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'A Budget deficit stimulates the economy and therefore should be encouraged.' Discuss this statement with reference to the Irish economy - Leaving Cert Economics - Question 8 - 2015
Question 8
'A Budget deficit stimulates the economy and therefore should be encouraged.' Discuss this statement with reference to the Irish economy. You may agree or disagree. ... show full transcript
Worked Solution & Example Answer:'A Budget deficit stimulates the economy and therefore should be encouraged.' Discuss this statement with reference to the Irish economy - Leaving Cert Economics - Question 8 - 2015
Step 1
Discuss this statement with reference to the Irish economy. You may agree or disagree.
Answer
A budget deficit can indeed stimulate the economy, especially during times of recession. In the context of the Irish economy, historically, budget deficits have enabled increased public spending on essential services and infrastructure, which can ultimately lead to economic growth. For instance, after the global financial crisis, the Irish government ran significant deficits to stabilize the economy and support sectors in distress.
However, the dangers of sustained budget deficits include increased national debt and potential loss of investor confidence. If public borrowing remains high, it could lead to higher interest rates and inflation in the long run. Thus, while a budget deficit can encourage short-term economic activity, it is crucial to manage it prudently to ensure long-term economic stability.
Step 2
Outline three policies the Irish Government could consider to achieve balanced regional development.
Answer
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Investment in Infrastructure: The government could focus on investing in transport and telecommunications infrastructure to connect rural areas better with urban centers, thereby facilitating trade and improving access to services.
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Support for Local Businesses: Implementing grants and subsidies for local businesses, particularly in underdeveloped regions, can promote entrepreneurship and create job opportunities.
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Enhancement of Education and Training Programs: By investing in education and vocational training in disadvantaged areas, the government can equip residents with the skills needed for various industries, enhancing employability and local economic activity.
Step 3
Outline two economic benefits to rural communities of balanced regional development.
Answer
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Job Creation: Balanced regional development ensures that job opportunities are not solely concentrated in urban areas. This can help reduce unemployment in rural communities, leading to increased income levels and improved standards of living.
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Investment in Public Services: With a focus on balanced development, rural areas are likely to receive more investment in public services such as healthcare, education, and transportation, enhancing the quality of life for residents and making these areas more attractive for families.
Step 4
Discuss the economic effects of emigration on the Irish economy.
Answer
Emigration can have several economic effects on the Irish economy. It often leads to a 'brain drain,' where highly skilled individuals leave, reducing the country’s human capital and innovation potential. This can hinder economic growth and competitiveness in the global market.
On the other hand, emigration can also lead to remittances sent back home, which can support local economies. Additionally, emigrants could return with new skills and experiences that could benefit the Irish economy in the long term, suggesting a cyclical pattern rather than purely negative effects.
Step 5
Advise the Government on two policy initiatives/measures that could be introduced in ‘Budget 2016’ to encourage emigrants to return to Ireland.
Answer
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Incentives for Returnees: The government could introduce financial incentives, such as tax breaks or housing grants, for returning emigrants to help ease their transition back to Ireland.
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Creation of a Returnee Program: Establishing a program designed specifically for returning emigrants, offering them job placement services, networking opportunities, and integration support, could help them successfully reintegrate into the workforce and society.