ECONHYU 2222

IN DETAILKS

7. (a) The Balance of Payments is made up of the Current Account and the Capital Account. Explain each of the underlined terms. Include details of the main components of each account in your explanations. (30 marks) (b) Suppose the euro (() increases in value relative to the American dollar ($) and sterling (f). Outline the likely effects this increase would have on any THREE components of the Balance of Payments, which you listed in answering (a) above. [At least one component should be from the Capital Account.] (25 marks) (c) The enlargement of the European Union (EU) continues with the addition of Bulgaria and Romania in January 2007. There are now 27 member states. Discuss FOUR economic consequences for the Irish economy, of the EU enlargement process. (20 marks) [75 marks] (a) Outline, using appropriate figures, how the Irish economy performed in the past twelve months in each of the following areas: (i) employment; (ii) interest rates; (iii) price inflation; (iv) government taxation. (20 marks) (b) (i) State and explain FOUR economic aims of the Irish government. (ii) Discuss TWO examples where economic policies introduced to achieve one economic aim, may make it more difficult to achieve one of the other aims. (25 marks) (c) "The National Debt / GDP ratio has fallen from over 90% during the first half of the 1990's to an estimated 25.1 % at the end of 2006'. (National Treasury Management Agency) (i) Briefly explain each of the underlined terms. (ii) Outline the economic benefits of this changed situation for the Irish economy. (30 marks) [75 marks]4. (a) Free Enterprise (Laissez Faire) and a Command Economy (Central Planning) are examples of economic systems. (i) Explain each of the underlined terms. (ii) In relation to any ONE of the economic systems above, outline TWO possible economic advantages and TWO possible economic disadvantages. (25 marks) (b) (1) 'The Irish Economy can be described as a Mixed Economy'. Outline FOUR examples of economic activity in the Irish economy to support this view. (li) Do you consider that the Irish economy is moving towards more free enterprise or towards more central planning in recent years? Explain your answer, using appropriate examples. (30 marks) (c) In the case of any TWO of the following economists, outline TWO contributions which each one has made to the development of economic ideas: Adam Smith; Alfred Marshall; John Maynard Keynes; Milton Friedman. (20 marks) [75 marks] Page 5 of 8 5. (a) Explain the following economic terms, using appropriate examples in each case: (i) Government Current Budget; (ii) Government Capital Budget; (iii) Revenue Buoyancy; (iv) Regressive Taxation. (25 marks) (b) State and explain how a government budget could be affected by each of the following developments: (i) a rise in interest rates in the economy; (ii) a fall in the rate of stamp duty on property purchased; (iii) the introduction of subsidised child care for all families within the state. (30 marks) (c) You are appointed Economic Advisor to the Minister for Finance. Outline the economic arguments you would identify for the Minister in favour of lowering Irish income taxation rates. (20 marks) 175 marks] . (a) The main components of National Income are: Consumption, Investment, Government Expenditure, Exports, Imports. (i) Show the equation which links all of these components with the level of National Income in the economy. (ii) Explain what determines/influences the size of each of these components of National Income. (25 marks) (b) The table below shows the level of National Income, Consumption, Investment, Exports and Imports at the end of Year 1 and Year 2. (For the purpose of this question you may ignore the government sector.) Year National Income Consumption Investment Exports Imports E10,000 E8,600 E1.000 E1,200 6800 E1 1,200 69,500 E1,300 E1,100 Calculate the following, showing all your workings: (i) The level of Exports in Year 2; (ii) The Marginal Propensity to Import; (lii) The Marginal Propensity to Save; (iv) The size of the Multiplier. Explain the economic meaning of this multiplier figure. (25 marks) (e) Less developed countries (LDCs) are primarily concerned with achieving economic development while developed countries are concerned with achieving economic growth.1. (a) (i) Define the economic terms: individual (firm) supply; market supply. (ii) Explain, with the aid of labelled diagrams, the relationship between individual (firm) supply and market supply. (20 marks) (b) Explain, with the aid of a labelled diagram, the supply curve of an individual firm in each of the following circumstances. State one example in each case. (i) A firm is willing to increase supply as price rises, but there is a minimum price below which the firm will not supply at all. (ii) A firm can supply only up to a maximum production capacity. (iii) The product is fixed in supply (e.g. perishable good) and a firm is operating in the short run. (30 marks) (e) Outline FOUR factors, other than price, which affect the supply curve of an individual firm. In each case explain how the factor affects the supply curve. (25 marks) 175 marks] 2. (a) (1) A firm operating under conditions of perfect competition is a 'price taker'. Explain the concept of being a 'price taker". (ii) Explain, with the aid of a labelled diagram, the equilibrium position of a firm in short run perfect competition. (25 marks) (b) With the aid of a labelled diagram(s), explain the impact which the entry of new firms would have on the market and on the equilibrium position of this firm. (25 marks) (c) (i) Many firms today engage in product differentiation. Explain this underlined term showing. with suitable examples, how it can be achieved. (ii) Explain the effect of product differentiation on the AR and MR curves of a firm, which previously operated under conditions of perfect competition. (25 marks) [75 marks] Page 4 of 8 3. (a) The demand for labour as a factor of production is a derived demand and is affected by that factor's Marginal Revenue Productivity (MRP). (1) Explain each of the underlined terms. (ii) Outline TWO developments, other than a fall in MRP, which may result in a firm reducing its number of employees. (20 marks) (b) (i) State and explain THREE factors which are currently affecting the supply of labour to the Irish economy. (ii) The demand for labour has increased significantly in certain sectors of the Irish economy in recent years, e.g. construction. Discuss THREE economic consequences of this situation. (30 marks) (c) "At a time of full (or near full) employment in the Irish economy, it is important that there should be the maximum occupational mobility and geographical mobility of labour. (1) Distinguish between the two underlined terms. (ii) Outline THREE economic policies which could increase either occupational mobility of labour or geographical mobility of labour. in Ireland.(17 marks) 8. Define Social Costs. State TWO significant examples currently facing the Irish economy. Definition: Example 1: Example 2: (17 marks) 9. Energy costs (e.g. electricity) increased significantly in Ireland during 2006. Outline TWO economic reasons for the increase and TWO economic consequences of this specific development for the Irish economy. Reasons: (ii) Consequences: (i) (ii) (17 marks)Answer six of the nine short response type questions in the spaces provided. 1. Define regressive tax and state TWO examples of this type of tax. Definition: Example 1: Example 2: (16 marks) 2. State FOUR economic aims of government. (i) (ii) (iii) (iv) (16 marks) 3. Define Monetary Policy. State TWO measures by which the European Central Bank implements monetary policy within the euro-zone countries. Definition: Measure 1: Measure 2: (16 marks) 4. Define the term "Balance of Payments on Capital Account'. State TWO examples of items which may appear in it. Definition: Example 1: Example 2: (16 marks) 5. State THREE economic reasons why entrepreneurs are important to the development of an economy. (i) (ii) (iii) (16 marks) Page 2 of 7 6. Using the diagram, explain how higher consumers' incomes (other factors unchanged) may affect the demand curve for mobile phones in Ireland. Diagram Explanation P1. (a) Outline THREE key features of an oligopolistic market and state ONE example of an oligopolistic market in Ireland. (20 marks) (b) With the aid of ONE clearly labelled diagram: (i) Explain the shape of the demand curve facing a firm in oligopoly. Explain the relationship between this demand curve and the firm's marginal revenue curve. (iii) Explain the long run equilibrium position of this firm. (40 marks) (c) Explain THREE methods by which firms in oligopolistic markets may collude. (15 marks) [75marks] 2. (a) Define (i) price elasticity of demand and (ii) cross elasticity of demand. In each case, state the formula by which it is measured. (20 marks) (b) When the price of Good X is 627, the quantity demanded of Good Y is 1,200 units. When the price of Good X falls to 623 (the price of Good Y unchanged) the quantity demanded of Good Y falls to 800 units. (i) Using the cross elasticity of demand formula, calculate the cross elasticity of demand for Good Y. Show all your workings. ) Is Good Y a substitute for or complement to Good X? Explain your choice. (25 marks) (c) A firm has the following price elasticities of demand for two goods, Good X and Good Y: Good X ..... 2.0 Good Y ..... 0.5 What changes, if any, should the firm make in the selling price of each of the goods to increase overall revenue. Explain your answer. (30 marks) 175 marks] Page 4 of 7 3. (a) (i) State and explain FOUR factors which affect a consumer's demand schedule, other than the price of a good itself. (ii) Explain the economic rationale for assuming that a person's demand curve for a normal good slopes downward. (30 marks) (b) For something to be considered an economic good, it must possess certain characteristics. State and explain THREE of these characteristics. (20 marks) (c) A consumer spends all income on two goods, Good A and Good B. Both goods are normal goods but they are not complementary goods. The price of Good A is reduced and the price of Good B remains unchanged. The consumer continues to spend all income on the two goods. Distinguish between the substitution effect and the income effect of the price reduction in Good A. (25 marks)