Question:

5 In Greece, rich households spend more than the average household. The amount of spending
in an economy influences whether its production point is on or inside its production possibility
curve (PPC). In 2020, household spending in Greece fell. This affected some firms’ plans to
merge. It also increased unemployment. More than half of those unemployed in Greece had been
unemployed for more than a year.
(a) Identify two reasons why rich households spend more than the average household. [2]
(b) Explain the significance of a production point inside a PPC and a production point on its PPC.
[4]
(c) Analyse why someone who has been unemployed for more than a year may not get another
job. [6]
(d) Discuss whether or not a government should encourage firms to merge. [8]

Sample Answers: