Let’s put dollar amounts on the flows in the circular flow diagram below. Money incom RESOURCE…
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Question “Let’s put dollar amounts on the flows in the circular flow diagram below. Money incom RESOURCE…”
Answer
The circular flow diagram depicts the actual functioning of the economy. In the simple mode, there are two participants: households and businesses. The household provides the production factors such as land, labour and capital. In return, the households receive rent, wages, interest, profit, and other factor payments. The product market is where the firm produces goods and services that are then consumed by households. In return, the households pay money to the firms as well as their revenue. The revenue of the household is the household’s spending, and the payments made by the firm are the income for the households.
a). Only factor of production is required. The value of each factor must be added to get the amount to pay for the fourth.
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b). So, the household’s spending is the revenue of the firm.
Ans: 120 billion.
Conclusion
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