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Outline one economic effect which a decrease in public sector pay may have for each of the following: Retailers in Ireland: Government Finances: - Leaving Cert Economics - Question 4 - 2014
Question 4
Outline one economic effect which a decrease in public sector pay may have for each of the following: Retailers in Ireland: Government Finances:
Worked Solution & Example Answer:Outline one economic effect which a decrease in public sector pay may have for each of the following: Retailers in Ireland: Government Finances: - Leaving Cert Economics - Question 4 - 2014
Step 1
Retailers in Ireland:
Answer
One possible economic effect of a decrease in public sector pay on retailers in Ireland is a reduction in demand for goods and services. As public sector workers experience reduced disposable income, their purchasing power declines, leading to lower spending at retailers. With fewer sales, retailers may face lower profits, which could force them to reconsider their operational strategies, such as reducing staff or adjusting their inventory levels.
Step 2
Government Finances:
Answer
An economic effect on government finances might involve reduced current expenditure. With lower wages for public sector employees, the government would have decreased expenditures on salaries. This reduction could potentially lead to decreased government borrowing, since there would be less need to finance large salary bills. However, the decrease in disposable income may also lead to lower tax revenues from income tax, thereby impacting the overall budget availability for public services.