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'Barter' and 'money' are used as mediums of exchange - Leaving Cert Economics - Question 4 - 2012
Question 4
'Barter' and 'money' are used as mediums of exchange. Money has a number of characteristics including the following: relatively scarce; portable and durable. (i... show full transcript
Worked Solution & Example Answer:'Barter' and 'money' are used as mediums of exchange - Leaving Cert Economics - Question 4 - 2012
Step 1
Explain any two of the underlined terms.
Answer
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Relatively Scarce: This indicates that money, or any medium of exchange, must be limited in quantity to maintain its value. If it were abundantly available, it would lose its purchasing power.
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Portable: This characteristic denotes that money should be easily transportable, allowing individuals to carry it without difficulty. This facilitates trade and transactions between parties.
Step 2
Outline the difficulty of using 'barter' as a medium of exchange.
Answer
The primary difficulty of barter lies in the 'double coincidence of wants.' This means that for a trade to occur, both parties must desire what the other is offering. Finding someone who has what you want and who simultaneously wants what you have can be challenging and time-consuming.
Step 3
Explain two functions of money other than ‘a medium of exchange’.
Answer
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Store of Wealth: Money allows individuals to save for future needs. It can be kept in various forms (like savings accounts) and maintains value over time, making it easier to plan for future expenses, emergencies, or investments.
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Standard for Deferred Payment: Money facilitates transactions that are to take place in the future. For example, it can define the value and terms of a loan, allowing individuals to make promises of future payments in a stable medium, which helps in credit trading.
Step 4
Explain the underlined term.
Answer
Economic Growth: This is defined as an increase in the gross national product (GNP) per head of the population. It reflects a rise in the overall economic performance of a country, marked by the improvement in living standards and increased production capacity.
Step 5
Step 6
State and explain two possible economic effects which an increase in economic growth may have on the Irish Economy.
Answer
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Increased imports: An increase in GNP will likely lead to higher levels of income, which can result in increased demand for imported goods as people have more disposable income to spend.
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Improved standard of living: Higher GNP typically leads to enhanced wealth in the economy, allowing individuals to purchase more goods and services, thereby reducing poverty levels and improving the overall standard of living.
Step 7
Step 9
Explain how a fall in the rate of price inflation may affect each of the following: Employees.
Answer
A fall in the rate of price inflation can lead to increased disposable income for employees. With lower inflation, the purchasing power of wages can improve, meaning that employees may feel more financially secure and capable of spending, which can stimulate economic activity.
Step 10
Explain how a fall in the rate of price inflation may affect each of the following: People in receipt of social welfare.
Answer
For individuals reliant on social welfare, a fall in the rate of price inflation could mean that the purchasing power of benefits remains stable or increases. This helps improve their standard of living as the cost of living stabilizes or decreases, allowing more access to essential goods and services.
Step 11
Explain how a fall in the rate of price inflation may affect each of the following: Business.
Answer
For businesses, a reduced rate of price inflation can enhance planning and investment strategies. Lower inflation rates generally create a more stable economic environment, enabling businesses to minimize costs and maximize profits, leading to potential expansion and job creation.