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Explain any three of the following: - Current Budget Deficit; - Progressive Tax; - Nationalisation; - Economic recession - Leaving Cert Economics - Question 8 - 2012
Question 8
Explain any three of the following: - Current Budget Deficit; - Progressive Tax; - Nationalisation; - Economic recession. An increased rate of VAT, increased carbo... show full transcript
Worked Solution & Example Answer:Explain any three of the following: - Current Budget Deficit; - Progressive Tax; - Nationalisation; - Economic recession - Leaving Cert Economics - Question 8 - 2012
Step 1
Explain each of the underlined taxes.
Answer
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VAT (Value Added Tax): VAT is a tax imposed on goods and services based on their value. It is charged at each stage of production and distribution, meaning consumers ultimately bear the cost through higher prices.
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Carbon Taxes: This is an environmental tax designed to reduce carbon emissions by taxing the carbon content of fossil fuels. It incentivizes businesses and consumers to use cleaner energy sources.
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Household Charge: A household charge is an annual fee imposed on property owners, which is used to cover local services and infrastructure.
Step 2
Discuss one economic effect which the above tax increases will have for each of the following: Households.
Answer
Households are likely to experience a decrease in disposable income due to higher taxes. With the increase in VAT and household charges, families may have less remaining income to spend on essentials, affecting their overall standard of living.
Step 3
Discuss one economic effect which the above tax increases will have for each of the following: Retailers in Ireland.
Answer
Retailers may face reduced sales and possible closures. As consumers cut back on spending due to higher taxes, businesses, especially in sectors like retail, may experience a decrease in revenue, leading to job losses and even closures of shops that cannot sustain profitability.
Step 4
Discuss one economic effect which the above tax increases will have for each of the following: Government’s Current Budget Deficit.
Answer
The government's Current Budget Deficit may be positively influenced as these tax increases are likely to increase tax revenue. Higher VAT and carbon taxes could lead to more income for public services, potentially reducing the deficit if spending remains controlled.
Step 5
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Step 7
State and explain two economic disadvantages of Ireland’s National Debt.
Answer
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Opportunity Costs: High national debt can divert funds away from essential services, limiting resources for education, healthcare, and infrastructure development as repayment obligations take precedence.
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Increased Burden on Taxpayers: To meet national debt obligations, the government may need to increase taxes. This can lead to dissent among citizens and impact their living standards.