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The CSO recorded an increase in GDP of 26.3% for Ireland in 2015 - Leaving Cert Economics - Question c - 2017
Question c
The CSO recorded an increase in GDP of 26.3% for Ireland in 2015. Experts agreed that this figure, though calculated using approved methods, overestimated the true G... show full transcript
Worked Solution & Example Answer:The CSO recorded an increase in GDP of 26.3% for Ireland in 2015 - Leaving Cert Economics - Question c - 2017
Step 1
Describe three uses of a country's National Income statistics.
Answer
National Income statistics provide essential information that can be utilized in several ways:
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Indication of alterations in the standard of living: By analyzing changes in national income, we can assess whether the overall standard of living is improving or declining over time.
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Means of comparing the standard of living in different countries: National Income figures allow for comparison between countries, helping to evaluate which nations are more prosperous and the effectiveness of their economic policies.
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Assists the government in formulating economic policy: These statistics aid policymakers in making informed decisions regarding future budgets and financial planning, ensuring that resource allocation aligns with current needs and future projections.
Step 2
Outline an economic implication for the Irish Government of using an overestimated GDP figure.
Answer
An overestimated GDP figure can significantly distort government policies and decisions. Specifically, it may create a misleading perception that the economy is growing faster than it is, leading the government to:
- Increase Spending: This could result in more public spending based on the false assumption of available budgetary resources, leading to increased borrowing, which may increase the national debt.
- Damage International Reputation: Misrepresentation in GDP figures could harm Ireland's credibility on a global scale, potentially impacting international relations and economic agreements.