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One method for calculating National Income, is the expenditure method - Leaving Cert Economics - Question 7 - 2016
Question 7
One method for calculating National Income, is the expenditure method. (i) Explain the underlined term. (ii) Name the two other methods used to calculate national ... show full transcript
Worked Solution & Example Answer:One method for calculating National Income, is the expenditure method - Leaving Cert Economics - Question 7 - 2016
Step 1
Explain the underlined term.
Answer
National Income refers to the total income earned by the permanent residents of a country from current economic activity in one year. It includes wages, profits, rents, and taxes, minus subsidies, and provides an overall measure of the economic performance of a nation.
Step 2
Step 3
State and explain two possible uses of national income statistics for a country.
Answer
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Changes in the level of economic growth: National income statistics help assess the growth rate of the economy over time, identifying potential improvements in living standards.
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International comparisons: By comparing national income statistics with those of other countries, policymakers can assess their country's economic standing and devise targeted policies for improvement.
Step 4
Step 5
Calculate, using the figures provided, the level of National Income.
Answer
Using the provided figures, we can calculate National Income (Y) as follows:
[ Y = C + I + G + X - M ] [ Y = €2,000m + €700m + €500m + €200m - €150m ] [ Y = €2,000m + €700m + €500m + €200m - €150m = €3,250m ]
Therefore, the level of National Income is €3,250m.
Step 6
Step 7
State and explain two possible economic advantages of the above development for the Irish economy.
Answer
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Increased employment opportunities: A growing GDP often leads to the creation of more jobs as businesses expand to meet rising demand, allowing more individuals to secure employment.
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Improved government finances: An increase in GDP results in higher tax revenues, which can lead to enhanced government spending on public services and investments to boost economic growth further.
Step 8
Outline two possible costs of economic growth.
Answer
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Pressure on housing market: Increased demand for housing due to a growing population can lead to higher prices, making housing less affordable for many.
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Environmental degradation: Rapid economic growth can often lead to a strain on resources and environmental damage, as higher production levels demand more energy and raw materials.