External Influences on Business Activity Solutions Paper 1

Economic Issues Exam Solutions✍🏽

Ymix is a large cement company based in country X. Ymix is in the private sector. It supplies builders in country X with 20% of the cement they need and the rest is imported.

Ymix now has eight cement factories but plans to close two of them. This will threaten 2000 employees with redundancy.

The Managing Director said: ‘I blame the appreciation of country X’s exchange rate. The Government should help private sector businesses.’

(e) Do you think the government should help private sector businesses? Justify your answer. [6]

Yes, because it will protect jobs which help government meets an economic objective of decreasing unemployment.

No, because government support reduces incentives for private sector businesses to be successful. This could result in businesses being less efficient.

Government’s should only help start-ups in the private sector. It will be too costly to help all private sector businesses and will lead to dependence on government hand-outs and lower efficiency.

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