the government earns ₦1 trillion and also spends ₦1 trillion.

b. Surplus Budget

 Occurs when government revenue exceeds expenditure.

 It may be used to reduce inflation or save for future investments.
 Example: If the government earns ₦1.5 trillion and spends ₦1 trillion, there is a
surplus of ₦500 billion.

c. Deficit Budget

 Happens when government expenditure exceeds revenue.

 Common during economic downturns or emergencies.
 Example: If the government earns ₦1 trillion but spends ₦1.3 trillion, there is a
deficit of ₦300 billion.

3. Ways of Financing a Deficit Budget

When the government runs a deficit budget, it must find ways to finance the extra spending.
Methods include:

1. Borrowing from internal sources (e.g., banks, citizens through bonds).

2. Borrowing from external sources (e.g., foreign countries, international
organizations like IMF or World Bank).
3. Printing more money (can lead to inflation if not controlled).
4. Using foreign reserves or national savings.
4. Concepts of National or Public Debt

Public debt refers to the total amount of money that a government owes to creditors. It
includes:

 Internal Debt: Borrowed within the country.

 External Debt: Borrowed from foreign countries or international bodies.

Public debt is used to finance national development projects, especially when government
revenue is insufficient.

5. Role of Budget in the Economy

1. Resource Allocation: Helps distribute resources to important sectors like health,

education, and infrastructure.
2. Economic Stability: Budgets can be used to control inflation and reduce
unemployment.
3. Development Planning: Supports long-term planning and implementation of
development projects.
4. Revenue Generation: Through taxation and investments.
5. Redistribution of Income: Through social welfare and subsidies.

6. Reasons for Public Debt (Why Government Borrows)

1. To finance budget deficits.

2. To fund capital projects like roads, schools, and hospitals.
3. To stabilize the economy during recessions or crises.
4. To meet emergency expenses such as natural disasters or pandemics.
5. To support monetary policy and control inflation or deflation.

WEEK 4 & 5
Subject: Economics

Topic: Elements of National Income Accounting

Lesson Objectives

By the end of the lesson, students should be able to:

1. Define national income and explain key concepts.

2. Identify and describe various components of national income (GDP, GNP, NDP,
NNP, etc.).
3. Explain the three methods of measuring national income.
4. Discuss the uses and importance of national income accounting.
5. Identify problems and limitations of computing national income.
6. Analyze the trend and structure of national income in Nigeria.

Meaning of National Income

National Income is the total monetary value of all goods and services produced in a country
over a specific period, usually one year. It measures the economic performance of a nation.

Key Concepts of National Income

1. Gross Domestic Product (GDP):

The total value of all goods and services produced within a country’s borders in a
year.
2. Gross National Product (GNP):
GDP plus income earned by citizens abroad minus income earned by foreigners
within the country.
3. Net Domestic Product (NDP):
GDP minus depreciation (the wear and tear of capital goods).
4. Net National Product (NNP):
GNP minus depreciation.
5. Income Per Capita:
National income divided by the population; it shows the average income of citizens.
6. Depreciation:
The reduction in the value of fixed assets due to wear and tear or obsolescence.

Methods of Measuring National Income

 1. Output/Product Method:
Measures the total value of all goods and services produced in different sectors
(agriculture, manufacturing, services, etc.).
2. Income Method:
Measures total income earned by individuals and businesses (wages, rents, interests,
profits).
3. Expenditure Method:
Measures total spending on final goods and services (consumption, investment,
government spending, net exports).

Uses of National Income Accounting

 To assess the performance of the economy.

 For policy formulation and planning.
 To compare living standards over time or across countries.
 To determine the contribution of different sectors to the economy.
 To monitor economic growth and development.

Problems of Computing National Income

 Inadequate and unreliable data.

 High rate of informal sector activities.
 Illiteracy and poor record-keeping.
 Difficulty in valuing non-market transactions (e.g., subsistence farming).
 Double counting of outputs.

Limitations of National Income Estimates

 Does not measure income distribution.

 May ignore non-monetary activities.
 Fails to account for environmental degradation.
 Not always a true indicator of welfare or standard of living.
 Exchange rate and inflation distortions in international comparisons.

Trend and Structure of National Income in Nigeria

  Trend: Nigeria's national income has grown over the years, especially due to oil
exports, but has been affected by fluctuations in oil prices, economic mismanagement,
and inflation.
 Structure:
o Major contributors: oil and gas sector, agriculture, services, and trade.
o Shift from agriculture-based economy in the 1960s to an oil-dominated
economy.
o Recently, services and ICT are contributing more to GDP.

Assignment

1. Differentiate between GDP and GNP.

2. Briefly explain three methods of measuring national income.
3. List four problems Nigeria faces in computing national income.
WEEK 6

TOPIC: FINANCIAL INSTITUTIONS AND MARKETS

Lesson Objectives:

By the end of the lesson, students should be able to:

1. Identify the types of financial institutions and explain their functions.

2. Explain the meaning of the money market, its institutions, and their functions.
3. Describe the capital market, its institutions, and their functions.
4. Explain the operation of the stock exchange market including primary and secondary
markets.

1. Types of Financial Institutions and Their Functions

Financial Institutions are establishments that provide financial services such as accepting
deposits, giving loans, investing funds, and managing money.

Types of Financial Institutions:

1. Commercial Banks
o Accept deposits
o Give loans and overdrafts
o Facilitate payments (cheques, transfers)
o Issue bank drafts and provide foreign exchange
2. Central Bank
o Issues currency
o Regulates money supply
o Serves as banker to the government and commercial banks
o Controls inflation and interest rates
3. Development Banks
o Provide long-term loans for infrastructure, agriculture, and industries
o Promote economic development
4. Merchant Banks
o Offer services in investment and wholesale banking
o Help in the issuance of shares and bonds
o Provide advisory services for mergers and acquisitions
5. Microfinance Banks
o Provide small loans and savings options to low-income earners or small
businesses
6. Insurance Companies
o Offer financial protection against risks and uncertainties
o Provide life and general insurance services
2. Money Market: Meaning, Institutions, and Functions
Meaning:
The money market is a segment of the financial market where short-term funds and
instruments (usually less than one year) are traded.

Institutions in the Money Market:

 Central Bank
 Commercial Banks
 Discount Houses
 Finance Houses
 Acceptance Houses
 Treasury Bill Issuers

Functions of the Money Market:

 Provides short-term funding for governments and businesses

 Helps in liquidity management
 Stabilizes interest rates and controls inflation
 Encourages saving and investment

3. Capital Market: Meaning, Institutions, and Functions

Meaning:
The capital market is a financial market where long-term securities like stocks and bonds
are bought and sold.

Institutions in the Capital Market:

 Stock Exchange
 Securities and Exchange Commission (SEC)
 Issuing Houses
 Investment Banks
 Insurance Companies
 Pension Funds
 Mutual Funds

Functions of the Capital Market:

 Provides long-term financing for businesses and government

 Encourages investment in productive ventures
 Facilitates transfer of savings to investments
 Promotes economic growth and development
4. Operation of the Stock Exchange Market
The stock exchange is a platform where securities (shares, bonds, etc.) are bought and sold.
It provides an organized and regulated environment for these transactions.

Functions of the Stock Exchange Market:

 Facilitates buying and selling of shares and bonds

 Provides a platform for companies to raise capital
 Ensures transparency and fair trading
 Provides information on price movements of securities

5. Primary and Secondary Markets

Primary Market:

 Where new securities are issued for the first time

 Companies raise capital by issuing shares directly to investors
 Also known as the New Issue Market

Secondary Market:

 Where existing securities are traded among investors

 Occurs on the floor of the stock exchange or electronically
 Provides liquidity to investors

Summary:

 Financial institutions include commercial banks, central banks, insurance companies,

etc.
 The money market deals in short-term funds while the capital market handles long-
term funds.
 The stock exchange allows companies to raise funds and investors to buy/sell
securities.
 The primary market issues new securities; the secondary market deals in existing
ones.

Assignment:

1. Explain two functions of the stock exchange.

2. Distinguish between the money market and the capital market with two examples
each.
3. List three institutions found in the capital market and state one function each.
WEEK 7, 8 & 9
Topic: DEMAND FOR MONEY AND SUPPLY OF MONEY

1. Meaning of Demand for Money

Demand for money refers to the desire to hold money (in the form of cash or bank deposits)
instead of other forms of wealth such as bonds or property. People demand money for
transactions, precaution, and speculative purposes.

2. Meaning of Supply of Money

Supply of money refers to the total amount of money available in an economy at a particular
point in time. It includes physical currency (coins and notes) and demand deposits in banks.

3. Determinants of Demand for Money

 Income level – Higher income leads to higher demand for money.

 Interest rates – Higher interest rates reduce money demand as people prefer to
invest.
 Price level – As prices rise, more money is needed for transactions.
 Economic uncertainty – Increases precautionary demand.
 Payment habits – Use of credit/debit cards can reduce demand for physical money.

4. Determinants of Supply of Money

 Central bank policies – Decisions on printing money or controlling inflation.

 Commercial bank lending – Banks create money through loans.
 Government borrowing – Can increase money supply if financed by central bank.
 Foreign reserves and exchange rate policy – Affects inflow/outflow of money.

5. Motives for Demanding Money (Keynesian Theory)

1. Transaction Motive – For daily purchases and expenses.

2. Precautionary Motive – For emergencies and unforeseen events.
3. Speculative Motive – To take advantage of future investment opportunities.

6. Elementary Quantity Theory of Money

The Quantity Theory of Money (QTM) explains the relationship between money supply
and price level using the equation:
MV = PT
Where:

 M = Money Supply
 V = Velocity of circulation
 P = Price level
 T = Volume of transactions (or output)

Assumptions:

 V and T are constant, so an increase in M leads to an increase in P.

7. Value of Money

The value of money refers to the purchasing power of money – how much goods and
services a unit of money can buy. It is inversely related to the price level.

 If price level increases, the value of money decreases.

 If price level decreases, the value of money increases.

8. How Price Level Affects the Value of Money

 High price levels (inflation) reduce the value of money, meaning money buys fewer
goods.
 Low price levels (deflation) increase the value of money, meaning money buys more
goods.

9. Factors Affecting the Value of Money

 Money supply – More money in circulation can lead to inflation.

 Demand for money – Less demand can reduce value.
 Price level – As discussed above.
 Economic stability – Confidence in the economy keeps value stable.
 Interest rates – High rates can increase demand for money, influencing its value.

10. Concept of Cost of Living

The cost of living refers to the amount of money needed to sustain a certain standard of
living, including basic expenses such as housing, food, taxes, and healthcare.

 It is often measured using Consumer Price Index (CPI).

 A rise in the cost of living indicates that goods and services have become more
expensive.
11. Concept of Standard of Living

Standard of living refers to the degree of wealth, comfort, material goods, and necessities
available to a person or group.

 It is influenced by income level, cost of living, quality of healthcare and education,

housing, and life expectancy.
 It can improve even when cost of living rises, if income or public services increase.

Conclusion

Understanding the demand and supply of money and how it affects the value of money is
essential in analyzing economic activities. Additionally, concepts like cost of living and
standard of living help us assess well-being and the effects of inflation and monetary policies.
WEEK 10
Topic: INFLATION AND DEFLATION
I. INFLATION

Meaning of Inflation:

Inflation is the sustained increase in the general price level of goods and services in an
economy over a period of time. It reduces the purchasing power of money, meaning that with
the same amount of money, people can buy fewer goods and services.

Types of Inflation:

1. Demand-Pull Inflation: Occurs when the demand for goods and services exceeds
supply.
2. Cost-Push Inflation: Caused by an increase in the cost of production (e.g., higher
wages or raw materials).
3. Imported Inflation: Caused by an increase in the price of imported goods.
4. Built-in Inflation: Results from a cycle of wage increases and price increases.
5. Hyperinflation: An extremely high and typically accelerating inflation rate.
6. Creeping Inflation: A slow and steady rise in the price level over time.
7. Galloping Inflation: A fast but not out-of-control inflation rate, often in double or
triple digits annually.

Causes of Inflation:

 Excessive demand for goods and services

 Increase in money supply
 Rising production costs
 High government spending
 Depreciation of currency
 Importing inflation from abroad

Effects of Inflation:

 Decreased purchasing power

 Increased cost of living
 Erosion of savings
 Income redistribution (affects fixed income earners)
 Encourages hoarding and speculation
 Discourages investment

Control of Inflation:

1. Monetary Measures:
o Increase in interest rates
o Reduction in money supply
2. Fiscal Measures:
 oReduction in government spending
oIncrease in taxes
3. Supply-side Measures:
o Increasing production
o Removing production bottlenecks
4. Wage and Price Controls:
o Government can fix prices and wages temporarily

II. DEFLATION

Meaning of Deflation:

Deflation is the sustained decrease in the general price level of goods and services in an
economy. It increases the value of money, allowing people to buy more with the same
amount of money.

Types of Deflation:

1. Credit Deflation: Caused by a decline in the availability or demand for credit.

2. Debt Deflation: When the burden of debt increases due to falling prices.
3. Monetary Deflation: Results from a decrease in the money supply.
4. Price Deflation: General fall in prices due to oversupply or reduced demand.

Causes of Deflation:

 Fall in demand for goods and services

 Decrease in money supply
 Increased productivity and efficiency
 Tight monetary policies
 Excessive saving and reduced spending

Effects of Deflation:

 Increased value of money

 Falling profits and wages
 Higher real debt burdens
 Rising unemployment
 Reduced consumer and business spending
 Slowed economic growth

Control of Deflation:

1. Monetary Measures:
o Lowering interest rates
o Increasing money supply
2. Fiscal Measures:
o Increased government spending
o Tax cuts to encourage spending
 3. Encouraging Consumption:
o Subsidies or incentives to stimulate demand
4. Quantitative Easing:
o Central bank buying assets to inject money into the economy

III. INFLATION IN NIGERIA

Current Situation:

Nigeria has faced persistent inflation due to a variety of structural and economic factors.
Inflation rates have fluctuated over the years but have generally remained high.

Causes of Inflation in Nigeria:

 High cost of fuel and transportation

 Import dependency and depreciation of the Naira
 Poor infrastructure
 Insecurity affecting agricultural output
 Excessive government spending and borrowing
 Supply chain disruptions

Effects of Inflation in Nigeria:

 Increased poverty levels

 Reduced real income and savings
 Difficulty in business planning and investment
 Social unrest and increased crime rates

Government Measures to Control Inflation:

 Tight monetary policies by the Central Bank of Nigeria (CBN)

 Support for local production and agriculture
 Control of public sector spending
 Promotion of foreign exchange stability
 Subsidies and interventions in key sectors