Define the following terms: • Gross Domestic Product at Current Market Prices; • Gross National Product at Factor Cost - Leaving Cert Economics - Question 7 - 2011

Gross National Product at Factor Cost is defined as the total output produced (value of goods & services) by Irish owned factors of production, both within Ireland and abroad, valued at payments to these factors.

1. Repatriation of profits by foreign multinationals based in Ireland contributes significantly to GDP, as these profits are included in the national output.

2. Repayment of interest on the foreign element of our national debt also affects this calculation, as the interest paid out reduces the GNP, making GDP appear larger.

The Multiplier is an economic concept that quantifies the relationship between an initial injection of spending (such as government investment) and the resulting total increase in national income. It reflects how initial expenditures lead to further income and spending, amplifying the effects within the economy.

Using the provided data:

• MPT = 0.22
• MPM = 0.30
• MPS = 0.28

The formula for calculating the Multiplier (k) is:

$k = \frac{1}{MPS + MPT + MPM}$

Thus,

$k = \frac{1}{0.28 + 0.22 + 0.30} = \frac{1}{0.80} = 1.25$

Therefore, the value of the Multiplier in the Irish economy is 1.25.

Taxes can reduce the value of the Multiplier. When taxes are introduced, they decrease disposable income, leading to lower consumer spending. This lower spending can subsequently diminish the overall economic activity and the effect of the multiplier, as less money circulates back in the economy thanks to fewer transactions.

An increase in the rate of economic growth can have both positive and negative effects:

Positive Effects:

1. Increased Employment: More job opportunities as businesses expand, leading to higher demand for workers.
2. Improved Government Finances: Increased economic activity often results in higher tax revenues, allowing the government to invest more in public services.
3. Improved Standard of Living: Economic growth can lead to increased wages and better access to goods and services.
4. Investment Opportunities: A growing economy attracts investors, contributing to further growth.

Negative Effects:

1. Inflationary Pressures: Increased demand can lead to higher prices if supply doesn't keep pace.
2. Resource Scarcity: Higher economic activity can strain natural resources, leading to environmental degradation.
3. Income Inequality: Growth can disproportionately benefit certain groups, widening the gap between rich and poor.
4. Expectations of Citizens: Residents might develop higher expectations for public services and employment, which can lead to dissatisfaction if not met.