Read the information below about a country where globalisation has increased competition for local clothing manufacturers. The government plans to reduce pa...
Question 1 Report
Read the information below about a country where globalisation has increased competition for local clothing manufacturers.
The government plans to reduce payroll taxes for small exporters. It hopes firms will employ more workers and sell more abroad.
(a) State one government objective that may be supported if exports increase. [1]
(b) Explain how lower payroll taxes could decrease unemployment. [2]
Answer Details
(a) If exports increase, this may support a favourable trade balance. [1] Lower unemployment or economic growth would also be acceptable objectives.
(b) Lower payroll taxes reduce firms' labour costs. [1] Firms may therefore hire more workers or avoid making workers redundant, decreasing unemployment. [1]
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