Social welfare payments and student grants are examples of transfer payments - Leaving Cert Economics - Question 5 - 2012

Transfer payments are excluded from National Income calculations because including them would result in double counting. These payments do not correspond to the production of goods or services; they simply redistribute income without contributing to the overall economic output.

1. Changes in the level of economic growth: National Income Statistics help track economic progress by assessing the growth rates of the economy over time.

2. International comparisons: These statistics facilitate comparisons with other countries, allowing insights into how economic activities compare on a global scale.

1. The Multiplier effect: This refers to the phenomenon where an initial change in spending leads to a greater overall increase in national income.

2. MPS (Marginal Propensity to Save): This is the fraction of additional income that is saved rather than spent.

3. MPM (Marginal Propensity to Import): This indicates the portion of additional income that is spent on imports.

Using the formula for the Multiplier:

$Multiplier = \frac{1}{MPS + MPM} = \frac{1}{0.3 + 0.2} = \frac{1}{0.5} = 2$

Therefore, the size of the Multiplier is 2.

The black economy refers to economic activities that occur outside of the official regulation and are not recorded in national economic accounts. This includes the unreported income earned through illegal means or unregistered businesses.

1. A teacher giving private tuition without declaring the income for tax purposes.

2. A plumber working on cash jobs without registering for tax purposes.

1. Reduce direct taxation: By reducing taxes, the government can incentivize individuals to declare their income honestly and avoid the temptation to operate in the black economy.

2. Public awareness campaigns: Educating the public on the consequences of engaging in the black economy, highlighting the importance of tax contributions for public services, can encourage compliance.