In January 2013, the Portuguese Government increased tax rates. Three months later it cut its spending on health care and education. Between these two periods, unemployment in Portugal rose.

Mark scheme

Marking points from the official mark scheme (May/June 2015). The mark or mark type is shown in brackets.

1. [1] a payment/finance
2. [1] to the government/local authority
3. [1] example e.g. sales tax/income tax
4. [1] higher unemployment will reduce people's incomes
5. [1] this will reduce the amount of income tax paid
6. [1] higher unemployment will reduce the amount people spend/reduce demand for goods and services
7. [1] this will reduce indirect tax revenue
8. [1] higher unemployment will reduce firms' revenue
9. [1] this will reduce corporation tax revenue
10. [1] the existence of unemployment may encourage government to cut tax rates
11. [1] in an attempt to reduce unemployment
12. [1] a fall in total (aggregate demand)
13. [1] will cause firms to reduce their output
14. [1] lower their need for labour
15. [1] increase cyclical unemployment
16. [1] a reduction in the skills/mobility of workers
17. [1] may result in firms being unable or unwilling to employ workers
18. [1] leading to structural unemployment
19. [1] a rise in unemployment benefits
20. [1] may lead to workers taking longer moving between jobs/less willing to search for work
21. [1] causing an increase in frictional/voluntary unemployment
22. [1] an increase in a country's exchange rate
23. [1] will make exports more expensive and imports cheaper
24. [1] this will reduce international competitiveness
25. [1] reduce demand for labour in affected industries
26. [1] cause international/structural unemployment
27. [1] a rise in wages above the equilibrium level
28. [1] this may be the result of industrial action/imposition of a national minimum wage
29. [1] workers may be replaced by machines
30. [1] firms may reduce the size of their labour forces in order to cut costs of production
31. [1] advances in technology
32. [1] may make certain skills redundant
33. [1] leading to structural unemployment
34. [1] it may reduce the quality/availability of education
35. [1] this could reduce the skills of workers
36. [1] lower their chances of getting a job
37. [1] getting a well-paid job
38. [1] reduce income
39. [1] reduce goods and services people can enjoy
40. [1] it may reduce people's access to knowledge about good nutrition/health care
41. [1] this could increase illness
42. [1] lower life expectancy
43. [1] a less skilled labour force
44. [1] may discourage multinational companies setting up in the country
45. [1] this could reduce employment opportunities/reduce wages
46. [1] reduce incomes
47. [1] reduce goods and services people can buy
48. [1] a reduction in government spending e.g. education may reduce aggregate demand
49. [1] lower aggregate demand may reduce output and incomes
50. [1] it will reduce the country's HDI value
51. [1] which is an indicator of living standards
52. [1] instead of spending money on education, the government might spend money on e.g. health care
53. [1] a healthier population can enjoy life more and live longer
54. [1] a healthier labour force may raise productivity
55. [1] increase wages
56. [1] increase the goods and services people can buy
57. [1] this could increase the HDI value
58. [1] instead of spending money on education, the government might spend money on e.g. infrastructure
59. [1] better infrastructure can reduce firms' costs of production
60. [1] make domestic firms more internationally competitive
61. [1] encourage firms to expand
62. [1] raise employment
63. [1] increase incomes
64. [1] increase the goods and services people can buy
65. [1] a country's birth rate may be falling
66. [1] so there may be fewer children in education
67. [1] the amount spent per child may still be rising
68. [1] improving productivity
69. [1] raising wages
70. [1] increasing consumption
71. [1] less may be spent but it might be spent more effectively
72. [1] this will raise the quality of education
73. [1] raise productivity
74. [1] raising employment
75. [1] increasing consumption