9 RESOURCE MARKET Households sell Businesses buy FIGURE 2.2 The circular flow di

Question

9 RESOURCE MARKET Households sell Businesses buy FIGURE 2.2 The circular flow diagram. Resources flow from households to businesses hrough the resource market, and products flow from businesses to households through the product market. Opposite these reall flows are monetary flows Households receilve income from buninesses (their costs) through dhe resource market, and businesses receive nevenue from househoilds (their Labor f expenditures) through the product marhet pped BUSINESSES buy resources sell produets HOUSEHOLDS sell resources buy products PRODUCT MARKET eBusinesses sell rvices Households buy Instructions: Enter your answers as whole numbers a. Suppose that businesses buy a total of $100 billion of the four resources labor, land, capital, and entreprene $60 billion in wages, $10 billion in rent, and $20 billion in interest, how much are households paid for providing en c rial ability) from households. if households receive ST billion. businesses receive in the product market? b. If households spend $55 billion on goods and $45 billion on services, how much in revenues do billion. 39 of 51 1 Next >

Explanation / Answer

A total of 100 bn$ are paid for land, labour, capital and entrepreneurial ability (EA);
Thus: Land + Labour + Capital + EA = 100
10+ 60 + 20 + EA = 100
EA = 100-90 = 10
EA=10 bn $
Thus, households are paid 10bn $ for providing entrepreneurial ability;

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