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A Minister for Finance prepares the following Current Budget for 2006: Current Budget - 2006 Government Current Income €3,800m Government Current Spending €3,000m a - Leaving Cert Economics - Question 8 - 2006
Question 8
A Minister for Finance prepares the following Current Budget for 2006: Current Budget - 2006 Government Current Income €3,800m Government Current Spending €3,000m ... show full transcript
Worked Solution & Example Answer:A Minister for Finance prepares the following Current Budget for 2006: Current Budget - 2006 Government Current Income €3,800m Government Current Spending €3,000m a - Leaving Cert Economics - Question 8 - 2006
Step 1
State TWO examples of government current income and TWO examples of government current expenditure.
Answer
Examples of government current income include:
- Direct tax revenue: This is the revenue collected from taxes on income, profits, or property.
- Indirect tax revenue: This refers to taxes collected on goods and services, such as VAT.
Examples of government current expenditure include:
- Salaries of all state government departments: This includes salaries paid to public servants.
- Grants to local authorities: Financial support provided to local councils for public services.
Step 2
Step 3
If you were Minister for Finance and this Current Budget Surplus was available to you, state and explain TWO measures you would take to improve the standard of living within the country.
Answer
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Improve the health sector: Investing in healthcare can enhance access to medical services, reducing waiting times and improving patient outcomes, which ultimately boosts the population's health and quality of life.
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Enhance the education sector: Allocating funds to educational institutions can improve teaching resources, facilities, and programs, leading to better educational outcomes and a more skilled workforce.
Step 4
State and explain TWO reasons for this development.
Answer
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Increased employment: With rising employment rates, individuals have more income, resulting in increased spending, which boosts tax revenue collected by the government.
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Higher consumer spending: As consumer confidence grows, spending on goods and services increases, leading to higher sales tax collections.
Step 5
If the Government reduced rates of indirect taxation state and explain the effects that this development would have on each of the following: Consumers; Manufacturers; Firms in the service industry (e.g. hotels / restaurants).
Answer
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Consumers: Lower indirect taxes lead to lower prices for goods and services, which increases consumer purchasing power.
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Manufacturers: A reduction in taxes can lower production costs, driving increased demand as prices of goods decrease, potentially enhancing profit margins.
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Firms in the service industry: Services provided will become more affordable for consumers, increasing demand for these services, and possibly leading to higher sales and profits.
Step 6
Step 7
State and explain ONE possible economic advantage and ONE possible economic disadvantage of this development for each of the following: Aer Lingus employees; Aer Lingus passengers; Irish Taxpayers.
Answer
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Aer Lingus employees:
- Advantage: Increased job security if the new management is efficient and profitable.
- Disadvantage: Risk of job losses due to restructuring aimed at increasing profitability.
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Aer Lingus passengers:
- Advantage: Competitive pricing could lead to better fares and improved services.
- Disadvantage: Possible reduction in service levels as the new owners focus on profit maximization over customer satisfaction.
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Irish Taxpayers:
- Advantage: Potential increase in government revenue from the sale of the state-owned enterprise.
- Disadvantage: Loss of public ownership of a national asset, which may not align with national interests.