1. The Role of the Government

2. The Role of the Government
John Maynard Keynes
To intervene in the working of the economy to achieve a stable level of growth
Milton Friedman
Government involvement in economic affairs should be minimal and the interaction of total demand and supply should determine economic issues

3. Instruments of Government Economic Policy
MONETARY POLICY
FISCAL POLICY
ECONOMIC PLANNING
LEGISLATION- PRICE & INCOME POLICIES
EXCHANGE RATE POLICY
MARKET INTERVENTION

4. FISCAL POLICY Policy on expenditure and taxation
The most powerful tool the government has
EXPANSIONARY
Government Plans for budget deficit.
Inflationary
Decreased taxes
Increase in Government
expenditure
Encourage Investment
Invest in Infrastructural projects
DEFLATORY
Slow down economy
Increase in Taxes
Decrease in
Government Expenditure
Redistribute Wealth
Fund Vital Services

5. Irish Spending and Revenue

6. Money Supply- Sourced by borrowing and earning
MONETARY POLICY
Carried out by the Central Bank on behalf of the ECB
Money supply, interest rates and credit creation
Money Supply- Sourced by borrowing and earning
Monetary Policy- concerned with borrowing and the availability of credit
ECB implements Monetary Policy by:
Controlling Interest Rates- Cost of Borrowing or Cost of Borrowing
Cost of Borrowing= interest rate

7. ECONOMIC PLANNING Irish Business and Employer’s Confederation (IBEC)
Consultations with social partners to achieve realistic economic targets
Irish Business and Employer’s Confederation (IBEC)
+ Irish Congress of Trade Unions (ICTU)
+Government
= Realistic Economic Targets over an agreed period of time

8. EXCHANGE RATE POLICY
The devaluing or re-valuing our currency in terms of other currencies
Controlled by the ECB
The price of one currency in terms of another currency

9. MARKET INTERNVENTION
Market Intervention is needed to provide socially desired but unprofitable services e.g. The Gardaí
The Government becomes the competitor (if there are there are other providers)/the sole operator of an industry
e.g. Gardaí (non- profitable),
Bus Éireann (gov. is the competitor),
Iarnród Eireann (gov. is the sole operator)

10. LEGISLATION- PRICE AND INCOME POLICIES
Used to:
-Set a minimum wage
-Protect the rights of the consumers
-Control prices
-Regulate how industries work
MONOPOLY
- There’s only one firm in this type of the industry .eg. Iarnród Eireann
OLIGOPOLY
-There are only a very small number of very large firms in this industry e.g. petrol firms- Shell

11. GOVERNMENT ECONOMIC AIMS Full Employment
(Fiscal Policy, Monetary Policy, Legislation, Exchange rate policy, Market intervention.)
Regional Development
(Fiscal policy, Economic planning)
Just Social Policy
(Fiscal policy)
Provision of Infrastucture
(Fiscal policy, market intervention)
GOVERNMENT
ECONOMIC AIMS
Achieve Economic Growth
(Economic planning)
Control Inflation (Fiscal Policy, Monetary policy, Legislation, Economic planning.)
Equilibrium on Balance of Payments (B.O.P.)
(Fiscal policy, Monetary policy, Exchange rate policy.)
Control Gov. Finances
(Fiscal policy)

12. If full employment is top priority, the gov. needs to:
CONFLICTS BETWEEN GOV. AIMS
1.FULL EMPLOYMENT vs CONTROL OF INFLATION
2.ECONOMIC GROWTH vs JUST SOCIAL POLICY
If full employment is top priority, the gov. needs to:
expenditure (eg FAS)
Interest Rates (leads to investment
If Contolling inflation is the priority, the gov. needs to:
interest rates (less money for consumption)
Direct Taxes (PAYE)
Expenditure
If Just Social Policy is top priority, the gov. needs to:
tax on high earners
Wealthy people may leave Ireland as a result, stunting economic growth
If Econmic Growth is top priority:
Gov. will be reluctant to take from the wealthy

13. 4.PROV. OF INFRASTRUCTURE vs CONTROL OF GOVERNMENT FINANCES
3. FULL EMPLOYMENT vs B.O.P
If providing new Infrastructure is top priority:
Gov. invests in an area
= little or no direct or immediate return
= National debt
If Full Employment is top priority
Gov. will introduce measures to increase employment.
This means people have more disposable incomes.
More incomes= demand for imports
=negative effect on B.O.P. as money goes out of the economy.
5.CONTROL OF GOV. FINANCES
vs FULL EMPLOMENT
If controlling gov. finances is top priority:
Grants, subsidies and other Financial incentives won’t be given to employers to boost employment

14. National Development Plan
Economic Infrastructure
Transport
Energy
Environmental Services
Communications & Broadband Programme
5. Social Inclusion
Invest in Child’s Programmes
Invest in Working Age Education Support systems
Invest in helping the elderly live independently
Invest in programmes for those with a disability
4. Social Infrastructure
Fair & equitable redistribution of wealth
Investment in housing
Investment in Health Sector
Investment in Prison infrastructure
2. Enterprise, Science & Innovation.
Attract high foreign direct investment
Develop our indigenous companies
Modernise Ag. Sector
National Development Plan
( )
3. Human Capital
Ensure access for everybody to the highest standards of education
Meet labour skills required for the future
Develop 3rd level education sector

15. b)i) State and explain what you consider to be the three most important economic aims of the Irish Government.
3 at 5 marks each
1. Achieve Full Employment
The Government should pursue policies which will:
boost our exports.
improve our competitiveness.
and so help create jobs in Ireland
2. Achieve Modern Economic Growth
The Government should:
try to manage current economic downturn in economic activity
ensure that we return to a position of some economic growth.
-Appropriate fiscal policy may help towards achieving this
2010 Q6(b)(i) Banking, econ0mic aims and monetarism

16. -The National Development Plans aim to do this. The government should:
EXAM ANS. CONT’D
4. Promote Balanced Regional Development
-The National Development Plans aim to do this. The government should:
develop broadband,
ensure the continuity of regional airports
develop educational opportunities in the regions so as to stimulate economic activity
encourage economic growth
3. Control Government Finances
The Gov. should:
reduce spending .
widen the tax base so that taxation revenues will increase.
-These will in turn reduce borrowing and help reduce national debt.
5. Improve Infrastructure
Continued development of road infrastructure, provision of improved public transport, development of airports etc, is essential to ensure that our standard of living is maintained

17. Control of national finances vs full employment
Balanced regional development vs maintaining state services
Distribution of wealth vs broadening tax base
Full employment vs price stability
Outline two examples of possible conflicts between economic aims/objectives.
Control of national finances vs economic growth
Stability in Banking sector vs control in government finances.
2 at 5 marks each
2010 Q6(b)(ii) Banking, economic aims and monetarism

18. THANKS FOR WATCHING
By Hannah Ortega- McCormack