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'Barter' and 'money' are used as mediums of exchange - Leaving Cert Economics - Question 4 - 2012
Question 4
'Barter' and 'money' are used as mediums of exchange. Money has a number of characteristics including the following: relatively scarce; portable and durable. (i) Ex... show full transcript
Worked Solution & Example Answer:'Barter' and 'money' are used as mediums of exchange - Leaving Cert Economics - Question 4 - 2012
Step 1
Explain any two of the underlined terms.
Answer
Relatively Scarce: This term refers to the limited availability of money in relation to its demand. If money is too plentiful, its value can diminish, leading to inflation.
Portable: This means that money must be easily transportable. Individuals should be able to carry it around without difficulty, allowing for convenient transactions.
Step 2
Outline the difficulty of using 'barter' as a medium of exchange.
Answer
The primary difficulty of using barter lies in the 'double coincidence of wants.' This means that for a transaction to occur, both parties must desire what the other has to offer. Additionally, determining a precise value for goods can be time-consuming and complicated.
Step 3
Explain two functions of money other than 'a medium of exchange'.
Answer
Measure of Value: Money serves to provide a common measure for the value of goods and services, enabling people to compare prices and gauge the worth of various items.
Store of Wealth: Money acts as a means for individuals to save for future consumption, preserving value over time and allowing for planned future expenditures.
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Step 6
State and explain two possible economic effects which an increase in economic growth may have on the Irish Economy.
Answer
Increased Imports: With economic growth, there would be a rise in GNP, which would lead to an increase in demand for imported goods. This can improve the balance of payments but may also lead to greater foreign dependency.
Inflation: Economic growth often raises demand for goods and services, leading to increased spending. If this demand exceeds supply, it can push prices higher, resulting in inflation.
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Step 9
Explain how a fall in the rate of price inflation may affect each of the following: Employees, People in receipt of social welfare, Business.
Answer
Employees: A fall in price inflation can lead to increased purchasing power, meaning employees can buy more with the same wage, potentially enhancing their standard of living.
People in Receipt of Social Welfare: A lower inflation rate could stabilize the value of social welfare payments, allowing recipients to maintain their purchasing power without worrying about costs rising rapidly.
Business: Companies can benefit from a stable inflation rate as it reduces uncertainty in planning and investments. This can lead to consistent pricing strategies and could encourage businesses to expand or innovate due to a stable economic environment.