Gross National Product at Current Market Prices for the year 2005 in Ireland was approximately 45% higher than the figure for the year 2000 - Leaving Cert Economics - Question e - 2006
Question e
Gross National Product at Current Market Prices for the year 2005 in Ireland was approximately 45% higher than the figure for the year 2000.
State and explain the r... show full transcript
Worked Solution & Example Answer:Gross National Product at Current Market Prices for the year 2005 in Ireland was approximately 45% higher than the figure for the year 2000 - Leaving Cert Economics - Question e - 2006
Step 1
1. Population changes
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Answer
If GNP grows at a slower rate than population, then GNP per head decreases and the average standard of living will fall. Therefore, understanding population growth is crucial in assessing the real increase in living standards.
Step 2
2. Inflation
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Answer
An increase in prices will automatically inflate the GNP at current market prices. To avoid misleading conclusions about the growth of living standards, it is essential to consider GNP at constant market prices, which adjusts for inflation.
Step 3
3. Employment / Unemployment
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Answer
If there is an increase in GNP but a corresponding rise in unemployment, this may not reflect improvements in average living standards. Specifically, if individuals are unemployed, an increase in GNP per head does not adequately represent their living conditions.
Step 4
4. Levels of taxation
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Answer
Changes in income tax rates or indirect tax levels can significantly affect a person's standard of living. Evaluating tax policy is important, as higher taxes can diminish the benefits of GNP growth if individuals do not see an improvement in their net income.
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