Mixed Economy Most of the decisionsregarding the factors ofproduction are made by theprivate sector Some industries controlled bythe government (Essentialservices)
Free EnterpriseEconomic choices aboutfactors of production madeby private sector- Government has littleintervention- Capitalism
Centrally Planned- Government controlledeconomy- Gov decides what isproduced and by whom-Little intervention by privatesector
Consumer Choices!Opportunity CostThe item that you do without whenyou have to make a choice betweentwo items. The items you choose isthe financial cost
ExampleThe government has €100 M to spend onbuilding a new or a newAs advisor what do you advise?
Economic Growth Is the increase in the production of goods &services from one year to the next
GDPGross Domestic ProductThe total value of all G & S produced in acountry in one year
Gross Domestic ProductFORMULA Increase in production x 100 Year 1 production 1Example 1Production Year 1 - €15,000Production Year 2 - €17,000Difference = €2,000 €2,000 x 100 €15,000 1 = 13.3%
Example 2Calculate the GDPProduction Year 1 - €50 billionProduction Year 2 - €52 billionExample 3Calculate the GDPProduction Year 1 - €64 billionProduction Year 2 - €68 billion
GNPGross National ProductGDP minus profits sent out of country byforeign owned companies plus profitsreturned to Ireland by Irish firms abroad
High Economic GrowthBenefits:1.Improved standard of living: Access to increased quantity & quality of goods2. Creates Employment: Demand for G&S increases3.Increases revenue for Gov: Increase in taxes
Low economic growth:Disadvantages1. Wages decrease2. Unemployment increases3. Decrease in tax revenue4. Lack of investment in essential services
InflationAn increase in prices ofgoods and servicesfrom one period to thenext.- Inflation is measuredby the (CPI) ConsumerPrice Index.
InflationFormula Increase in price x 100 Year 1 price 1
Example 1Calculate the rate of inflation.Year 1 Cost of Living = €20000Year 2 Cost of Living = €21500
Example 2A family’s weekly grocery bill costs€111 in July 2010.If the inflation rate for the year was11%, what would the bill cost in July2011?SolutionPrice in 2010 € 111 €111 x 11% = + € 12.21Price in 2011 = € 123.21
Causes of Inflation1. An increase in the cost of production e.g. rent, wages2. If demand for G &S › supply3. An increase in taxation e.g. VAT4.The cost of importing goods may increase e.g. oil
Effects of low Inflation1. Cost of Living is cheaper2.Businesses keep costs to minimum3.Increase in demand for exports4.Lower interest rates
Reasons for Government intervention1. Meet minimum needs of Irish people2. Provide basic services3. Provide income for people who cantwork
The National Budget Is a financial plan outlining theIncome & Expenditure of the Government
Government Income & ExpenditureCapital Income Capital ExpenditureCurrent Income Current Expenditure
Capital Income Capital ExpenditurePrivatisation: Selling of state assets to the Building new school private sector EU Grants Building new roads Borrowing Building new hospitals
Current Income Income Tax Excise duty Stamp Duty VAT DIRTCorporation Tax Customs Duty Capital Gains Tax Capital Acquisition Tax
Income Tax PAYE. Tax deducted from workers gross wage VAT Tax paid on G & S. Two rates: 13.5% & 23% Stamp Duty Tax paid on the purchase of property. Rate: 1%Corporation Tax Tax paid on the profits made by companiesCustoms Duty/ Tax paid on goods brought in from outside the EU import duty DIRT Tax paid on interest earned in deposit account Excise duty Tax paid on alcohol tobacco and oil
Tax on profits made from the sale of an asset e.g.Capital Gains Tax buildingsCapital Acquisition Tax Tax on inheritance or gifts
Place expenditures under correct headings Department Current Expenditure Capital Expenditure Department of Health School buildings and NCT Testing and Children Equipment Department of Building Prisons, Teachers’ pay, school Education and Court Buildings running costs Science Department of Justice, Building waste Building hospitals, Equality and Law treatment facilities Clinics, Hospital Equipment Department of Garda Pay, Judges Medical cards, Nurses Environment pay and Doctors pay
Solution Department Current Expenditure Capital Expenditure Department of Health Medical cards, Nurses Building hospitals, and Children and Doctors pay Clinics, Hospital Equipment Department of Teachers’ pay, school School buildings and Education and running costs Equipment Science Department of Justice, Garda Pay, Judges Building Prisons, Equality and Law pay Court Buildings Department of NCT Testing Building waste Environment treatment facilities
Activity 1. Collect a newspaper articlerelating to Ireland economy 2. Cut it out and place it innotebook. 3. Underline key words. 4. Write summary of article. 5. Provide opinion/ recommendation 6. Present to the class
Types of Current Budgets1.A balanced Budget: Income = Expenditure2. A surplus Budget: Income › Expenditure3. A deficit Budget: Income ‹ ExpenditureWhich of the three is our current budget?
Question € Agriculture Service 137 Corporation Tax 77 Customs Duty 24 Debt Servicing * 237 Defence Service 86 DIRT* 139 Education & Science 330 Service Excise Duty 148 Health & Social Welfare 509 Service PAYE 619 VAT 170
Solution Revenue € € Corporation tax 77 Customs duty 24 DIRT 139 Excise duty 148 PAYE 619 VAT 170 Total income 1177 Expenditure Agriculture 137 services Debt servicing 237 Defence services 86 Ed & Science 330 Health & social 509 service Total expenditure 1299
RevenueText bookPg. 143 Customs Duty 500Q.20 VAT 800 PAYE 900 DIRT 50 Capital Gains Tax 100 Corp Tax 750 Total Income 3100 Expenditure Social Welfare Services 1000 Health Services 900 Ed and Science Services 800 Agric Services 500 Debt Servicing 30 Defence Services 250 Total Expenditure 3480 Deficit Budget (380)
RevenueText bookPg. 143 Income Tax 7000Q.21 Customs & Excise 2000 DIRT 600 VAT 6500 Corp Tax 4500 Capital Gains Tax 550 Total Income 21150 Expenditure Social Welfare 5000 Services Health Services 4500 Ed & Science 4000 Debt Servicing 90 Agric Services 2500 Equality & Law 2000 Local Gov Services 2400 20490 Surplus 660
Sample Question Revenue & Expenditure € Social Welfare Payments 800M Debt Servicing 222M Customs & Excise Duty 600M Corporation Tax 500M Education & Science 300M Services Department of Justice 500M VAT 600M Income Tax 700M Q.1 Was this a Surplus or Deficit Budget. Explain. Q.2 What was the main source of Gov Income? Q.3 What % of total expenditure was spent on Education Q.4 Explain two effects of decreasing level of unemployment on the National Budget.
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