Celtic Phoenix Ireland

Question: Describe about the Celtic Phoenix for Ireland. Answer: 1. According to the article, the given bailout is 64 billion i.e. $89 billion USD. This is close to two-fifths of the economys GDP. Hence the actual GDP is close to: (5/2)*($89 billion) = $222.5 billion. After there is an 11.2% contraction, the GDP will shrink to: [{(100-11.2)*$222.5}/100] = $197.58 billion USD. The given annual growth rate of the Euro Zone is 1.2%. At this rate, say, the economy would take A years to recover. The value of A can be found by the process: 197.58*(1+0.012)A = 222.5 By solving this problem for A, the value becomes A = 10 (approximately). Hence, it would take almost ten years to recover from the economy (Lancaster 2012). 2. The gross domestic product (GDP) is the monetary worth of all the finished goods and services which are produced within a country's borders in a given period. GDP is usually estimated on an annual basis; it can be computed on a quarterly basis as well. A country's GDP may rise for various reasons. One of the primary reasons is, increasing the population. The GDP is counted by adding the total population's income. Hence, the rise in population will lead to increasing total revenue, resulting in an increased GDP. Because of this reason, GDP alone cannot depict the accurate picture of a country's economy. To get the real essence of a country's economy, one has to find out its per capita GDP. A country with high population number might have a higher GDP than a country with less number of population, but that does not imply the former country is in a better position economically than the later one. The GDP per person or per capita is equal to the total GDP of the country, divided by the e ntire population of the country, i.e. GDP per capita of a country = (Total GDP of the country/ Total population of the country). This is a better indicator of an economys strength. Now, if there is a rise in population which is greater than the increase in GDP, the GDP per capita of the country will fall, as the denominator becomes higher than the numerator (Wuyi and Kaike 2014). By this way, the GDP of the country has surpassed its previous peak, and at the same time, the GDP per capita remains below the peak (Barnes et al. 2013). 3. The national income identity represents the method in which the gross domestic product (GDP) is measured, as the sum of expenditures in different comprehensive spending sections (Kaldor 2015). The identity, as shown below, states that GDP of a country is the sum of personal consumption expenditures (C), private investment expenditures (I), government consumption expenditures (G), and expenditures on exports (X) minus expenditures on imports (M): GDP = C + I + G + (X M). Personal consumption expenditures (C) include the goods and services, bought by domestic citizens. Private domestic investment (I) includes expenditures by businesses on fixed investment and any changes in business inventories. Government expenditures (G) include purchases of goods, services, and structures from domestic firms and the rest of the world by federal, state, and local government. Exports (X) consist of the goods and services that are sold to the foreign buyers. Imports (M) include those products and services which are purchased from the rest of the world, by the domestic citizens. The difference between exports and imports (X M) is called the net exports (Cooper et al. 2013). From the article, it is clear that the reason behind the rapid growth of GDP is the growth in the net exports (X - M). It has nothing to do with the consumption of the citizens of Ireland, domestic investment, and government expenditure. The difference between exports and imports has increased which is acting as a balance of the national income (Mackenbach and Looman 2013). The domestic consumption of the country remains low, along with the lower level of investment and government expenditure, which depicts the weakness of the economy of the country. But here, the increased net exports are "offsetting the decrease" caused by the small volume of consumption, and hence, increasing the gross domestic product (GDP) of the country (Economist.com, 2016). Thus, the increase in net exports not necessarily indicates a strong economy (O'Hagan and Newman 2014). 4. The Neoclassical economics is a set of explanations to various problems of economics which focuses on the determination of goods, outputs, and distribution of income in the markets present in an economy through the concept of supply and demand. The Neoclassical economics mainly manages the microeconomics concept of the country, and together with Keynesian economics forms the neoclassical structure. It operates on the mainstream economics today (Lawson 2013). In the case of Ireland, there are sufficient demands as well as supply in the markets currently. So, at present, Ireland can spend more. The increase in spending by the public is well expected. This will result in growing demand and consumption. An increase in investment will follow it. The national income identity is: GDP = C + I + G + (X M); C = consumption expenditures, I = private investment expenditures, G = government consumption expenditures, X = exports and M = imports. The increase in C and I are not alone going to increase the national income scenario of Ireland. Planned expenditure by the government is also needed to make a sustainable change. The majority of the income Ireland is getting now is from various multinational corporations (MNC) (Lunn 2013). Although the supply of revenue is steady now, it is not guaranteed in the future. To make this change in income permanent, the authorities need to take actions as soon as possible. The present resources must be used to increase the investments in the productive areas of the country's economy. The increase in C, I and G will result in a strong, sustainable income of Ireland. This will increase the supply and demand scenario of the economy strengthening the economy (Sexton 2014). References: Barnes, S., Bouis, R., Briard, P., Dougherty, S. and Eris, M., 2013.The GDP impact of reform: a simple simulation framework(No. 834). OECD Publishing. Cooper, R., Edey, H.C. and Peacock, A.T., 2013.National income and social accounting. Routledge. Economist.com. (2016). Celtic phoenix | The Economist. [online] Available at: https://www.economist.com/news/finance-and-economics/21678830-ireland-shows-there-economic-life-after-death-celtic-phoenix [Accessed 21 Aug. 2016]. Kaldor, N., 2015. Keynesian economics after fifty years. InEssays on Keynesian and Kaldorian Economics(pp. 27-74). Palgrave Macmillan UK. Kubiszewski, I., Costanza, R., Franco, C., Lawn, P., Talberth, J., Jackson, T. and Aylmer, C., 2013. Beyond GDP: Measuring and achieving global genuine progress. Ecological Economics, 93, pp.57-68. Lancaster, K., 2012. Mathematical economics. Courier Corporation. Lawson, T., 2013. What is this school called neoclassical economics?.Cambridge Journal of Economics,37(5), pp.947-983. Lunn, P.D., 2013. The role of decision-making biases in Ireland's banking crisis.Irish Political Studies,28(4), pp.563-590. Mackenbach, J.P. and Looman, C.W., 2013. Life expectancy and national income in Europe, 1900-2008: an update of Prestons analysis.International journal of epidemiology,42(4), pp.1100-1110. O'Hagan, J.W. and Newman, C. eds., 2014.The Economy of Ireland: national and sectoral policy Issues. Gill Macmillan Ltd. Sexton, L.A., 2014. Ireland's knowledge economy policy: beliefs, drivers and prospects. Wuyi, Z. and Kaike, W., 2014. The Main Contents, Effects and Revelations of the Latest Adjustment on GDP Accounting in USA.Statistical Research,3, p.002.