In a mixed economy like Portugal’s, the state takes action in the economy. Government intervention may be used to remedy market failure and to meet economic objectives, for example keeping inflation under control. In 2017, one-fifth of Portugal’s population was in poverty, and government spending rose.
(a)[2]
Identify two causes of market failure.
(b)[4]
Explain how resources are allocated in a mixed economic system.
(c)[6]
Analyse how a high rate of inflation may harm the poor.
(d)[8]
Discuss whether or not increasing government spending will enable a government to achieve its aims for the economy.
Worked solution & mark scheme
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