SAMPLE QUESTIONS AND ANSWERS
SECTION A – SHORT QUESTIONS
1. Sample question
Outline why “choice” is fundamental to the study of economics.
Sample answer:
In economics, resources are limited/scarce and have alternative uses (e.g. money), however consumer wants 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 equals Marginal Revenue. 17 marks
3. Sample question:
(a) Outline the primary responsibility of the National Treasury Management Agency (NTMA).
(b) Is selling bonds at a low yield good or bad for the Irish Government? Explain your answer.
Solution:
(a) The National Treasury Management Agency (NTMA) is mainly responsible for borrowing for the Exchequer and national debt management in order to ensure liquidity for the Exchequer and to minimise the interest burden over the medium term. It also manages the Central Treasury Service, which offers cash management facilities to non-commercial state companies.
(b) Selling bonds at a low yield is good for the Irish
Government.
Because it means that the cost to the Government of raising money is reduced. 17 marks
4. Sample question:
Outline one possible social benefit and one possible social cost of the Irish Government investing in infrastructure.
Solution:
Social benefit:
Attracts foreign direct investment: enhanced infrastructure should enable Ireland to attract more foreign investment into the economy. This will result in the benefits of increased employment, increased incomes, economic growth and a better standard of living.
Social cost:
Opportunity costs of funds: the funds used for developing these projects could have been used for alternative purposes which may have benefited society in general. For example, the Government could have spent money on improvements in the health services or education. 16 marks
5. 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
SECTION B – LONG QUESTIONS
▶ DEMAND, SUPPLY, EQUILIBRIUM & ELASTICITY
(a) (i) State the “Law of Supply” and illustrate with a labelled diagram.
(ii) Outline, with the aid of labelled diagrams, two factors that would cause a shift in the supply curve. (20 marks)
(b)(i) Explain the term Market Equilibrium. (ii) Assume the average hourly equilibrium wage (price) in a free labour market is €9 per hour. On one diagram, illustrate the effect on this labour market if the Government introduced a minimum wage rate of €10.10 per hour.
(iii) The Irish Government has continued to increase the National Minimum Wage in its recent annual budgets, and again, it is to increase to €10.10 per hour, in February 2020. There are arguments that this is still not high enough to meet the rising cost of living in Ireland. Discuss one economic advantage and one economic disadvantage of a rising minimum wage rate in Ireland.
(25 marks)
(c) Which figure stated below is most likely to represent each of the following:
● Income elasticity of demand for inner-city bus transport ● Income elasticity of demand for Kellogg’s Cornflakes ● Price elasticity of demand for cuts of organic meat -2.6 -0.2 +3.3
Give reasons for your choice in each case.
(30 marks) [75marks] (a)(i) The Law of Supply states that there is a positive relationship between the price of a good and the quantity supplied of that good. If the price rises, quantity supplied rises (P↑Q↑) and if price falls quantity supplied falls (P↓Q↓). Ceteris paribus – all other things being equal.
Explanation 5 marks
(ii) 2 @ 4 marks each + 2 diagrams each @ 1 mark 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 a decrease in the costs of production (e.g. fall in wages, fall in cost of raw materials, reduction in taxes, increase in subsidies) then it will be less expensive to manufacture the good, therefore it will increase its supply of the good. This will cause a rightward shift in the supply curve (b) (i) Market equilibrium arises where the quantity demanded equals the quantity supplied. As there is neither surplus nor shortage in the market, there is no tendency for price to change.
Definition 5 marks
(iii)
Advantage:
Encourage employment: the increase in wages will encourage people to join the workforce (increased participation rate) and reduce government expenditure on social welfare payments and participation in the black economy.
Disadvantage: Higher selling prices: with labour costs rising for firms, this may lead to higher prices of goods/services for consumers in the form of cost-push inflation.
1 advantage + 1 disadvantage @ 5 marks each (2+3)
(c)
YED for inner-city bus transport is -0.2
- Inner-city bus transport is an inferior good with regard to income (negative income effect), therefore a negative YED value.
- Bus transport is a necessity for those using it to commute, therefore income inelastic (percentage change in quantity demanded is less than the percentage change in income) (YED<1). 10 marks
YED for Kellogg’s Cornflakes is +2.6
- Kellogg’s Cornflakes are a normal good with regards to income (positive income effect), therefore a positive YED value.
- Kellogg’s Cornflakes are a non-necessity and therefore income elastic (change in quantity demanded greater than change in income) (YED>1). 10 marks PED for cuts of organic meat is -3.3
- Cuts of organic meat are a normal good with regards to price (negative price effect), therefore a negative PED value. - Cuts of organic meat are a non-necessity and therefore price elastic (change in quantity demanded greater than change in price) (PED>1). 10 marks ▶ MARKET STRUCTURES (a) (i) Distinguish between ‘price competition’ and ‘non-price competition’.
(ii) State whether you would expect to find “price competition” or “non-price competition” in each of the following market structures:
● Imperfect Competition
● Oligopoly
Give reasons for your answer in each case. (20 marks)
(b) (i) Explain, with the aid of a diagram, the long-run equilibrium of a firm in imperfect competition.
(ii) With reference to your diagram in (b) (i) explain why the firm is not making socially efficient use of scarce resources. (30 marks)
(c) Discuss the main SIMILARITIES and DIFFERENCES between Monopoly and Imperfect Competition as market structures (25 marks) [75 marks]
(a) (i) Price Competition is where firms compete by changing their prices and trying to undercut their rivals on the basis of price, in order to gain market share. 5 marks
Non-price Competition is where firms compete using methods other than changing their prices, as products are close substitutes and firms try to distinguish them in some way, through product differentiation, such as packaging, advertising, promotion, advertising, branding, competitions, club points and good customer service. 5 marks
(ii) Imperfect Competition: price competition 1 mark
Reasons: Any 2 @ 2 marks each – Price makers set their own prices – goods are very close substitutes – each firm must entice consumers to buy its product (through price competition)
Oligopoly (5m): non-price competition 1 mark
Reasons: Any 2 @ 2 marks each – firms are interdependent and watch each other’s actions – one firm is generally a price leader – limit pricing may occur to discourage the entry of new firms – price rigidity generally occurs etc.
Super Normal Profit (SNP) is not being earned as Average Revenue is equal to Average Cost. This means that only normal profit is being earned, as this is included in the average costs.
P2 is the equilibrium selling price and Q2 is the equilibrium quantity produced.
Equilibrium occurs at point E, where Marginal Cost is equal to Marginal Revenue (MC = MR) and MC cuts MR from below/ MC is rising at a faster rate than MR.
Cost of production is at point B, which is not the lowest point of the AC (point W). At this point the firm is covering its costs and making a normal profit.
Scarce resources are not being used efficiently, and the firm is said to be wasting scarce resources as it is not operating at the lowest point of the AC curve (point W). This is due to product differentiation, which is achieved through additional costs such as advertising and branding.
Explanation: 8 marks
(ii)
● An imperfectly competitive firm does not produce at the socially efficient lowest point on its AC curve, (point W in diagram above)
● It does not produce at the lowest point of AC due to product differentiation, which is achieved through additional costs such as advertising and branding.
● As it is not producing at the lowest point of the AC curve, there is spare/excess capacity (they could produce more at
lower average costs) in its operations and society does not benefit from maximum utilisation of resources. Therefore, consumers gain variety at the expense of social efficiency.
3 points of information: 4 marks each = 12 marks
(C) SIMILARITIES:
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. 5 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 sell less at higher prices and more at lower prices. 5 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 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. 5 marks
DIFFERENCES:
Barriers to Entry:
● In Monopoly barriers to entry exist (such as cost barriers) which prohibit entry of new firms into the market.
● In Imperfect Competition barriers to entry do not exist as there is free entry and exit in the market.
● Barriers to Entry are obstacles that prevent new competitors from easily entering an industry and threatening the position of the firm(s) already in existence, such as high start-up costs or legal restrictions. 5 marks
Profits in the long run:
● In Monopoly firms can continue to earn Super Normal Profits in the long run as new firms cannot enter (Average Revenue can exceed Average Costs).
● In Imperfect Competition due to free entry and exit, firms will enter and Super Normal Profits will be eroded, so only normal profit will be earned (Average Revenue equals Average Cost). 5 marks
Economies of Scale:
● In Monopoly a firm may benefit from Economies of Scale, as there is only one firm in the industry and it can expand.
● In Imperfect Competition firms tend not to benefit from Economies of Scale as they produce such a small fraction of total output 5 marks
▶ FACTORS OF PRODUCTION
(a) (i) Distinguish between the short-run and long-run production periods.
(ii) In the short run, firms may stay in the industry even if they are making a loss.
Explain this statement. (15 marks)
(b) (i) Outline two factors that have caused the prices of residential property in Ireland to rise in recent years. (ii) Discuss two economic effects of the above situation for the Irish economy (iii) “Scarce land usually ends up in its most profitable use”.
Briefly discuss this statement. (25 marks)
(c) (i) Define the term “Investment”.
(ii) Discuss two factors that influence the level of investment in the Irish economy at present.
(iii) Keynes’s concept of Liquidity Preference is based on three reasons why people desire to hold wealth in money form.
State and explain each of these reasons AND discuss the effect a fall in interest rates is generally expected to have on each of these reasons. (35 marks) [75 marks]
(a) (i) 5 marks (3+2)
Short run is a period of time during which at least one
factor of production is fixed in supply. Therefore, at least one cost of production is fixed. (Example: the lease on a premises is fixed for six months for a particular firm, so six months is their short-run period)
Long run is a period of time during which all the factors
of production are variable in quantity. Therefore, all costs of production are variable. (Example: amount of labour becomes variable once contracts expire after 24 months)
(ii) 5 + 5 marks
● The rule for all companies in the short run is that their total revenue should cover their variable costs and any revenue generated above the firm’s variable costs can contribute toward the paying of their fixed costs.
● In the short run, a company may make a loss, but as long as it is covering its variable costs, it should stay in production, as the loss by producing would be smaller than by closing down. (b)
(i) 2 @ 5 marks (2+3) each
Population: Ireland’s population is increasing, with a growth of 64,500 in the year to April 2019 (from April 2018). This is due to the combined effect of a natural increase (number of births minus number of deaths = 30,800) and positive net migration (immigrants 88,600 minus
emigrants 54,900 = 33,700). 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.
Economic growth: The Irish economy is growing, with a GDP growth rate of 4.9% for the third quarter of 2019. With economic growth and increased employment (unemployment rate in November 2019 was at 4.8%), more people are demanding property, limiting supply and therefore causing prices to increase further.
(ii) 2 @ 5 marks each (2+3)
Pressure on the rental market: The figures in the latest Daft.ie Rental report show that, on average, listed rents increased by 5.2% in Q3 of 2019, from 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 and on Ireland’s social housing waiting list as a result.
Homeless crisis: The number of people accessing Statefunded emergency accommodation is 10,514 (3,752 of whom are children), according to latest figures published by the Department of Housing, Planning and Local Government. This is a direct result of the increasing number of lowincome families unable to access and afford housing.
(iii) Land is a non-specific factor of production:
● Land can be used for various different purposes
● It can be switched easily from agricultural use to industrial or residential use
● Therefore, land will always be devoted to its most profitable use. 5 marks
(c) (i) 5 marks
Investment: Involves the production of capital goods. It is any addition to capital stock in the economy (opposite of saving), for example: purchase of new machinery by a firm. (Also known as capital formation).
(ii) 2 @ 5 marks each
● Interest rates
▶ As interest rates decrease, the cost of borrowing decreases. Therefore, the profit earned will be higher, resulting in a rise in investment.
▶ Interest rates in Ireland are relatively low, as dictated by the European Central Bank (MRO interest rate at 0% since March 2016), encouraging investment both nationally and from foreign direct investment.
● Government economic policies
▶ If government policy is favourable towards investment, then investment tends to rise. Examples of favourable policies currently in Ireland include a policy to maintain corporation tax at current low levels (12.5%) and continued development of infrastructure (National Broadband Plan). ▶ NATIONAL INCOME & ECONOMIC GROWTH (a) (i) Show the equation which links the level of national income with all of its components.
(ii) Explain what determines the size of each of these components of national income. (20 marks)
(b) (i) With the aid of a suitably labelled diagram, explain the circular flow of income in an open economy.
(ii) Outline briefly how imports affect the value of the multiplier. (25 marks)
(c) (i) Distinguish between the terms Gross Domestic Product (GDP) and Gross National Product (GNP).
(ii) Which of these terms do you consider to be a more useful measure of economic activity for Ireland? Explain your answer.
(iii) According to estimates, for the past number of years, Ireland was measured as having the highest economic growth rate (GDP) in the European Union.
Discuss two factors influencing Ireland’s recent fast rates of economic growth. (30 marks) [75 marks]
(a)(i)Y=C+I+G+X–M 5 marks (ii) 5 @ 3 marks each ● Consumption:
▶ Level of income: the higher the level of income, the higher the consumption, and vice versa. ▶ Availability of credit: as credit becomes more easily available, spending rises and vice versa.
● Investment:
▶ Rate of interest: as interest rates rise, borrowing becomes more expensive and investment tends to fall and vice versa.
▶ Government economic policies: If government policy (such as corporation tax, development of infrastructure) is favourable towards investment, then investment tends to rise and vice versa.
● Government expenditure:
▶ Political decisions: government expenditure primarily depends on the political decisions of the Government and the type of fiscal policy being pursued by the State.
● Exports:
▶ Value of the euro: the value of the euro in relation to other currencies will affect the amount of exports (e.g. if the euro rises in value in relation to the US dollar, exports to the US will fall as Irish goods are less competitive abroad).
▶ Income levels in export markets: if income levels abroad are rising, demand for Irish products may also increase and vice versa.
● Imports:
▶ Value of the euro: the value of the euro in relation to other currencies will also affect the level of imports (e.g. if the value of the euro increases in relation to the Pound Sterling, imports from the UK will increase). ▶ Availability of goods: if essential goods are not available in Ireland, they will have to be imported (such as oil).
(b) (i) diagram 10 marks
Explanation 10 marks
● Households:
▶ Households supply the factors of production (such as labour, land, capital and enterprise) to firms.
▶ In return, they get paid wages, rent, interest and profit. ▶ Households then use this income to:
∎ Consume (spend on) the goods and services produced by the firms
∎ Pay tax to the government (direct and indirect) π Save in financial institutions
∎ Purchase imports.
● Firms:
▶ Firms produce goods/services using factors of production provided by households.
∎ Firms receive household spending for the goods/ services they produce.
∎ The Government spends money, mainly from the taxation revenue, in the economy which increases the demand for firms’ output.
∎ Financial institutions use money saved to lend out for investment purposes.
∎ Foreign markets will spend money on output exported from Irish firms.
(ii) 5 marks
1. Imports decrease spending within the Irish economy as they are a leakage from the circular flow of national income.
2. When spending decreases less economic activity is
generated within the economy.
3. The value of the multiplier decreases as imports increase.
(c) (i) 2 @ 5 marks each
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 factors of production (MNCs, etc).
Gross National Product is the total output produced (value of goods and services) by Irish-owned factors of production in Ireland and elsewhere. This excludes any earnings by foreign factors of production in Ireland and it is the measure of the income accruing to a country’s residents.
(ii)
● GDP measures the value of all goods and services produced in the country in the period. It is the fundamental measure of economic activity.
● GDP is actually larger than GNP in Ireland’s case.
● The difference between GDP and GNP is significant in Ireland. GDP is larger than GNP in our case as NFIA is a relatively large negative in Ireland’s case 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 money earned by Irish emigrants abroad and sent home to Ireland.
● 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, spent in Ireland and contributes towards Ireland’s economic growth.
● However, GDP is used for comparison with other EU countries and it is generally easier to measure.
(iii) 2 @ 5 marks (2+3) each
Employment rates: unemployment rates are decreasing rapidly (down to 4.8% in December 2019) and job creation is staying strong. Ireland has hit record highs of numbers in employment. This is increasing consumer spending and aggregate demand and contributing to the level of economic growth.
Corporation tax: by maintaining low levels of corporation tax (at 12.5%, Ireland’s corporation tax is amongst the lowest in the world), Ireland has ensured it has continued to stay a desirable location for indigenous and multinational companies to locate and invest in. This is creating employment, increasing aggregate demand and contributing to economic growth.
▶ 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 4.9% for the third quarter of 2019. With economic growth and increased employment (unemployment rate in December 2019 was at 4.8%) as numbers of people at work are reaching record levels, the economy is strong with plenty of signs of continued growth going into 2020, 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 major external risks to its economy, and as a small, open economy, it is particularly exposed to the actions of other countries. Factors outside of our control (Brexit, US trade and taxation policy, Chinese economic performance) will expose any weakness in the Irish economy and threaten 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
Value Added Tax 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 went back to 13.5%, as announced in the 2019 Government 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 fell into this category, encouraging FDI, creating employment and greatly contributing to Ireland’s return to economic growth during a period where our economic prospects appeared bleak. The Irish Government believes this ultra-reduced VAT rate 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
Housing Crisis
Residential property prices increased by 1.4% nationally in the year to November 2019. This compares with an increase of 7.2% in the 12 months to November 2018. In Dublin, residential property prices decreased by 0.7% in the year to November and excluding Dublin were 3.6% higher in the year to November. Although property prices are high, the growth in prices is relatively stable at present. It is the rental market – home to almost one third of all households in the country – that is the core of Ireland’s housing issues at present and looks set to continue this way unless we see a notable improvement in the supply of rental properties.
Demand for housing is massively exceeding supply in Irish cities and towns, putting huge pressure on the rental market and resulting in significant price increases, especially in urban areas, for renters. The figures in the latest Daft.ie Rental report show that, on average, listed rents increased by 5.2% in Q3 of 2019, from 11.3% during 2018. 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.
The number of people accessing State-funded emergency accommodation is 10,514 (3,752 of whom are children), according to latest figures published by the Department of Housing, Planning and Local Government. This is a direct result of the increasing number of low-income families unable to access and afford housing. Ireland evidently is still no closer to resolving the overall accommodation crisis.
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’ Scheme below)
‘Help-to-Buy’ Scheme
Budget 2020 announced that the Help-to-Buy Scheme in its current form will be extended to the end of 2021. The Help-toBuy 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 of Ireland’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.
The continuation of the Help-to-Buy scheme should enable new homes development, particularly in regional Ireland and should help to take pressure of the saturated rental market.
Students should be prepared to discuss:
● The possible advantages/disadvantages of this government scheme for the Irish economy.
BREXIT
The UK left the European Union at 23:00 GMT on 31 January, but that is not the end of the Brexit story. The UK has now entered an 11-month period, known as the transition period, which keeps the UK bound to the EU’s rules. The transition (sometimes called the implementation period) is due to last until 31 December 2020. During this period, the UK will remain in both the EU customs union and single market.
The ultimate economic impact of Britain’s exit on Ireland will depend on the trade deal that is established during the transition period. 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 Englishspeaking 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 a trade deal, the situation will be totally different if the UK crashes out at the end of the transition with no trade deal with the EU. 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 for the Irish economy.
Minimum Wage Increase
The economic effects of increasing the minimum wage is topical for the 2020 exam, as from 1 February 2020 the national minimum wage in Ireland was increased to €10.10 per hour from €9.80. Normally a minimum wage rise would take place in January, however the Government decided to delay the date of implementation because of fears of a ‘no–deal’ Brexit and its effect on the economy. This increase will improve the standard of living amongst those earning minimum wage and higher incomes will increase aggregate spending, raising 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 for the Irish economy of the increase in the national minimum wage. Unemployment rate - total (% labour force) Ireland