Let\'s put a dollar amounts on the flows in the circular flow diagram of figure

ID: 1188422 • Letter: L

Question

Let's put a dollar amounts on the flows in the circular flow diagram of figure 2.2. a. Suppose that business buy a total of $120 billion of the four resources (labor, land, capital, and entrepreneurial ability) from households. If households receive $68 billion in waged, $14 billion in rent, and $24 billion in interest, how much are households paid for providing entrepreneurial ability? b-) If households spend $ 65 billion on goods and $ 55 billion on services, how much in revenues do businesses receive in the product market?

Explanation / Answer

Assume that x be the dollars households are paid for providing entrepreneurial ability

$120 = $68 + $14 + $24 + x

x = $14 billion

Businesses receipts in product market = households expenditure on goods and services

= $65 + $55 billion

= $120 billion

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Let\'s put a dollar amounts on the flows in the circular flow diagram of figure

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