ROLE OF THE GOVERNMENT

1. ROLE OF THE GOVERNMENT

2. AIMS OF THE GOVERNMENT 1.Create Full Employment 2.Control Inflation 3.Achieve Equilibrium of Balance of Trade 4.Control Government Finances 5.Achieve a Just Social Policy 6.Provision of Adequate National Infrastructure 7.Achievement of National Growth 8.Regional Development **usually asked when this section comes up**

3. Policies used by the Government -Fiscal : expenditure & taxation -Monetary : supply of money, interest rates & credit creation. -Exchange rate : devaluing or revaluing the currency in terms of other currencies -Direct intervention : setting up semi-state bodies to provide goods and services in the open market -Deregulation : changing of laws and practices which are determined to competition. -Prices & Income : gov implements price controls to freeze or limit wage increases -Economic planning : consultations with social partners to achieve realistic economic targets

4. Why?? Income for government Less exp Less social cost More spending in economy Note 0% employment in not achievable How?? Fiscal: reduce tax to encourage spending Monetary: reduce interest to encourage investment Exchange rate: reduce value of currency to stimulate exports Direct intervention: increase jobs in public sector CREATE FULL EMPLOYMENT

5. Why?? Stabilise cost of living Prevent wage increases Keep Irish industry competitive How?? Fiscal: increase tax to reduce demand Monetary: increase interest rates to decrease demand for loans Price and incomes: impose wage freezes & impose price control orders CONTROL INFLATION

6. Why?? Keep the value of imports balanced Exports equal to each other Maintains employment, production & standards of living How?? Fiscal: increase taxes to lower income-decreasing demand for imports Monetary: increase interest rates on loans - less money available to be spent on imports Exchange rate: devalue currency – cheaper exports and more expensive inports ACHIEVE EQULIBRIUM OF BALANCE OF TRADE

7. Why?? Reduce national debt Reduce cost of servicing debt Make better use of resources Reduce taxes Use surplus money to provide better services How?? Fiscal: decrease exp & gov borrowing CONTROL OF GOVERNMENT FINANCES

8. Why?? Without infrastructure the provision of goods and services could not take place How?? Fiscal: implement a progressive income tax policy & increase social welfare ACHIEVE A JUST SOCIAL POLICY

9. Why?? Without infrastructure the provision of goods & services could not take place efficiently How?? Direct intervention: co-operate with private enterprise in the provision of facilities such as telephone services Fiscal: increase gov sending on infrastructure.eg. Schools & hospitals THE PROVISION OF ADEQUATE NATIONAL INFRASTRUCTURE

10. Why?? Ensure all regions of the country share in the wealth All the population has an adequate infrastructure suited to their needs How?? Fiscal: ensure the payment of higher grants to companies setting up in disadvantaged areas REGIONAL DEVELOPMENT

11. Why?? Economic growth is aimed at increasing the average income per head of the population How?? Economic planning: negotiate with social partners to set up realistic targets for growth Monetary: ensure that the money supply is adequate when needed ACHIEVEMENT OF ECONOMIC GROWTH

12. CONFLICTS BETWEEN GOVERNMENT AIMS 1. Full employment ~ control of inflation, balance of payments & control of gov finances 2. Control of gov finances ~ provision of infrastructure, just social policy &full employment 3. Economic growth~ just social policy & controlof inflation **usually asked when this section comes up**

13. NEW GOVERNMENT INVESTMENTS • New schools Permission has been given by the government for the building of 40 new schools around the country. • New children’s hospital A new children’s hospital will be built over the next few years. *as a result of findings in the 2011 census.

14. Advantages Raise money for the government Many state bodies are supported by taxation, their sale will result in less need for higher taxation Gives Irish people the opportunity to invest in the Irish economy. Disadvantages New companies could fall into foreign control May reduce labour force Could discontinue services to society that are non-profitable PRIVATISATION=the sale of state owned companies to the private sector

15. NATIONALISATION= the process of a national government acquiring the ownership of o private business/industry. Advantages • Ensure continuity of essential services.

16. The Government has designed a plan to promote the creation of 100,000 jobs over the next four years. The Action Plan for Jobs 2012  seeks to help companies expand their scope for exporting goods; provide credit to small and medium sized enterprises; improve competitiveness; and attract more international investment to Ireland - A €150 million Development Capital Scheme which will offer supports for small and medium-sized businesses with the potential to create jobs that are struggling to access credit - The extension of the corporation tax exemption for start-up companies until 2014 100,000 new jobs by 2016

17. EXAM QUESTIONS • 2010 higher level • 2009 higher level • 2008 higher • 2007 higher • 2006 higher • 2011 ordinary • 2008 ordinary level • 2007 ordinary • 2006 ordinary level • 2004 ordinary

18. EXAM QUESTIONS CONTINUED 2009 higher level:‘The Irish government should encourage initiatives that will prevent further cost increases and in turn sustain employment in small firms’.Suggest with reasons two actions the government could take to improve the competitiveness of small firms. • Reduce the minimum wage • Reduce taxation • Develop infrastructure • Subsidies to firms