Brief and clear explanation

1. (a) Explain the following terms which are commonly used in estimating the National Income

statistics of a country:

Subsidies;

Incomes-in-kind;

Net Factor Income from the Rest of the World.

(b) (i) Illustrate by means of a diagram the Circular Flow of Income for an open economy.

(ii) Are transfer payments an injection into, or a leakage from the Circular Flow of Income?

Explain your answer.

(iii) Outline three current determinants of the level of consumption in the Irish economy.

(c) (i) Using the Keynesian multiplier process outline how a fiscal stimulus ( i.e. a government

injection) would affect an economy's Aggregate Demand.

(ii) Explain why the Irish government might find it difficult to implement such a Keynesian

stimulus plan at the current time.

2' (a) (i) Explain, using a numerical example, how banks create credit in an economy.

(ii) Outline two factors which limit the ability of banks to create credit during recessionary

times.

(b) Some central banks have responded to the global financial crisis by introducing the monetary

policy measure of 'Quantitative Easing' (i.e. buying financial assets from financial

institutions using new money it has created).

(i) Outline two possible economic effects of this measure for an economy.

The European Central Bank (ECB) reduced interest rates in 2012.

(ii) Discuss two possible economic benefits of falling interest rates for the Irish economy.

(20)

(c) The monetary policy of the ECB aims to maintain the annual euro area inflation rate at a very

low level.

(i) State the rate of inflation in Ireland during 2013, as measured by the Consumer Price

Index (CPI).

(ii) Outline two uses of the CPI, other than as a measure of the rate of inflation.

(iii) Discuss the possible limitations of the CPI as an accurate measure of changes in the cost

of living in Ireland.

3. (a) 'The Balance of Payments figures give the most detailed information on Ireland's large and

rapidly growing internationally traded services sector' (The Irish Times, September 2012).

(i) Explain the term Balance of Payments Current Account.

(ii) Explain two economic consequences of a surplus on the Balance of Payments Current

Account.

(iii) Describe how foreign firms operating in Ireland may affect Ireland's Balance of

Payments Current Account. (30)

(b) Discuss the possible economic effects for the Irish economy of the euro rising in value

relative to many other international currencies. (25)

(c) 'Exporting businesses need to become the engine of economic growth.'

(Statement of Strategy 2011-2014, Department of Jobs, Enterprise and Innovation)

Discuss the key challenges for Irish businesses on international markets. (20)

4. (a) 'The rate of unemployment among 15-24 year olds in Ireland has increased by 74% between

2006 and 2011' (Profile 3 At Work, Central Statistics Office, July 2012).

(i) Explain three economic consequences of a high rate of youth unemployment on the Irish

economy.

(ii) Discuss three measures which the Irish government may introduce to reduce the problem

of youth unemployment. (30)

(b) 'Ireland's National Debt was 137.6bn at the end of December 2012'.

(National Treasury Management Agency)

(i) Discuss the disadvantages for Ireland of having a high National Debt.

(ii) Outline two means by which Ireland's National Debt may be made more sustainable.

(30)

(c) Ireland, in common with many developed countries, is facing the challenges of an ageing

population.

Discuss the possible economic consequences of an ageing population for the Irish economy.