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You are given the following information about a country's trade - Leaving Cert Economics - Question 4 - 2011
Question 4
You are given the following information about a country's trade. Visible Exports € million Visible Imports € million Balance of Trade € million Surplus or Defici... show full transcript
Worked Solution & Example Answer:You are given the following information about a country's trade - Leaving Cert Economics - Question 4 - 2011
Step 1
Explain the terms 'visible exports' and 'visible imports' and give one example each with reference to Ireland.
Answer
Visible exports refer to goods sent abroad by a country, contributing to its economy and balance of trade, such as the sale of Irish beef to consumers outside Ireland.
Visible imports are the goods purchased from abroad that are brought into a country, indicating consumption levels of foreign products, such as the import of foreign cereals by Irish consumers.
Example:
- Visible Exports: Irish beef sold abroad.
- Visible Imports: Imported foreign cereals.
Step 2
If the level of visible imports above increased by €600m, calculate the new Balance of Trade. (Show your workings.)
Answer
To calculate the new Balance of Trade after an increase in visible imports, we start with the original figures:
- Visible Exports: €24,000 million
- Visible Imports before increase: €23,600 million
Now, we add the increase:
- New Visible Imports = €23,600 million + €600 million = €24,200 million
Now, we calculate the Balance of Trade:
Balance of Trade = Visible Exports - Visible Imports
Balance of Trade = €24,000 million - €24,200 million = -€200 million
This results in a deficit of €200 million.
Step 3
State whether the new Balance of Trade is a surplus or deficit and explain your answer.
Answer
The new Balance of Trade is a deficit. A deficit occurs when visible imports exceed visible exports. In this case, visible imports after the increase total €24,200 million, which is greater than the visible exports of €24,000 million, leading to a balance of -€200 million.
Step 4
Explain the underlined term 'small open economy'.
Answer
A small open economy is one that interacts freely with other economies and relies heavily on international trade. This type of economy typically has fewer resources compared to larger economies and is more susceptible to foreign market fluctuations, making external trade crucial for its growth and stability.
Step 5
State and explain three economic reasons why Ireland needs to engage in trade.
Answer
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Job creation: Exporting goods leads to increased demand, creating more jobs in the country, which subsequently boosts local employment.
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Increased GNP: Engaging in trade enhances national income, as money earned through exports flows back into the economy, increasing the gross national product.
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Enhanced choice for consumers: Imports enable consumers to access a broader range of goods, improving living standards and providing options that might not be available domestically.
Step 6
Explain the underlined term 'invisible export'.
Answer
An invisible export refers to services provided by a country to foreign consumers, which do not involve the physical transfer of goods. Examples include tourism, where overseas visitors spend money on hotels, restaurants, and attractions in Ireland.
Step 7
State and explain two benefits for the Irish economy of an increase in the number of overseas visitors to Ireland.
Answer
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Increased employment: A rise in visitors leads to more jobs in the hospitality and tourism sectors, enhancing overall job availability in the economy.
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Increased income/GNP: Spending by tourists generates additional income for businesses, resulting in an increase in gross national product as the money circulates within the economy.
Step 8
State and explain two actions which the Irish Tourist Industry could take to encourage visitors to Ireland.
Answer
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Advertising campaigns: Launching targeted advertising to attract specific demographics, such as promoting cultural festivals or natural scenery to entice tourists from particular markets.
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Special promotions: Offering discounts for early bookings or creating packages that include accommodation and transportation can make visiting Ireland more appealing and accessible for travelers.