Question

Let's put dollar amounts on the flows in the circular flow diagram below. Money incom RESOURCE MARKET • Households sell • Businesses buy borand, crew profiel Resource FIGURE 2.2 The circular flow diagram. Resources flow from households to businesses through the resource market, and products flow from businesses to households through the product market. Opposite these real flows are monetary flows. Households receive income from businesses their costs) through the resource market, and businesses receive revenue from households their expenditures) through the product market Werents Garalabi entrepre BUSINESSES • buy resources . sell products HOUSEHOLDS • sell resources • buy products poo as PRODUCT MARKET • Businesses sell • Households buy Goods and Consumo

Answer 1

The circular flow diagram shows the actual working of the economy , in the simple mode of circular flow there are two participants households and firms. The households provide the factors of production such as the land , labour, capital and entrepreneurial ability, the households receive the factor payments in the form of rent, wages, interest , and profit. In the product market the firm produces the goods and services and are consumed by the households , the households pays money to the firms and its their revenue. The spending of the household is the revenue for the firm and the payments by the firm is the income for households.

a). There are only factor of production and the value of the three is already given so in order to find the amount of payment to the fourth factor we have to add the sum of three and deduct it from the total.

.

= 120-168 +14+24)

.

= 120-106

$=14$.

Ans: billion.

b). The spending of the household is the revenue for the firm, So

.

= 65 + 55

.

= 120

Ans: 120 billion.