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Multinational Companies (MNCs), such as Facebook and Amazon, locate in Ireland and contribute to economic growth - Leaving Cert Economics - Question b - 2018
Question b
Multinational Companies (MNCs), such as Facebook and Amazon, locate in Ireland and contribute to economic growth. (i) Explain the terms multinational company and ec... show full transcript
Worked Solution & Example Answer:Multinational Companies (MNCs), such as Facebook and Amazon, locate in Ireland and contribute to economic growth - Leaving Cert Economics - Question b - 2018
Step 1
Explain the terms multinational company and economic growth.
Answer
A multinational company (MNC) is a business that operates in several different countries, engaging in various commercial activities across borders. These firms often localize parts of their operations in foreign markets to tap into new customer bases and streamline production.
Economic growth, on the other hand, refers to the increase in a country’s output of goods and services, measured typically through metrics like Gross National Product (GNP) or national income. It signifies improvement in the economic health of a nation, often leading to enhanced living standards and employment opportunities.
Step 2
Discuss two possible economic benefits of MNCs, other than economic growth, for the Irish economy.
Answer
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Employment: MNCs create jobs in Ireland, contributing to lower unemployment rates. As they establish operations, they often require a diverse workforce, which can lead to better job prospects for the local population.
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Taxation Revenues: The presence of MNCs can increase tax revenues for the government. With higher employment levels, income tax revenues rise. Additionally, MNCs contribute through corporate profits tax, which can fund public services.
Step 3
Discuss one possible economic challenge of MNCs for the Irish economy.
Answer
One significant challenge is domestic firm closures. MNCs often have substantial financial resources, allowing them to operate at lower prices than local firms. This competitive pressure can lead to the closure of smaller domestic businesses that cannot keep up. As a result, this may create higher unemployment and diminish local entrepreneurial activities.