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At end of December 2008 the Irish National Debt amounted to approximately €50.4bn and at the end of December 2009 it was approximately €75bn - Leaving Cert Economics - Question (c) - 2010
Question (c)
At end of December 2008 the Irish National Debt amounted to approximately €50.4bn and at the end of December 2009 it was approximately €75bn. State and explain four... show full transcript
Worked Solution & Example Answer:At end of December 2008 the Irish National Debt amounted to approximately €50.4bn and at the end of December 2009 it was approximately €75bn - Leaving Cert Economics - Question (c) - 2010
Step 1
Opportunity costs involved.
Answer
With more funds being used to meet our annual interest repayments, the government has less capital available for other essential services and investments. This can hinder progress in infrastructure, education, and health, ultimately affecting economic growth.
Step 2
Increased burden on taxpayers.
Answer
An increase in national debt implies that the government must consider raising taxes in the future to cover its growing obligations. In turn, this can impose a heavier financial burden on citizens, potentially reducing disposable income and consumer spending.
Step 3
Increased annual interest repayments.
Answer
As Ireland's national debt rises, so too do the annual interest repayments. An increasing annual interest burden may lead to budgetary pressures, making it difficult for the government to allocate funds to priority areas such as public services and economic development.
Step 4
Diminished international credit-rating.
Answer
An increasing national debt can lead to concerns among international investors regarding Ireland's creditworthiness. A lower credit rating may increase borrowing costs for the government and can undermine investor confidence in the country’s economy.