Question:

4 In 2020, Australia had a high national minimum wage (NMW). The NMW is received by some
people who work on Australian dairy farms. Australia produces milk and soft drinks. Milk is
purchased by some people as an alternative to soft drinks. Some dairy farms and some small
firms went out of business in 2020. The year saw an increase in the value of the country’s floating
foreign exchange rate.
(a) Identify two reasons why a government may set an NMW. [2]
(b) Explain two causes of an increase in the value of a country’s floating foreign exchange rate.
[4]
(c) Analyse how an increase in the price of milk may affect the revenue earned by milk producers
and soft drinks producers. [6]
(d) Discuss whether or not small firms are more likely to go out of business than large firms. [8]

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