International Trade points and summaries for Jamb candidates

Jamb(UTME) summaries/points on the meaning and basis for international trade (absolute and comparative costs etc); examine the basis for international trade; differentiate between absolute and comparative advantages;

Meaning and Basis for International Trade

1. Definition of International Trade: International trade is the exchange of goods and services between countries.
2. Purpose of Trade: It allows countries to access goods they cannot produce or that are more costly to produce domestically.
3. Basis for International Trade: Trade is based on differences in resources, technology, climate, and production efficiency between countries.
4. Specialization: Countries focus on producing goods they can produce efficiently and trade them for other goods.
5. Absolute Advantage: A country has an absolute advantage if it can produce a good using fewer resources than another country.
6. Comparative Advantage: A country has a comparative advantage if it can produce a good at a lower opportunity cost than another country.
7. Opportunity Cost: The cost of forgoing the production of one good to produce another; it’s essential in determining comparative advantage.
8. Efficiency in Production: Countries produce goods where they are most efficient and trade to maximize their resources.
9. Natural Resources: Differences in natural resources, like oil, minerals, and climate, create trade opportunities.
10. Economies of Scale: Trade allows countries to produce large quantities, reducing costs per unit and increasing efficiency.
11. Access to New Markets: International trade enables countries to sell goods to a larger customer base, beyond their borders.
12. Variety of Goods: Trade allows consumers to access a variety of goods and services from around the world.
13. Increased Competition: International trade promotes competition, leading to better quality and lower prices.
14. Technology Transfer: Trade encourages the exchange of technology and innovation, benefiting all trading partners.
15. Resource Utilization: Countries use their resources more effectively by trading, promoting economic growth.
16. Climate and Geographical Factors: Climate differences mean some countries are better suited to produce certain goods.
17. Labor Costs: Countries with lower labor costs can produce labor-intensive goods more cheaply, encouraging trade.
18. Capital and Machinery: Wealthier countries with advanced technology focus on capital-intensive goods.
19. Trade Agreements: Agreements between countries promote trade by reducing tariffs and other trade barriers.
20. Foreign Exchange Earnings: Exporting goods generates foreign exchange, helping countries pay for imports.
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Basis for International Trade

21. Specialization and Division of Labor: By specializing in goods where they have a comparative advantage, countries produce more efficiently.
22. Comparative Cost Differences: International trade is based on differences in opportunity costs between countries.
23. Absolute Cost Differences: When one country can produce goods more efficiently in absolute terms, trade is beneficial.
24. Economic Welfare: Trade increases welfare by allowing countries to consume beyond their production limits.
25. Resource Allocation: Trade helps allocate global resources where they are most needed and used efficiently.
26. Global Efficiency: International trade increases global productivity by enabling countries to focus on their strengths.
27. Trade Balances: Countries trade to balance their imports and exports, keeping their economies stable.
28. Interdependence: Trade creates economic interdependence, fostering peaceful relationships between nations.
29. Economic Growth: Access to foreign markets stimulates economic growth by creating new revenue sources.
30. Technology and Skills Transfer: Through trade, countries can adopt new technologies and practices from one another.
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Differentiating Between Absolute and Comparative Advantage

31. Absolute Advantage: Exists when a country can produce a good using fewer resources than another country.
32. Comparative Advantage: Exists when a country can produce a good at a lower opportunity cost, even if it lacks an absolute advantage.
33. Resource Efficiency (Absolute Advantage): Focuses on using fewer resources (labor, land, etc.) than other countries.
34. Opportunity Cost (Comparative Advantage): Focuses on the cost of forgoing other goods to produce a particular good.
35. Examples of Absolute Advantage: If Country A produces 100 units of cotton per hour while Country B produces 50, Country A has an absolute advantage.
36. Examples of Comparative Advantage: If Country A sacrifices less to produce cotton than Country B, Country A has a comparative advantage.
37. Absolute Advantage in Practice: Countries with absolute advantages produce more efficiently but may not necessarily have a comparative advantage.
38. Comparative Advantage in Practice: Countries should specialize in goods where they have the lowest opportunity cost, even without an absolute advantage.
39. Foundation of Trade: Comparative advantage, not absolute advantage, is the primary basis for beneficial trade.
40. Mutual Benefit: Both countries benefit from trade if each focuses on goods where they have a comparative advantage.
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Additional Insights on Trade, Absolute and Comparative Advantages

41. Specialization Based on Comparative Advantage: Countries should specialize in producing goods with the least opportunity cost.
42. Trade Example (Comparative Advantage): If Nigeria produces oil at a low opportunity cost and trades it for food from a country specializing in agriculture, both benefit.
43. Efficiency in Comparative Advantage: Even if a country has an absolute advantage in all goods, it benefits from focusing on comparative advantage.
44. Production Possibility Curve: Comparative advantage explains why countries operate on different points along the production possibility curve.
45. Limitations of Absolute Advantage: Absolute advantage doesn’t account for opportunity costs, making it less practical for trade decisions.
46. Positive-Sum Game: Comparative advantage shows that trade is a positive-sum game, where both parties gain.
47. Ricardian Model: The theory of comparative advantage was introduced by David Ricardo, highlighting opportunity cost in trade.
48. Maximizing Output: Comparative advantage helps countries produce maximum output with limited resources.
49. Global Specialization: Comparative advantage promotes global specialization, where each country focuses on its best-suited goods.
50. Trade Efficiency: Understanding comparative and absolute advantages allows countries to make more efficient trade decisions.
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Jamb(UTME) summaries/points distinguishing between balance of trade and balance of payments and their corrective measures; highlight the problems of balance of payments and their corrective measures;

Distinguishing Between Balance of Trade and Balance of Payments

1. Balance of Trade: Measures the difference between a country's exports and imports of goods and services.
2. Balance of Payments (BOP): Records all financial transactions between a country and the rest of the world, including trade, investments, and transfers.
3. Goods and Services: Balance of trade focuses only on exports and imports of goods and services.
4. All Transactions: Balance of payments includes all international transactions, such as trade, investments, and remittances.
5. Surplus or Deficit: Balance of trade can show a surplus (exports > imports) or a deficit (imports > exports).
6. Current Account: The balance of trade is a part of the current account within the balance of payments.
7. Components of BOP: Balance of payments includes the current account, capital account, and financial account.
8. Trade Surplus/Deficit: A trade surplus is when exports exceed imports; a trade deficit is the opposite.
9. BOP Surplus/Deficit: A BOP surplus occurs when inflows exceed outflows; a deficit is when outflows exceed inflows.
10. Impact on Currency: A trade deficit can lead to a depreciation of a country’s currency, while a surplus can strengthen it.
11. Exchange Rate Effect: BOP deficits can affect exchange rates, potentially making the currency weaker.
12. Influence on Economy: A favorable balance of trade boosts the economy, while a negative balance of payments can weaken it.
13. Capital Flows: Balance of payments includes capital flows, like foreign investments, which are not part of the balance of trade.
14. Government Loans: Loans received or given by a government are recorded in the BOP, not in the balance of trade.
15. Unilateral Transfers: Remittances and foreign aid are part of the BOP but not the balance of trade.
16. Time Period: Both the balance of trade and balance of payments are typically measured over a year.
17. National Wealth Indicator: Balance of trade indicates a country's production strength, while BOP shows economic health.
18. Cash Flow: Balance of payments reflects the overall cash inflow and outflow for a country.
19. Trade Policies: Trade policies affect the balance of trade directly by influencing import/export regulations.
20. Investment Policies: Investment policies, foreign loans, and aid impact the BOP more than the balance of trade.
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Problems of Balance of Payments

21. Persistent Deficits: Continuous BOP deficits can lead to depletion of foreign reserves.
22. Currency Depreciation: A BOP deficit may cause currency depreciation, reducing the country’s purchasing power.
23. High External Debt: BOP deficits can increase a country's debt if it has to borrow to cover the gap.
24. Inflation: Currency depreciation from a BOP deficit can lead to higher import prices, causing inflation.
25. Loss of Investor Confidence: BOP deficits can reduce investor confidence, leading to lower foreign investments.
26. Pressure on Reserves: BOP deficits deplete foreign reserves, weakening a country's ability to pay for imports.
27. Reduced Economic Growth: A BOP deficit may discourage investment, leading to slower economic growth.
28. Unemployment: Reduced production due to less demand for exports can increase unemployment.
29. Dependence on Imports: Countries with BOP deficits may become overly dependent on imports, harming local industries.
30. High Interest Payments: Borrowing to cover BOP deficits can lead to high interest payments, straining finances.
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Corrective Measures for Balance of Payments Problems

31. Export Promotion: Encourage exports through subsidies, tax incentives, and improved quality standards.
32. Import Substitution: Reduce imports by producing more goods domestically.
33. Currency Devaluation: Lowering the currency’s value can make exports cheaper and imports more expensive, improving BOP.
34. Trade Barriers: Imposing tariffs and quotas can reduce imports and protect local industries.
35. Attracting Foreign Investment: Encouraging foreign direct investment (FDI) can bring in foreign capital.
36. Borrowing from International Institutions: Loans from the IMF or World Bank can temporarily support BOP deficits.
37. Reducing Expenditure: The government can reduce spending on foreign goods and services.
38. Exchange Control Measures: The government can control how much foreign currency is allowed to leave the country.
39. Foreign Exchange Reserves: Using reserves to support the currency and pay for necessary imports can temporarily address BOP issues.
40. Encouraging Remittances: Encouraging citizens working abroad to send remittances can improve foreign currency inflows.
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Advantages of Corrective Measures

41. Improved Trade Balance: Export promotion and import substitution improve the balance of trade, which benefits BOP.
42. Boosts Domestic Production: Import substitution encourages local production and reduces dependency on foreign goods.
43. Stronger Currency: Stabilizing the BOP can strengthen the currency and improve economic stability.
44. Employment Growth: Increasing local production and export demand creates more jobs.
45. Increased Foreign Reserves: Corrective measures can increase reserves, strengthening the economy.
46. Attracts Foreign Investment: A stable BOP improves investor confidence, attracting more FDI.
47. Lower External Debt: Reducing deficits limits the need for borrowing, lowering the debt burden.
48. Control Over Inflation: Improved BOP reduces inflationary pressure by stabilizing the currency.
49. Long-Term Economic Growth: A stable BOP encourages sustainable growth by supporting investment and trade.
50. Enhanced Global Standing: A healthy BOP boosts international confidence in a country’s economic management.
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Jamb(UTME) summaries/points on Exchange rate: meaning, types and determination; Composition and direction of Nigeria’s foreign trade;

Exchange Rate: Meaning, Types, and Determination

1. Meaning of Exchange Rate: The exchange rate is the price of one country’s currency in terms of another country’s currency.
2. Importance of Exchange Rate: It determines how much foreign currency you receive for your local currency.
3. Role in Trade: Exchange rates affect the cost of importing and exporting goods and services between countries.
4. Foreign Exchange Market: The market where currencies are traded and exchange rates are determined.
5. Fixed Exchange Rate: The government sets and maintains the exchange rate at a specific value.
6. Floating Exchange Rate: The exchange rate is determined by market forces, such as supply and demand.
7. Pegged Exchange Rate: The currency value is fixed relative to another major currency (like the US dollar).
8. Spot Exchange Rate: The rate at which a currency can be exchanged immediately.
9. Forward Exchange Rate: A set rate for a currency exchange that will take place at a future date.
10. Managed Float: A system where the currency's value is largely determined by the market but with occasional government intervention.
11. Nominal Exchange Rate: The actual quoted rate for currency exchange in the foreign exchange market.
12. Real Exchange Rate: The nominal rate adjusted for inflation, showing the actual purchasing power.
13. Currency Appreciation: When a currency’s value increases compared to another currency.
14. Currency Depreciation: When a currency’s value decreases compared to another currency.
15. Devaluation: When a government deliberately reduces the value of its currency in a fixed exchange rate system.
16. Revaluation: When a government increases the value of its currency in a fixed exchange rate system.
17. Supply and Demand: Exchange rates in a floating system are determined by the demand for and supply of currencies.
18. Interest Rates: Higher interest rates can attract foreign investment, increasing demand for the currency and raising its value.
19. Inflation Rates: Higher inflation in a country can reduce currency value as goods become more expensive.
20. Balance of Payments: A surplus can strengthen a currency, while a deficit can weaken it.
21. Political Stability: Stable countries attract more foreign investment, boosting their currency’s value.
22. Speculation: If investors believe a currency will rise, demand for it may increase, strengthening its value.
23. Economic Indicators: Data like GDP growth, unemployment, and inflation affect investor confidence and currency value.
24. Government Intervention: Central banks may buy or sell currencies to influence exchange rates.
25. Foreign Exchange Reserves: Countries hold reserves to stabilize their currency during volatility.
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Types of Exchange Rate Regimes

26. Fixed or Pegged Regime: The exchange rate is set and maintained by the government or central bank.
27. Floating Regime: The exchange rate is allowed to fluctuate freely based on market conditions.
28. Managed Float Regime: A system with minimal government intervention, but the central bank steps in when needed.
29. Currency Board: A strict form of fixed exchange rate where a currency is fully backed by foreign currency reserves.
30. Dual Exchange Rate: Countries use two rates: one for official transactions and another for private transactions.
31. Target Zone: Exchange rates are allowed to fluctuate within a specific range set by the government.
32. Crawling Peg: The exchange rate is adjusted periodically, often to keep up with inflation.
33. Dollarization: When a country uses another country's currency (like the US dollar) as its own.
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Determinants of Exchange Rates

34. Supply and Demand for Currency: High demand or limited supply strengthens a currency, while low demand or high supply weakens it.
35. Interest Rate Differentials: Countries with higher interest rates attract investors, increasing demand for their currency.
36. Inflation Differentials: Lower inflation in a country makes its currency more attractive as purchasing power remains stable.
37. Economic Growth: High economic growth rates make a country more attractive to investors, boosting its currency.
38. Trade Balance: Countries with trade surpluses generally have stronger currencies.
39. Government Debt: High debt may weaken a currency as it increases the risk of inflation or default.
40. Foreign Investment: Increased foreign direct investment strengthens a currency as investors need local currency to invest.
41. Speculative Activity: Traders’ speculation on currency performance can impact exchange rates.
42. Central Bank Actions: Central banks buying or selling currencies can influence exchange rates.
43. Political Events: Political stability or instability can lead to fluctuations in a currency’s value.
44. Global Economic Conditions: Economic trends and events in major economies like the US, EU, or China affect exchange rates globally.
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Composition and Direction of Nigeria’s Foreign Trade

45. Main Export Products: Nigeria primarily exports crude oil, natural gas, cocoa, rubber, and cotton.
46. Oil as a Major Export: Crude oil makes up over 80% of Nigeria's exports, making the economy heavily dependent on oil revenue.
47. Non-Oil Exports: Includes agricultural products like cocoa, palm oil, and leather.
48. Import Products: Nigeria imports machinery, vehicles, electronics, refined petroleum, and food products.
49. Top Export Destinations: Major export partners include India, the United States, Spain, and the Netherlands.
50. Top Import Sources: Nigeria’s main import partners are China, the United States, India, and the Netherlands.
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