A regional government gives grants to firms that open factories in an area with high youth unemployment. The grants are paid only after workers have complet...
Question 1 Report
A regional government gives grants to firms that open factories in an area with high youth unemployment. The grants are paid only after workers have completed one year in employment.
(a) State what is meant by a subsidy. [1]
(b) Explain why linking the grant to one year of employment may benefit the regional economy. [1]
Answer Details
(a) A subsidy is a payment by the government that reduces a firm's costs or encourages production. [1]
(b) Paying the grant only after a worker has completed a year encourages firms to create sustained rather than very short-term jobs. This can reduce youth unemployment and increase local income in the regional economy. [1]
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