Question 1; (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 explanation.

(b) Suppose the euro () increases in value relative to the American dollar ($) and sterling ()

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

(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

Question 2;(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.

(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

1 10,000 8,600 1,000 1,200 800

2 11,200 9,500 1,300 1,100

Calculate the following, showing all your workings:

(i) The level of Exports in Year 2;

(ii) The Marginal Propensity to Import;

(iii) The Marginal Propensity to Save;

(iv) The size of the Multiplier. Explain the economic meaning of this multiplier figure.

(c) Less developed countries (LDCs) are primarily concerned with achieving economic development

while developed countries are concerned with achieving economic growth.

(i) Distinguish between the two underlined terms.

(ii) Outline THREE characteristics which indicate that a country is a LDC

Question 3; The demand for labour as a factor of production is a derived demand and is affected by that factor's Marginal Revenue Productivity (MRP).

(i) 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)

(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.