Social welfare payments and student grants are examples of **transfer payments** - Leaving Cert Economics - Question 5 - 2012
Question 5
Social welfare payments and student grants are examples of **transfer payments**.
(i) Explain the underlined term.
(ii) Explain why transfer payments are not inclu... show full transcript
Worked Solution & Example Answer:Social welfare payments and student grants are examples of **transfer payments** - Leaving Cert Economics - Question 5 - 2012
Step 1
Explain the underlined term.
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Answer
Transfer payments are income received by individuals or organizations when no goods or services are provided in return. These payments include social welfare benefits, unemployment benefits, and grants.
Step 2
Explain why transfer payments are not included in National Income.
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Answer
Transfer payments are excluded from National Income calculations to avoid double counting. Although they are monetary transfers to individuals, they do not reflect an actual production of goods or services, which is necessary for National Income.
Step 3
State and explain two possible uses of National Income Statistics.
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Answer
Changes in the level of economic growth: National Income Statistics indicate the economic growth of a country, helping policymakers understand trends over time.
International comparisons: These statistics allow comparisons between countries, helping to gauge relative economic performance and living standards.
Step 4
Explain each of the above underlined terms.
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Answer
The Multiplier refers to the process by which an initial increase in spending leads to a larger increase in national income.
Open economy: This is an economy that engages in international trade, importing and exporting goods and services.
Step 5
Calculate, using the above formula, the size of the Multiplier. (Show all your workings.)
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Answer
The black economy refers to economic activities that occur outside the formal sector, which are not reported to the government and are thus not taxed or regulated.
Step 7
State two examples of activities considered part of the black economy.
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A teacher giving private lessons without declaring the income to tax authorities.
A plumber working for cash and not reporting their earnings for tax purposes.
Step 8
State and explain two actions the Irish Government could take to discourage activities in the black economy.
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Reduce direct taxation: By lowering taxes, the government can incentivize individuals to report their income and pay taxes legally.
Better enforcement by revenue commissioners: Implementing stricter checks and balances can deter individuals from engaging in unreported income activities.
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