1.There has been an increase in government income from taxation in the past year.

(i) Outline THREE reasons for this outcome.

(ii) State ONE revenue opportunity and ONE expenditure opportunity for the government

arising from this increased income. Which of these would you consider a priority?

Explain your choice. (

(c) Explain how an understanding by the Minister for Finance of the concept of Price Elasticity of

Demand would help in setting levels of indirect taxation. Use examples to illustrate your answer.

2.It has been estimated that MPM = 0.2, MPT = 0.1 and MPC = 0.9.

Calculate the following, showing all your workings:

(i) The size of the Multiplier;

(ii) The increase in the level of national income if there was an injection of government spending of

500 million.

A bank needs to keep a balance between its twin objectives of liquidity and profitability.

Explain the underlined terms. How does the bank reconcile these twin objectives? (20 marks)

(b) The Central Bank (now called the Central Bank and Financial Services Authority of Ireland)

continues to play a very important economic role in the Irish economy.

Explain the role it plays in the Irish economy.

(c) The euro is now well established as a currency in Ireland. Discuss the economic effects which

the introduction of the euro has had on:

Irish consumers;

Irish exporters and importers.

The last census of population (in 2002) showed that the Irish population continues to grow and now

exceeds 3.9 million.

Discuss the economic consequences of an increasing population.