FIGURE 2-2 The Circular Flow Diagram Factors of production flow from households to businesses through the factor 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 factor market, and businesses receive revenue from households (their expenditures) through the product market. Costs of production Factors of BUSINESSES Buy factors of production -Sell products Goods a and services Revenue FACTOR MARKET Households sell Firms buy PRODUCT MARKET Firms sell - Households buy Money Labour, land, preneurial Income wages, rents, Interest, profits) capital, entre. ability HOUSEHOLDS -Sell factors of prodtion Buy products Goods and services Consumption nditures expend a. Suppose that businesses buy a total of $100 billion of the four resources (labour, 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? $ billion for entrepreneurial ability

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FIGURE 2-2 The Circular Flow Diagram
Factors of production flow from households to businesses through the
factor 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
factor market, and businesses receive revenue from households (their
expenditures) through the product market.
Costs
$
Factors
production
Goods and s
of
BUSINESSES
Buy factors of
production
- Sell products
and services
Revenue
FACTOR
MARKET
- Households sell
. Firms buy
PRODUCT
MARKET
- Firms sell
- Households buy
Money income
interest,
Labour, land,
preneurial
capital, entre-
HOUSEHOLDS
- Sell factors of
prodation
- Buy products
Goods and services
(wages, rents,
Consumption
expenditures
a. Suppose that businesses buy a total of $100 billion of the four resources (labour, 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?
billion for entrepreneurial ability
Transcribed Image Text:FIGURE 2-2 The Circular Flow Diagram Factors of production flow from households to businesses through the factor 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 factor market, and businesses receive revenue from households (their expenditures) through the product market. Costs $ Factors production Goods and s of BUSINESSES Buy factors of production - Sell products and services Revenue FACTOR MARKET - Households sell . Firms buy PRODUCT MARKET - Firms sell - Households buy Money income interest, Labour, land, preneurial capital, entre- HOUSEHOLDS - Sell factors of prodation - Buy products Goods and services (wages, rents, Consumption expenditures a. Suppose that businesses buy a total of $100 billion of the four resources (labour, 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? billion for entrepreneurial ability
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