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Outline, using appropriate figures, how the Irish economy performed in the past twelve months in each of the following areas: (i) employment; (ii) interest rates; (iii) price inflation; (iv) government taxation. - Leaving Cert Economics - Question 8 - 2007
Question 8
Outline, using appropriate figures, how the Irish economy performed in the past twelve months in each of the following areas: (i) employment; (ii) interest rates; (... show full transcript
Worked Solution & Example Answer:Outline, using appropriate figures, how the Irish economy performed in the past twelve months in each of the following areas: (i) employment; (ii) interest rates; (iii) price inflation; (iv) government taxation. - Leaving Cert Economics - Question 8 - 2007
Step 1
employment
Answer
In the past twelve months, the Irish economy created approximately 76,800 new jobs. By the end of February, the number of people at work had increased by 3.8% to reach 2.07 million. However, there was a slowdown in economic growth which led to job losses still being a concern.
In May 2007, it was recorded that 159,800 persons were on the live register, representing about 4.5% of the total labor force. The Central Bank predicts an average unemployment rate of 4.5% for 2007.
Step 2
interest rates
Answer
Interest rates in Ireland have continued to rise, with the European Central Bank (ECB) increasing the base interest rate six times in the last twelve months, with the most significant change occurring in June 2007. As of now, the base interest rate stands at 4.0%, and further increases are expected in the autumn. The impact of rising interest rates is evident in the mortgage market, where the cost of repaying mortgages has increased.
Step 3
price inflation
Answer
Price inflation has been a significant issue in Ireland, with inflation rates continuing to rise. The average inflation rate over the past year is approximately 2.2%. This rise in inflation is partly attributed to the increase in the value of the Euro and rising international oil prices. In May 2007, inflation recorded a slight decrease to 5%, down by 0.1% from the previous month.
Step 4
government taxation
Answer
In the 2007 Budget, several changes were made concerning taxation. The higher rate of income tax was reduced from 42% to 41%, and the tax bands were widened, which benefits taxpayers. However, the standard rate of tax remained unchanged, and those on minimum wage are exempt from this tax.
Regarding indirect taxes, there were no changes to VAT rates. However, excise duty on cigarettes increased by 50 cent per pack of 20, reflecting a rise of approximately 7.6%. Moreover, the government introduced measures affecting property tax, encouraging first-time home buyers.