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The Irish economy is an open economy which relies on exports to help economic growth - Leaving Cert Economics - Question 8 - 2010
Question 8
The Irish economy is an open economy which relies on exports to help economic growth. (a) (i) Explain each of the underlined terms. (ii) State and explain three... show full transcript
Worked Solution & Example Answer:The Irish economy is an open economy which relies on exports to help economic growth - Leaving Cert Economics - Question 8 - 2010
Step 1
Explain each of the underlined terms.
Answer
An open economy is one that engages in international trade, meaning it imports and exports goods and services while interdependent on other countries' economies. Economic growth refers to an increase in the production of goods and services in an economy, typically measured as an increase in Gross National Product (GNP) per head.
Step 2
State and explain three reasons why exports are so important for the Irish economy.
Answer
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Job creation: Exports lead to increased demand for goods manufactured in Ireland, which subsequently results in job creation in multiple sectors.
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Increased GNP/Economic growth: Revenue from exports contributes to a rise in GNP, allowing for increased spending and investment within the economy.
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Increased sales/profits: Exporting allows Irish firms to expand their markets beyond national borders, which can significantly boost their sales and profits, ultimately benefiting the overall economy.
Step 3
Step 4
Step 5
State and explain two reasons why some governments wish to restrict imports.
Answer
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Protect domestic industries: Governments may restrict imports to help local businesses compete against foreign companies that can offer goods at lower prices.
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Protect domestic employment: By restricting imports, a government can safeguard jobs within its own country from being lost due to competition from cheaper foreign products.
Step 6
Discuss the economic effects of the above development on each of the following: (i) Irish firms exporting to the UK;
Answer
The increase in the value of the euro against the pound means that Irish exports to the UK become more expensive for British consumers. As a result, Irish firms may experience a decline in sales and profitability, with some firms potentially facing job losses due to reduced demand.
Step 7
Discuss the economic effects of the above development on each of the following: (ii) Irish imports from the UK;
Answer
With the euro being stronger than the pound, imports from the UK are cheaper for Irish consumers. This could lead to a surge in demand for UK goods and services in Ireland, resulting in increased trade volume and possibly lower inflation rates in Ireland.
Step 8
Discuss the economic effects of the above development on each of the following: (iii) Employment within Ireland.
Answer
The overall impact on employment may be negative. If Irish firms exporting to the UK reduce their staff due to decreased sales, this could lead to an overall decrease in employment levels in Ireland. Additionally, increased imports from the UK could lead domestic companies to struggle, further affecting job opportunities in local markets.