The estimated Government current budget for 2015 is as follows: Government Current Income €45,255 m Government Current Expenditure €48,985 m (i) Calculate the current budget deficit. (Show your workings.) (ii) Suggest two ways the government could reduce this deficit. (iii) State one example of Government current income and one example of Government current expenditure. (b) In Budget 2015 the Government reduced the higher rate of income tax from 41% to 40% and reduced some of the rates of USC. (i) What do the initials USC stand for? (ii) Is income tax a direct or indirect tax? Explain your answer. (iii) Explain one possible economic effect which the reduction in the rate of income tax may have on any two of the following: - the government’s current budget deficit - the level of employment in Ireland - the level of emigration from Ireland. (c) The tax on a packet of twenty cigarettes was increased by 40c in Budget 2015. (i) Outline one other measure which could be taken to reduce the consumption of cigarettes. (ii) State and explain two economic benefits for individuals if they reduce their consumption of cigarettes. (iii) State and explain two benefits for society if the consumption of cigarettes falls.

Leaving Cert Economics Fiscal Policy & the Budget Framework: The estimated Government current

The estimated Government current budget for 2015 is as follows: Government Current Income €45,255 m Government Current Expenditure €48,985 m (i) Calculate the current budget deficit - Leaving Cert Economics - Question 6 - 2015

Question 6

The estimated Government current budget for 2015 is as follows: Government Current Income €45,255 m Government Current Expenditure €48,985 m (i) Calculate the curr... show full transcript

Worked Solution & Example Answer:The estimated Government current budget for 2015 is as follows: Government Current Income €45,255 m Government Current Expenditure €48,985 m (i) Calculate the current budget deficit - Leaving Cert Economics - Question 6 - 2015

Step 1

(i) Calculate the current budget deficit. (Show your workings.)

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Answer

To calculate the current budget deficit, we use the formula:

$\text{Budget Deficit} = \text{Government Current Expenditure} - \text{Government Current Income}$

Substituting the values:

$\text{Budget Deficit} = €48,985 \text{ m} - €45,255 \text{ m} = €3,730 \text{ m}$

Thus, the current budget deficit is €3,730 m.

Step 2

(ii) Suggest two ways the government could reduce this deficit.

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Answer

Reduce Current Government Expenditure: The government can cut spending on non-essential services or welfare programs.
Increase Government Current Income: This can be achieved through raising taxes or improving tax collection to ensure that more income is reported and taxed.

Step 3

(iii) State one example of Government current income and one example of Government current expenditure.

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Example of Government Current Income:

Direct tax revenue (e.g., income tax).

Example of Government Current Expenditure:

Salaries of public sector employees.

Step 4

(i) What do the initials USC stand for?

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Answer

USC stands for Universal Social Charge.

Step 5

(ii) Is income tax a direct or indirect tax? Explain your answer.

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Income tax is a direct tax. This is because it is levied directly on individuals' earnings, making it proportionate to their income.

Step 6

(iii) Explain one possible economic effect which the reduction in the rate of income tax may have on any two of the following: - the government’s current budget deficit - the level of employment in Ireland - the level of emigration from Ireland.

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The government’s current budget deficit: A reduction in income tax may initially decrease tax revenue for the government, potentially increasing the deficit. However, if higher disposable income leads to greater consumer spending, it may eventually boost tax revenue in the long run.
The level of employment in Ireland: Reducing the tax rate may encourage businesses to hire more employees as they retain more profits. Increased consumer spending can also stimulate business growth and job creation.

Step 7

(i) Outline one other measure which could be taken to reduce the consumption of cigarettes.

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One measure could be to introduce plain packaging for cigarettes, which may help reduce their appeal and subsequently lower consumption.

Step 8

(ii) State and explain two economic benefits for individuals if they reduce their consumption of cigarettes.

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Greater Disposable Incomes: By spending less on cigarettes, individuals will have more disposable income to allocate to other needs or savings.
Healthier Lifestyles: Reducing cigarette consumption can lead to better health, decreasing medical expenses and potentially lowering health insurance premiums.

Step 9

(iii) State and explain two benefits for society if the consumption of cigarettes falls.

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Greater Productivity: A reduction in smoking can lead to fewer sick days and higher productivity in the workforce, benefiting the economy.
Reduced Health Care Costs: With fewer individuals smoking, overall healthcare costs for society may decrease, alleviating pressure on public health services.

The estimated Government current budget for 2015 is as follows: Government Current Income €45,255 m Government Current Expenditure €48,985 m (i) Calculate the current budget deficit - Leaving Cert Economics - Question 6 - 2015

Worked Solution & Example Answer:The estimated Government current budget for 2015 is as follows: Government Current Income €45,255 m Government Current Expenditure €48,985 m (i) Calculate the current budget deficit - Leaving Cert Economics - Question 6 - 2015

(i) Calculate the current budget deficit. (Show your workings.)

(ii) Suggest two ways the government could reduce this deficit.

(iii) State one example of Government current income and one example of Government current expenditure.

(i) What do the initials USC stand for?

(ii) Is income tax a direct or indirect tax? Explain your answer.

(iii) Explain one possible economic effect which the reduction in the rate of income tax may have on any two of the following: - the government’s current budget deficit - the level of employment in Ireland - the level of emigration from Ireland.

(i) Outline one other measure which could be taken to reduce the consumption of cigarettes.

(ii) State and explain two economic benefits for individuals if they reduce their consumption of cigarettes.

(iii) State and explain two benefits for society if the consumption of cigarettes falls.

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