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Study the information supplied and answer the questions which follow: Unemployment in Ireland is less than 5% but some economists are concerned because interest rates have risen and are forecast to increase - Leaving Cert Business - Question Question 1 - 2007
Question Question 1
Study the information supplied and answer the questions which follow: Unemployment in Ireland is less than 5% but some economists are concerned because interest rat... show full transcript
Worked Solution & Example Answer:Study the information supplied and answer the questions which follow: Unemployment in Ireland is less than 5% but some economists are concerned because interest rates have risen and are forecast to increase - Leaving Cert Business - Question Question 1 - 2007
Step 1
Outline three benefits of low unemployment to the Irish economy.
Answer
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Wealth Creation: Low unemployment leads to increased disposable income for individuals, fostering greater investment and spending within the economy.
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Increased Consumer Spending: With more people employed, there is a higher demand for goods and services, which stimulates business growth and job creation.
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More Tax Revenue for the Government: Low unemployment generates higher tax contributions such as PAYE, PRSI, VAT, etc., allowing the government to invest more in public services.
Step 2
Outline three effects of increasing interest rates on Irish business.
Answer
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Increased Costs of Existing Borrowings: Businesses with variable-rate loans will face higher repayment amounts, reducing profitability.
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Reduced Business Expansion: Higher interest rates can lead to more cautious borrowing, making it challenging for businesses to fund growth opportunities.
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Decline in Consumer Spending: As interest rates rise, consumers may reduce their spending, leading to decreased sales and profits for businesses.
Step 3
Describe two ways in which the Irish Government assists business.
Answer
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Grant Aid: The government provides financial support through grants for various projects, fostering innovation and growth in the business sector.
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Agencies Support: Organizations like Enterprise Ireland and Údarás na Gaeltachta offer assistance in terms of grants, feasibility studies, and strategic advice to help businesses thrive.
Step 4
Discuss two opportunities and two challenges for Irish business arising from the enlarged European Union.
Answer
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Opportunity - Larger Market: The expansion of the EU provides access to a larger customer base of approximately 500 million people, which can lead to increased sales and exports for Irish businesses.
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Opportunity - Free Trade: Businesses can benefit from reduced barriers to trade within the EU, facilitating easier access to markets and resources.
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Challenge - Increased Competition: Irish businesses may face more competitors as companies from other EU nations enter the Irish market, necessitating a focus on quality and innovation.
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Challenge - Payment Difficulties: Dealing with various currencies and payment systems can create complexities and risks in transactions for Irish businesses operating across different EU countries.