Lets put a dollar amounts on the flows in the circular flow diagram. a) suppose

Question

Lets put a dollar amounts on the flows in the circular flow diagram.

a) suppose that businesses buy total of $ 130 billion of the four resources ( labor,land,capital, and entrepreneurial ability) from households. If households receive $ 72 billion in wages, $ 16 billion in rent, and $ 26 billion in interest, how much are households paid for providing entrepreneurial ability?
b) if household spend $ 70 billion on goods and $ 60 billion on services, how much in revenues do businesses receive in the product market?

Explanation / Answer

Part B is wrong (got it wrong on my homework), it's

$130 billion (= $70 billion + $60 billion) because household expenditures equal business revenues.

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