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You are given the following information about a country's trade in a year - Leaving Cert Economics - Question 5 - 2015
Question 5
You are given the following information about a country's trade in a year. Visible Exports £ million 25,000 Visible Imports £ million 24,200 Balance of Trade £ mill... show full transcript
Worked Solution & Example Answer:You are given the following information about a country's trade in a year - Leaving Cert Economics - Question 5 - 2015
Step 1
Explain the term Balance of Trade.
Answer
The Balance of Trade is a measure of the difference between a country's visible exports and visible imports over a specific period of time. It indicates whether a country has a trade surplus (exports exceed imports) or a trade deficit (imports exceed exports). In essence, it reflects a country's economic performance in its trade relationships.
Step 2
Using the above data calculate the Balance of Trade and explain your answer.
Answer
To calculate the Balance of Trade, we use the formula:
Balance of Trade = Visible Exports - Visible Imports
Substituting the given numbers:
Balance of Trade = £25,000 million - £24,200 million = £800 million
This value signifies a surplus because it indicates that visible exports are greater than visible imports.
Step 3
If the level of visible imports above increased by £1,000, calculate the new Balance of Trade and state if it is a surplus or deficit.
Answer
If visible imports increase by £1,000, the new visible imports will be:
ew Visible Imports = £24,200 million + £1,000 = £25,200 million
Now, calculating the new Balance of Trade:
New Balance of Trade = £25,000 million - £25,200 million = -£200 million
This indicates a deficit as the visible imports now exceed exports.
Step 4
Explain the economic term embargo.
Answer
An embargo is a government-imposed restriction on trade with specific countries or the exchange of certain goods. It can be enacted to achieve political objectives, protect domestic industries, or respond to international relations. In this case, an embargo on European beef imports into the US implies that Irish beef exports were previously restricted from entering that market.
Step 5
Step 6
State and explain two economic benefits of an increase in exports for the Irish economy.
Answer
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Employment Creation: Increased exports typically lead to heightened demand for goods produced in Ireland, thereby resulting in the creation of new jobs in manufacturing, logistics, and related sectors.
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Increased GNP/Economic Growth: As exports grow, the income generated from these sales contributes to a higher Gross National Product (GNP), leading to enhanced economic activity and investment in local industries. This fosters a cycle of growth within the economy, which can further improve living standards.
Step 7
Explain the possible effects which this fall in the value of the euro may have on each of the following:
Answer
(i) Ireland's exports to the UK: With the euro falling in value relative to the UK pound, Irish exports become cheaper for UK consumers. This can lead to a rise in demand for Irish goods.
(ii) Ireland's imports from the UK: The cost of UK imports for Ireland will increase as a result of the weaker euro. This may lead to decreased demand for UK goods in Ireland, as they become more expensive.
(iii) Employment in Ireland: An increase in exports can lead to job creation in Ireland, as businesses may need to hire more staff to meet the rising demand. Conversely, reduced imports may also encourage domestic production, further influencing employment positively.