Economics

Question 1

Opportunity cost

Answer 1

-the item that one decides not to buy in order to buy another

Question 2

The factors of production

Answer 2

• Land: natural resources
• Labour: the work force
• Capital: assets
• Enterprise: something that brings them all together

Question 3

The rewards of the factors of production

Answer 3

Land-> rent
Labour-> wage/salary
Capital-> interest
Enterprise-> profit

Question 4

Free enterprise

Answer 4

Capitalism (eg. America)
-decisions made by private firms/individuals
-resources allocated by supply and demand
-private firms decide•what to produce
•how to produce
•for whom

Question 5

Centrally Planned

Answer 5

Communism (eg. China)

-government makes decisions+allocates resources+do everything basically

Question 6

Mixed economy

Answer 6

(Eg. Ireland)

• some made by entrepreneurs, some by gov.
• some resources allocated by supply and demand, others may the state planning system

Question 7

GDP

Answer 7

Gross Domestic Product

-total value of goods and services produced in. Country in one year (includes foreign companies)

Question 8

GNP

Answer 8

Gross national product

• total value of goods and services produced in a country in one year that REMAINS there (ie. Only Irish companies)
• includes profit made by Irish companies abroad

Question 9

Causes of economic growth

Answer 9

• more business investment
• better machinery
• better skills
• new ideas

Question 10

Benefits of economic growth

Answer 10

• better income
• creates more jobs
• more variety of products
• more tax revenue-> higher standard of living

Question 11

Consequences of economic growth decline

Answer 11

• less goods and services available
• more cutbacks
• increase in social welfare payments
• less tax revenue
• increase in unemployment and emigration

Question 12

Recession

Answer 12

When a country experiences a decrease in the total value of goods and services produced (GDP) for 6 months+

Question 13

Rate of inflation

Answer 13

An increase in the genealogy price of goods and services in a country from one period to the next

Question 14

What causes inflation?

Answer 14

• increase in production costs
• demand becomes higher than supply
• increase in tax
• cost of imported goods increase

Question 15

Benefits of low inflation

Answer 15

• income buys more goods
• higher standard of living
• consumers are encourage to save more
• increase in consumer confidence

Question 16

Inflation is calculated using the

Answer 16

CPI

Consumer price index

Question 17

Deflation

Answer 17

-A decrease in the general prices of goods and services in a country from one period to the next

Question 18

National budget

Answer 18

• Adocument which gives a detailed breakdown of government income and expenditure for the next 12 months
• prepared by the minister for finance in October/November

Question 19

Current

Answer 19

Day to day or regular income and expenditure

Question 20

Capital

Answer 20

Refers to long term or once off income and expenditure

Question 21

Examples of government income

Answer 21

• income tax
• corporation tax
• VAT
• DIRT
• EU grants
• Sales of Semi-State Bodies
• Dividends of Semi State Bodies

Question 22

Examples of government expenditure

Answer 22

Current

• social welfare payments
• wages to public sector
• hospital and school running costs

Capital
-building of new roads
                                 Hospitals
                                 Schools
-new Garda equipment

Question 23

Deficit National Budget

Answer 23

-government do not have enough money to continue providing it’s services
-may need to borrow money
‘-> this money is called the Government Borrowing Requirement

Question 24

National debt

Answer 24

Amount of money owed by the government

Question 25

Debt servicing

Answer 25

-the payment of interest on the national debt

Question 26

Economics

Answer 26

-how people/countries try to make good decisions on how to use a limited resource available to them

Question 27

Formula for economic growth

Answer 27

Change in production 100
———————- X —– = GNP
Production in year 1 1

Question 28

Formula for GNP and rate of Inflation

Answer 28

Change. Multiplied by 100

Year 1