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ACCA Applied Knowledge · Business and Technology · Political and legal factors affecting business

A government gives grants to firms that locate new factories in a region with high unemployment. Which is the main policy objective of this measure?

The main objective is to reduce regional economic imbalance and create jobs. Grants make it more attractive for businesses to invest in areas of high unemployment. They cost the government money, so they do not cut the deficit, and they are not trade protection.

  1. ATo reduce regional economic imbalance and create jobsCorrect
  2. BTo restrict competition by protecting domestic producers from imports
  3. CTo reduce the government's budget deficit in the short term

Explanation

Regional grants are a form of industrial policy that encourage investment where unemployment is high. Grants cost the government money, so they do not reduce the deficit. They are not import protection either, which would involve tariffs or quotas.

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