Question:

4 People in Ecuador buy products using a variety of forms of money. The Ecuadorian government
pays public sector workers’ wages directly into their bank accounts. In 2019, some Ecuadorian
firms’ profits were affected by advances in technology. That year, the Ecuadorian government cut
public sector workers’ hours and, in 2020, it reduced its spending. Economists were uncertain
what effect the decrease in government spending would have on unemployment.
(a) Identify two characteristics of money. [2]
(b) Explain two reasons why a reduction in their working hours may not cause public sector
workers to move to working in the private sector. [4]
(c) Analyse how advances in technology could affect firms’ profits. [6]
(d) Discuss whether or not a decrease in government spending will increase unemployment. [8]

Sample Answers: