. Let\'s put dollar amounts on the flows in the circular flow diagram of Figure

Question

. Let's put dollar amounts on the flows in the circular flow diagram of Figure 2.2. a. Suppose that businesses buy a total of $100 billion of the four resources (labor, land, capital, and entrepreneurial ability) from households. If households receive $60 billion in wages, $10 billion in rent, and $20 billion in interest, how much are households paid for providing entrepreneurial ability? b. If households spend $55 billion on goods and $45 billion on services, how much in revenues do businesses receive in the product market?

Explanation / Answer

(a) $10 billion for entrepreneurial ability Reason=(= $100 billion in total factor payments - $60 billion in wages - $10 billion in rent - $20 billion in interest) (b) $100 billion (= $45 billion + $55 billion) because household expenditures equal business revenues

Related Questions

Navigate

• Browse (All)
• Browse #
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.