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It has been suggested that the main commercial (retail) banks in Ireland should be nationalised - Leaving Cert Economics - Question 6 (a) - 2010
Question 6 (a)
It has been suggested that the main commercial (retail) banks in Ireland should be nationalised. (i) Explain the underlined terms. (ii) Outline two possible econom... show full transcript
Worked Solution & Example Answer:It has been suggested that the main commercial (retail) banks in Ireland should be nationalised - Leaving Cert Economics - Question 6 (a) - 2010
Step 1
Explain commercial banks
Answer
Commercial banks are institutions that provide deposit and lending services to personal consumers and businesses. They play a crucial role in the economy by offering a safe place for individuals and companies to deposit their money, providing loans for various purposes such as personal expenses, business expansion, and property purchases. Their main function is to facilitate transactions, manage payments, and provide credit, thus supporting economic activity and growth.
Step 2
Explain nationalisation
Answer
Nationalisation refers to the process of taking an industry or assets into public ownership by a government. In the context of banks, this means that the government assumes control of the banks, operating them as state-owned enterprises. The intent behind nationalisation is often to ensure that banking services are provided in a way that serves the public interest, rather than profit motives. This can help stabilize the banking system in times of economic crisis and ensure equitable access to financial services.
Step 3
Outline two possible economic arguments for the nationalisation of the banks
Answer
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Stability to economy / investor confidence: Nationalising banks may signal to domestic and international investors that the state seeks to protect its important resource and attract investment. This can enhance overall stability in the banking sector.
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Availability of credit: Nationalisation could ensure that credit flows to those individuals and businesses who require it, especially during periods when private banks may tighten their lending criteria.
Step 4
Outline two possible economic arguments against the nationalisation of the banks
Answer
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Unnecessary state interference: The government’s involvement in commercial business may stifle competition and discourage private sector investment. This could lead to inefficiencies in banking operations.
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Increased taxation: To fund the purchase and running of nationalised banks, the government may need to increase taxes, which can burden taxpayers and potentially slow economic growth.