Explain four ways an increase in government spending may affect a business.

Mark scheme

Marking points from the official mark scheme (May/June 2020). The mark or mark type is shown in brackets.

1. [1] (a) Government may increase purchases from other businesses – increasing demands for its products
2. [1] (a) May lead to higher inflation - increase business costs
3. [1] (a) May reduce unemployment - increase consumer spending
4. [1] (a) May lead to a need to increase taxes - reducing consumer spending
5. [1] (a) Explanation of way (e.g., Government may increase purchases from other businesses, increasing their revenue)
6. [12] (b) Level 3: Sound application of knowledge and understanding of relevant business concepts using appropriate terminology. Detailed discussion of two or more applicants. Well-justified recommendation. Candidates discussing all three applicants in detail, in context and with well-justified recommendation including why the alternative applicants were rejected should be rewarded with the top marks in the band.
7. [5-8] (b) Level 2: Sound application of knowledge and understanding of relevant business concepts using appropriate terminology. Detailed discussion of at least one applicant. Judgement with some justification/some evaluation of choice made. Candidates discussing two or more applicants in detail and applying it to the case should be rewarded with the top marks in the band.
8. [1-4] (b) Level 1: Limited application of knowledge and understanding of relevant business concepts. Limited ability to discuss the applicants with little/no explanation. Simple judgement with limited justification/limited evaluation of choice made. Candidates outlining all three applicants in context should be rewarded with the top marks in the band.
9. [0] (b) Joe point: Inexperienced as only worked part-time
10. [0] (b) Joe point: Doesn't want to work long hours so may not work hard for Simon
11. [0] (b) Joe point: Has experience of the food and drink industry and already trained in hygiene regulations so saving time and money
12. [0] (b) Joe point: But cheapest at $6 hourly wage of the three so costs will be lower
13. [0] (b) Zabeen point: Experience of management – may be skilled to manage the market stalls without training
14. [0] (b) Zabeen point: No qualifications so may not have much ability to learn - training less effective
15. [0] (b) Zabeen point: Ambitious so may be keen to do well and impress Simon
16. [0] (b) Zabeen point: But the most expensive at $15 per hour to employ so costs will be higher
17. [0] (b) Zabeen point: May leave if better job comes along to higher costs of recruitment as need to replace her
18. [0] (b) Jim point: Has experience of the food industry and already trained in hygiene regulations so saving time and money
19. [0] (b) Jim point: Enthusiastic and wants to do more challenging work – will work hard to impress Simon
20. [0] (b) Jim point: Has already worked as a manager so no need to train him in what to do – do the job quicker and cheaper
21. [0] (b) Justification (Joe): Joe is probably youngest and cheapest (at $6 per hour) of the three applicants to employ but has the least experience and Simon needs someone reliable to make the stall successful.
22. [0] (b) Justification (Zabeen): Zabeen most experience but not on a food or drinks stall. Also has no formal qualifications and is the most expensive of the three applicants to employ. As FJ is a new business it will need to keep costs down.
23. [0] (b) Justification (Jim): Jim has hygiene certificate and so lower costs than Zabeen as training not required. Has more experience than Joe of working in a food and drinks establishment. He is ambitious so will try hard and more likely to help make the market stall successful.