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7. (a) The "Law of Comparative Advantage' suggests that specialisation and trade increases world output. (i) Explain the meaning of the underlined term in the context of international trade. (ii) Identify the main assumptions underlying this law. (iii) Identify two sources of comparative advantage for the Irish economy. (30 marks) (b) Ireland is a small open economy which relies very heavily on international trade. ) Discuss the importance of international trade to the Irish economy. (ii) Are there any economic justifications for a government intervening in order to restrict international trade? Outline reasons for your answer. (30 marks) (c) Write a brief note on David Ricardo's contributions to economic thought. (15 marks) 175 marks] 8. (a) Discuss the factors that influence the size of the Irish labour force. (20 marks) (b) *According to the Quarterly National Household Survey (QNHS) the rate of unemployment was 7.7% in December 2008'. (1) Name a source, other than QNHS, for unemployment statistics in Ireland. (ii) State, with reasons, which of the measurements of unemployment used by each of these sources gives the most accurate estimate of Irish unemployment. (15 marks) (c) (i) Outline the major causes of the recent increases in unemployment in the Irish economy. (ii) Discuss economic policies which the Irish government might pursue in order to reduce the level of unemployment. (40 marks) [75 marks]5. (a) The following table shows the level of National Income its Consumption, Investment and Export components at the end of periods 1 and 2, and the level of Imports at the end of period 1. (For the purpose of this question you may ignore the Government sector). National Income Consumption Investment Exports Imports Period 1 640,000 E30,000 E15,000 E15,000 E20,000 Period 2 650,000 E39,000 E18,000 (21,000 Calculate the following, showing all your workings: (1) Level of imports at the end of period 2; (ii) Level of savings at the end of period 2; (iii) Marginal Propensity to Consume (MPC); (iv) Size of the Multiplier. (20 marks) (b) "Ireland is described as a small open economy and this affects the government's ability to influence the level of aggregate demand in the country'. Explain this statement, using the Circular Flow of Income diagram to support your answer. (30 marks) (c) Outline the limitations of using Gross National Product at Current Market Prices when comparing the average standard of living between two different years. (25 marks) [75 marks] 6. (a) Define each of the following terms: (i) Current Budget Deficit; (ii) Exchequer Borrowing Requirement; (iii) Public Sector Borrowing Requirement; (iv) National Debt. (20 marks) (b) Ireland's National Debt grew from 636bn at end of 2006 to 650.4bn at end of 2008. Outline the major reasons for the increase in National Debt. Describe the economic consequences (positive and negative) of the increase in National Debt in recent years. (35 marks) (c) The Irish economy will experience a substantial Current Budget Deficit for 2009. You have been employed as an Economic Advisor to the Minister for Finance. (i) State and explain two specific courses of action (one on the revenue side and one on the expenditure side of the Government Account) you would advise the Minister to take in order to reduce significantly the Current Budget Deficit. (ii) Outline the possible economic effect(s) of each course of action you have chosen. (20 marks) [75 marks]3. (a) The Short Run Average Cost (AC) of a firm is usually shown as a U-shaped curve. (i) State and explain the reason(s) for the shape of the AC curve: From point X to Y; From point Y to Z. Unit + Cost MC AC Quantity (ii) Explain the relationship between the Marginal Cost (MC) and Average Cost (AC) curves as shown above. (25 marks) (b) "The shape of a Long Run Average Cost (LRAC) curve is determined by economies and diseconomies of scale'. (i) Explain this statement, with the aid of a clearly labelled diagram. ii) Define Internal Economies of Scale and External Economies of Scale. (iii) State and explain two examples of each economy. (30 marks) (c) 'The Irish government should encourage initiatives that will prevent further cost increases and in turn sustain employment in small firms'. Suggest with reasons actions the government could take to improve the competitiveness of small firms. (20 marks) [75 marks] 4. (a) "Banks may fail by over-extending their loan book'. Explain this statement within the context of a bank's twin requirements of liquidity and profitability. (25 marks) (b) Keynes' concept of 'Liquidity Preference' is based on three reasons why people desire to hold wealth in money form. (i) State and explain each of these reasons. (ii) Discuss the effect a fall in interest rates is generally expected to have on each of these reasons. (30 marks) (c) Outline how the recent tightening (reduction) in the availability of credit may affect: (i) The Irish Motor Industry; (ii) Inflation; (iii) Ireland's Balance of Payments. (20 marks) [75 marks]1. Outline two non-insurable risks faced by entrepreneurs. (i) (ii) (16 marks) 2. The diagram below represents the demand curve facing a firm in Perfect Competition. This demand curve is; PA ( correct answer) Unitary Elastic . Perfectly Inelastic Perfectly Elastic PI D=AR=MR State the reason for your choice: (16 marks) 3. Ireland has a mixed economy. What do you understand by the underlined term? State one economic advantage and one economic disadvantage of this type of economic system. Explanation: Advantage: Disadvantage: (16 marks) 4. Define 'cost-push' inflation. Identify two sources of this form of inflation in the Irish economy. Definition: Source 1: Source 2: (16 marks) 5. The demand for land is a derived demand. Explain what is meant by the underlined term with reference to land. (16 marks)