SAMPLE QUESTIONS AND ANSWERS

Section A – Short Questions 1. SAMPLE QUESTION

Explain why “scarcity” is the fundamental problem in the study of Economics.

Sample answer:

In economics, the supply of resources are limited/ scarce and have alternative uses (e.g. money), however consumer wants and the demand for these resources are unlimited. Therefore, choices must be made on how to allocate these scarce resources. This is done by firstly prioritising needs over wants, involving opportunity cost. 16 marks

2. SAMPLE QUESTION

“When a firm produces at a level of output at which marginal cost is greater than marginal revenue the firm is maximising profit (or minimising losses)”.

True or false? Explain your answer.

Sample answer:

FALSE, because if the extra cost of producing another unit of output is greater than the extra revenue earned from selling another unit of output, the firm could increase profit by producing less. Profit is maximised where marginal cost marginal revenue. equals 17 marks

3. SAMPLE QUESTION

“Imperfect competition is wasteful of scarce resources”. Do you agree with this statement? Explain your answer.

Sample answer:

Yes, imperfect competition is wasteful of resources. This is because it does not produce at the lowest point of the average cost curve, due to spending on additional costs by the firm on differentiating its products or services, such as advertising, branding and innovation. 17 marks

4. SAMPLE QUESTION

Explain what is meant by the term the ‘black economy’. State one method by which the Government could discourage this activity.

Sample answer:

The black economy is all economic activity that goes unrecorded in the national income accounts. This is also referred to as “non-market economic activities” or the shadow/underground economy.

Method:

Reduce taxation rates: if the Government did this, citizens may be more inclined to be tax compliant and buy legitimate goods and services as less of their income is being deducted on taxes. This will reduce activity on the black economy (such as smuggling cigarettes, etc). 17 marks

5. SAMPLE QUESTION

Given that Gross National Product at current market prices is €360m, price subsidies are €8m, depreciation is €30m and indirect taxes are €50m, Calculate:

(i) Gross National Product at factor cost (ii)Net National Product at factor cost Show your workings. Solution: (i) Gross National Product at factor cost: = GNP @ market prices + price subsidies – indirect

taxes

= €360m + €8m - €50m = €318m (ii) Net National Product at factor cost / National Income: = GNP @ factor cost – depreciation = €318m - €30m = €288m

Section B – Long Questions DEMAND, SUPPLY, EQUILIBRIUM & ELASTICITY SAMPLE QUESTION – 30 MARKS

(i) Outline four factors that determine the supply of a good or service. (ii) Explain the difference between a movement along a supply curve and a shift in a supply curve. Use appropriate diagrams to illustrate your answer.

Sample answer:

(i) 4 @ 5 marks each

Changes in the price of related goods: If the price of a related good rises, it becomes a much more profitable alternative for the supplier to produce, therefore it will

decrease its supply of the good it is currently supplying. (e.g. a computer manufacturing company sees that the price of tablets is increasing while the price of laptops remains the same, so it will increase its production of tablets and reduce its supply of laptops) This will cause a leftward shift in the supply curve of the good.

Changes in the cost of production: If there is an increase in costs of production (e.g. rise in wages, rise in the cost of raw materials, increase in taxes, reduction in subsidies) then it will be more expensive to manufacture the good. Therefore the supplier will decrease its supply of the good. This will cause a leftward shift in the supply curve.

Unplanned factors: If unfavourable, unplanned circumstances occur, this would decrease the supply of the good (e.g. unfavourable weather conditions, strikes by workers, shortage of raw materials, transport failure) and cause a leftward shift in the supply curve.

Introduction of new technologies: A technological improvement means that the supplier can use inputs more efficiently and the cost of production falls. This causes an increase in the quantity of the good supplied and will result in a rightward shift of the supply curve.

(ii) Movement along the supply curve is caused by a change in the selling price of the good itself. This results in a change in quantity supplied, at different prices. 3 marks

Diagram 5 marks

A shift in the supply curve is caused by a change in any of the factors other than the price of the good itself. ● This will cause the supply curve to shift to the right (an increase in supply) or to the left (a decrease in supply).

● In this case we say that there has been a change in supply at any given price. 2 marks

Diagram 5 marks SAMPLE QUESTION – 25 MARKS

Explain briefly how knowledge of elasticities would be useful to:

● A producer of goods who is considering increasing production

● The Irish Government when it is considering if it should increase VAT on goods and services

● An Post when it is considering if it should increase the price of stamps.

Sample answer:

A producer of goods who is considering increasing production

Price Elasticity of Demand (PED) will show the producer the effects of price changes on demand and on total revenue. It is useful for making decisions on maximising total revenue.

Income Elasticity of Demand (YED) will show the producer how changes in incomes will affect the demand for its goods. It would be useful during times of recession or economic growth.

Cross Elasticity of Demand (CED) will show how price changes of other goods (substitutes or complements) will affect the demand for the producer’s goods. Any 2 of the above (5 marks + 4 marks)

The Irish Government when it is considering if it should increase VAT on goods and services

If demand is price inelastic: then the Government has scope to increase VAT, as a percentage increase in price (caused by increased VAT) will result in a less than proportionate drop in the quantity demanded. Therefore, an increase in VAT on a commodity will lead to increased tax revenue for the Government. If PED is inelastic, then the Government may decide to increase VAT.

If demand is price elastic: then the Government might be wary of increasing VAT, as the percentage increase in price may result in a greater than proportionate drop in the quantity demanded. Therefore, an increase in VAT on a commodity may cause a fall in total revenue for the Government. If PED is elastic, then the Government may decide to not increase VAT. 2 @ 4 marks

An Post when it is considering if it should increase the price of stamps:

Demand is price inelastic: the demand for stamps is price inelastic, due to the fact that An Post has almost a monopoly in the market, meaning consumers have very few alternatives available to them. Also, stamps are a necessity to many people. Therefore, a percentage increase in price will result in a less than proportionate decrease in the quantity demanded. Therefore, a rise in price will increase total revenue for An Post and it may decide to increase price in order to increase total revenue. 2 @ 4 marks

MARKET STRUCTURES SAMPLE QUESTION – 20 MARKS

State and explain FOUR assumptions of monopoly as a market structure.

One firm in the industry: One firm exists in the entire industry, so we don’t distinguish between the firm and the industry (i.e, the firm is the industry). The one firm supplies the output in the entire industry. 5 marks Controls either price or quantity supplied: The firm can control either the price that it charges or the quantity it supplies, but not both . If it sets the price the output sold will be determined by the market (it can’t control the quantity the public will buy). If it sets

the output the price will be determined by the market (it can’t make the public buy this quantity at the price it sets). 5 marks

Seeks to maximise profits: The firm aims to make maximum profits and therefore produce where marginal cost equals marginal revenue, with marginal cost rising at a faster rate than marginal revenue. It is possible for the firm to make super normal profits both in the short and long run. 5 marks

Barriers to entry exist: If a monopoly market structure is to continue into the long run, there cannot be freedom of entry into the industry. Barriers to entry such as legal restrictions exist to prevent new firms from entering the industry and threatening the position of the monopolist. 5 marks

SAMPLE QUESTION – 25 MARKS

Explain, with the aid of a diagram, the long run equilibrium position of a monopoly firm.

Diagram: 11 points at 1 mark each. Price axis Quantity

axis AR MR MC AC Correct Equilibrium point - E P1 C1 Q1 Profits shown The firm is earning super normal profits because average revenue is greater than average costs (covering its costs and making extra profits) and these super normal profits can continue to exist in the long run due to barriers to entry. Equilibrium price is charged at P1 and equilibrium output is produced at Q1.

Equilibrium occurs at point X, where marginal cost equals marginal revenue and marginal cost cuts marginal revenue from below/marginal cost is rising at a faster rate than marginal revenue. The cost of production is at point C, which is not the lowest point of the AC curve (point W), however at this point the firm is covering its costs and making a normal profit. The firm is considered to be wasting scarce resources and not operating efficiently as it is not operating at point W, the lowest point of the average cost curve. This is mainly due to the lack of competition in the market, as the firm has no incentive to be as efficient as possible.

Explanation: 14 marks SAMPLE QUESTION – 20 MARKS

Discuss the main SIMILARITIES between monopoly and imperfect competition as market structures.

Sample answer: Profits in the short run:

● In monopoly firms earn super normal profits in the short run, as average revenue is greater than average cost.

● In imperfect competition firms earn super normal profits in the short run, as average revenue is greater than average cost. 6 marks

Seek to maximise profits:

● We assume that the main objective of producers in both of these markets is to earn the maximum profit possible.

● To achieve this, each firm seeks to produce the quantity where marginal cost is equal to marginal revenue (MC=MR). 6 marks

Demand-curve:

● Firms in both of these markets face a downward sloping demand curve, from left to right.

● This is due to the inverse relationship which exists between price and quantity demanded, as both firms will see less at higher prices and more at lower prices. 4 marks

Use of scarce resources:

● Firms in both markets do not produce at the lowest point of the AC, indicating waste of scarce resources.

● For monopoly, the firm incurs the additional costs of branding. Also, the lack of competition in the market means the firm has no incentive to be as efficient as possible.

● For imperfect competition, they incur additional costs of differentiation. 4 marks

FACTORS OF PRODUCTION SAMPLE QUESTION – 20 MARKS

Discuss the factors that affect the marginal physical product (MPP) of a factor of production.

Sample answer:

Quality of the factors: if the quality of the factors used improves, then they become more efficient and additional output will be produced (such as a builder switching from using a shovel to a mechanical digger, thus increasing output). Therefore, marginal physical product will increase. 5 marks

Training/education provided for the factors: if the factors are trained, they become more skilled, resulting in increased efficiency and more output (such as nurses in a hospital being trained in the use of specialised equipment, thus performing their work more efficiently). Therefore, marginal physical product will increase. 5 marks

Expertise of the entrepreneur: if the entrepreneur is good at organising the production unit, then each factor will be more productive and work to its maximum efficiency. Therefore, marginal physical product will increase. 5 marks

Law of Diminishing Marginal Returns: as each additional factor is used, a point will be reached where the additional output produced will decline. Therefore, marginal physical product will fall. 5 marks

SAMPLE QUESTION – 20 MARKS

The price of residential property has increased in Ireland in recent years. Discuss four reasons for this development.

Sample answer:

Note: This is very topical for the 2019 exam, as the house/ land prices in Ireland are on the rise. Use these same points and make them relative to the question being asked. Population: Ireland’s population is increasing, with growth of 64,500 in the year to April 2018 (from April 2017). This is due to the combined effect of a natural

increase (number of births minus number of deaths = 30,500) and positive net migration (immigrants 90,300

minus emigrants 56,300 = 34,000). This has increased the demand for housing and therefore increased prices further. It has been estimated that Ireland would need 25,000 extra housing units each year to meet demographic changes in the short to medium term. 5 marks

Economic growth: The Irish economy is growing, with a GDP growth rate of 5% for the third quarter of 2018. With economic growth and increased employment (unemployment rate in December 2018 is at 5.3%), more people are demanding property, limiting supply and therefore, causing prices to increase further. 5 marks

Speculation in housing: Increases in property prices (7.1% increase in residential property prices in November 2018) fuels speculative demand, with more people seeking to invest in property as it is viewed as being a safe and sensible financial move. This causes an increase in demand for housing/land and therefore, a further increase in price. 5 marks

Banking (availability of loans): Financial institutions have eased lending restrictions. Interest rates (dictated by the ECB) have stayed at a very low level (base interest rate at 0% since March 2016), therefore the cost of borrowing money (mortgages) is low. This has increased demand for housing/land and therefore increased prices. This has been further enhanced by the Central Bank’s mortgage rules for first-time buyers, who only need a deposit of 10% of the value of the property and since 2017, the Government’s new ‘Help to Buy/Build’ scheme (income tax rebate for first time buyers). 5 marks

SAMPLE QUESTION – 25 MARKS

Explain, with the aid of a labour market diagram in each case, how equilibrium wage rates are determined in: (i) A free labour market

(ii)A labour market where a trade union has negotiated a

minimum wage

Diagram 5 marks

• A free market is where there are no restrictions on the

demand and supply of labour

• The demand curve for labour will be the MRP of

labour and slopes downwards

• The supply curve will be upward sloping

• The curves intersect at E

• This point represents the equilibrium wage rate WE,

with equilibrium quantity QE

• If the wage rate was above WE, then excess supply

would force the wage rate downwards

• If the wage rate was below WE, then excess demand

would force wages upwards

Explanation 7 marks

Equilibrium wage rate in a labour market with a minimum wage:

Diagram 5 marks

• The negotiated minimum wage rate is W min • No labour will be supplied below this rate

• Q1 represents the quantity of workers available at this

rate

• At Q1, the demand for labour equals the supply at the

minimum wage rate

• Here, this labour market is in equilibrium Explanation 8 marks

MONEY & BANKING

SAMPLE QUESTION – 20 MARKS A bank needs to keep a balance between its twin objectives of LIQUIDITY and PROFITABILITY. Explain the underlined terms.

How does the bank reconcile between these twin objectives? Sample answer: It is said that banks have twin objectives, which they must balance:

Profitability refers to the need for a bank to make as much profit as possible from its assets (loans, overdrafts) to satisfy its shareholders. The more

profitable the asset is, the less liquid it is. 4 marks Liquidity refers to a bank’s need to have assets (money) in order to meet the demand for cash by its consumers. The more liquid the asset is, the more profitable it is. 4 marks • Banks must have enough liquidity, meaning they must satisfy their consumers’ need for cash. They could do this by holding all their assets in cash.

• However, banks also wish to be profitable, and cash

doesn’t earn them any interest.

• Banks learned from experience that the compromise in having sufficient liquidity while still earning profits is to hold their assets in the following portfolio: ➤ They will keep the majority of their assets in the form of loans and overdrafts. The assets are profitable but not very liquid ➤ They will require sufficient assets in cash and liquid form to meet the cash requirements of their customers. These assets are liquid but not very profitable. 12 marks As a result, banks structure their holding of assets along the following lines: INFLATION

SAMPLE QUESTION – 25 MARKS

Explain the terms inflation and Consumer Price Index. Do you consider the Consumer Price Index an accurate measure of changes in the cost of living? Explain your answer.

Sample answer:

Inflation (or ‘price inflation’) refers to a sustained rise in the average prices of goods and services in the economy. It usually occurs because there is an increasing supply of money or credit circulating in the economy. Most recent figures from the Central Statistics Office show inflation in Ireland at 0.7% (December 2018). 5 marks

The Consumer Price Index (CPI) is the official measure of inflation in Ireland. CPI measures the price changes of goods and services typically consumed by all consumers. It is a price index (change) that compares the current cost of purchasing the same identical basket of goods within the base year (starting point). The CSO calculates inflation using the CPI in Ireland. 5 marks No, I don’t believe the CPI is an accurate measure of changes in the cost of living, for the following reasons: 1 mark

Limitations of an average: As CPI covers the buying habits of the average consumer, it may not accurately represent different groups in society, e.g. non-smokers/ non-drinkers, etc. 4 marks

Introduction of new products: New products are not included in CPI. It does not take into account increases in the purchasing power of money due to the introduction of new products. Greater variety makes each euro more valuable, so consumers need fewer euros to maintain any given standard of living. 5 marks

Limited range of products: A limited range of products is included in the CPI. Most families spend their income on a very large range of products. Only 12 categories of products are included in the CPI comprising roughly 8,000 different products. However, there are tens of thousands of different products on the market at any given time. 5 marks NATIONAL INCOME & ECONOMIC GROWTH

SAMPLE QUESTION

(i) Define Gross Domestic Product and Gross National Product.

(ii)Which of these terms do you consider to be a more useful measure of economic activity for Ireland? Explain your answer.

Sample answer:

(i)

Gross Domestic Product is the total output produced (value of goods and services) by the factors of production in the domestic economy irrespective of whether the factors are owned by Irish nationals or foreign nationals. 6 marks

Gross National Product is the total output produced (value of goods and services) by Irish-owned factors of production in Ireland and elsewhere. It is the measure of the income accruing to a country’s residents. 6 marks (ii) The difference between GDP and GNP is significant in Ireland. GDP is larger than GNP in Ireland’s case, as NFIA (net factor income from abroad) is a relatively large negative due to:

1. Profits earned by MNCs and repatriated back to their home countries is greater than the profits earned by Irish MNCs located abroad and returned to Ireland. 2. The interest payments on the foreign elements of Ireland’s debt. 3. The remittances (money sent back home) of immigrants in Ireland sent abroad is larger than the monies sent back to Ireland by Irish emigrants living abroad.

Therefore, GNP is a better measure of Irish economic

activity (and our standard of living) as GNP reflects only the part of economic activity that is produced and shared by Irish nationals. However, GDP is often used for comparisons with other EU countries and it is generally easier to measure. 8 marks

TOPICAL ISSUES

As Laurence J Peter once said, “An economist is an expert who will know tomorrow why the things he predicted yesterday did not happen today”. Many of you will be trying to predict topical issues that may feature in this year’s paper. The best way to get prepared for an unexpected question on a topical issue is to ensure you stay up-to-date with current economic issues and do your best to discuss your knowledge on these at home and at school.

The following is by no means a predictive or exhaustive list; it is merely a selection of possible topical issues that may be relevant for your exam this June.

Ireland’s economic growth

The Irish economy is continuing to grow, with most recent CSO results reporting a GDP growth rate of 5% for the third quarter of 2018. With economic growth and increased employment (unemployment rate in December 2018 was at 5.3%) as numbers of people at work are reaching record levels, the economy is strong with plenty of signs of continued growth going into 2019, from a domestic prospective. Growth has provided the benefits of improved government finances and investment opportunities but has also had the negative effects of pressure on the housing market and inflationary pressures.

However, Ireland does face some major external risks to its economy, with Brexit looming, weak eurozone economic growth and a possible transatlantic trade war posing huge threats to our continued growth. Students should be prepared to discuss:

• The factors contributing to Ireland’s recent economic growth rates

• Possible advantages/disadvantages of strong economic growth for Ireland

VAT on tourism activities

In July 2011 VAT rates on hotels and tourism attractions were cut from 13.5% to 9%, where they remained until 1 January, 2019, when they increased to 13.5%, as announced in the 2019 Budget. This rate extends to cinemas, theatres, sporting events, golf fees, newspapers and magazines due to links with the industry. The 9% rate, which continued for eight years, greatly benefitted the tourism industry and hence the Irish economy as a whole. It encouraged growth in the tourism sector and increased sales for any business that fitted into this category, encouraged FDI, created employment and greatly contributed to Ireland’s return to economic growth, during a period where our economic prospects appeared bleak. The Irish Government now believes this ultra-reduced VAT rate has achieved its original objective and a return to a 13.5% VAT rate on tourism activities is more appropriate, however, this is still a low VAT rate when compared to the standard 23% VAT rate in Ireland. Students should be prepared to discuss: • The economic advantages/disadvantages of the

increase in VAT on tourism activities

Universal Social Charge (USC)

The Universal Social Charge (USC) is a tax on income that replaced both the income levy and the health levy (also known as the health contribution) in January 2011. Over the past number of Budgets, the USC rates and thresholds have been decreased and were again in the 2019 Budget, as shown below. There are speculations and promises by the Government that the USC, often referred to as the “most hated tax”, will be completely abolished in the future.

2019 USC changes:

Incomes of €13,000 or less will continue to be exempt from USC in 2019. Once your income is over this limit, you will pay the relevant rate of USC on your income as follows:

• €0 to €12,012 @ 0.5%

• €12,012 to €19,874 @ 2%

• €19,874 to €70,044 @ 4.5%

• €70,044+ @ 8% Medical card holders and individuals aged 70 years and older whose aggregate income does not exceed €60,000 will continue to pay a maximum USC rate of 2% in 2019. Students should be prepared to discuss:

• The economic effects of the cuts in USC/possible

abolition of USC.

Housing crisis

Demand for housing is massively exceeding supply in Irish cities and towns, resulting in huge price increases, especially in urban areas, for renters and house hunters. The latest CSO figures report that in the year to November 2018, residential property prices at a national level increased by 7.1% (compared to November 2017). Major causes of Ireland’s shortage of residential properties and the subsequent rise in prices include fast rates of economic growth and employment, population growth, banking and the recent easing of lending restrictions. Also, the collapse of the Irish economy and the burst of the property bubble brought construction of housing to a halt from 2008 onwards. Public policies began focusing on dealing with mortgage debt and ghost housing estates rather than planning for future housing needs. This has put huge pressure on the rental market. Figures in the latest Daft.ie rental report show that, on average, listed rents increased by 11.3% during 2018. This compares with an increase of 10.7% in 2017, 13.5% in 2016, 9% in 2015 and 10.7% in 2014. Low income families cannot afford the constant increases in rent and are therefore being forced out of their accommodation, with many families on the verge of homelessness as a result. About 130,000 people are now on Ireland’s social housing waiting list, according to government figures. According to the Peter McVerry Trust, the number of people accessing State-funded emergency accommodation in Ireland in November 2018 was 9,968 (an increase of 244 from October) and 3,811 of these were children. This is a direct result of the increasing number of low-income families unable to access and afford housing. Students should be prepared to discuss:

• The causes of residential property price increases

and the current housing crisis in Ireland

• The effects of this on the Irish economy

• Policies being implemented by the Irish Government to attempt to solve these problems (see ‘Help to Buy’ and ‘Rebuilding Ireland Home Loans below).

‘Help to Buy’ scheme

The Help-to-Buy Scheme was introduced in 2017, to assist first-time buyers of newly built or self-build homes to fund the deposit required under the Central Bank’s rules. It will consist of a refund of income tax and DIRT paid over the previous four years.

To qualify for the scheme, applicants must take out a mortgage of at least 80% of the purchase price (or, for a self-build, 80% of the valuation approved by the mortgage provider).

For these new homes costing up to €400,000, a rebate of up to 5% of the purchase price will be available. (For homes costing between €400,000 and €600,000, the maximum relief will be €20,000.) No relief will be available for homes costing more than €600,000. This scheme will apply to first-time buyers of self-builds or new residential property between 19 July 2016 and 31 December 2019. Students should be prepared to discuss: • The possible advantages/disadvantages of this government scheme on the Irish economy.

Rebuilding Ireland Home Loans

Since 1 February, 2018, local authorities across the country have been offering Rebuilding Ireland Home Loans, a Government-backed initiative which aims to offer low-cost mortgages to purchasers who have difficulty in securing finance from the main lenders. Unlike the Help to Buy grant, which is restricted to new homes, the new scheme can be used to purchase a new or second-hand home or finance the construction of a self-build. The Department of Housing confirmed that first-time buyers will still be able to apply for the 5% tax Help to Buy rebate through the Revenue Commissioners, as well as applying for a low-cost mortgage through this scheme. The home loan scheme is aimed at first-time buyers with low and middle incomes (annual salaries of up to €75,000). While the scheme offers cut-price lending rates, starting at just 2% fixed for 25 years, its big attraction is that it will allow home buyers to avoid the Central Bank’s tricky income multiple rules, which have made it difficult for many to buy at a time of rapidly rising prices, as they limit the amount someone can borrow to 3.5 times their salary (with certain exceptions). In urban areas, particularly in Dublin, this has made it very difficult for someone on the average salary of about €37,000 to purchase a home. The new scheme however allows buyers to sidestep this rule, by offering mortgages on the ability to service their debt. Local authorities are able to do this because, as unregulated financial providers, they are not subject to Central Bank rules. Students should be prepared to discuss:

• Possible advantages/disadvantages of this government backed initiative on the Irish economy.

BREXIT

On the 23 June, 2016 Britain voted to leave the EU, a decision that shocked the world. Often referred to as the “awkward partner”, Britain has always been a semi-detached member of the EU. Over the past few decades, British governments have kept their distance as other European member states pursued an “ever closer union”. Britain did not join the single euro currency and is not a member of the Schengen Passport-free travel zone (neither is Ireland).

Britain is to officially leave the EU and enter the transition period on Friday, 29 March, 2019. The ultimate economic impact of Britain’s exit on Ireland will depend on the withdrawal agreement. The UK and Irish economies have always had a very close relationship and Brexit may have huge consequences for Irish trade. However, as the only English-speaking economy remaining in the EU, Ireland may also stand to gain from an increase in foreign direct investment (FDI).

While possibilities exist for Ireland in the context of an orderly withdrawal, the situation will be totally different if the UK crashes out with no agreement. The volume of trade between Ireland and the UK (including Northern Ireland) and the fact that the UK has always been a land bridge for goods being transported to Europe from Ireland and vice versa makes the situation potentially very volatile and impossible to predict. Students should be prepared to discuss:

• The possible advantages/disadvantages that Brexit

will have on the Irish economy.

Minimum wage increase

The economic effects of increasing the minimum wage is topical for the 2019 exam. In line with Budget 2019, since 1 January the minimum wage has increased from

€9.55 to €9.80 per hour. This increase will improve the standard of living amongst those earning minimum wage. Hgher incomes will increase aggregate spending, rising the demand for goods and services and resulting in more VAT receipts for the Irish Government. Students should be prepared to discuss:

• The advantages/disadvantages on the Irish economy of the increase in the national minimum wage. Irish Unemployment rate - total (% labour force)