The circular flow of income and output.

Question

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Answer 1

Question

Chapter 8, Problem 8.1LO

To determine

The circular flow of income and output.

Expert Solution & Answer

Answer to Problem 8.1LO

Circular flow of income and output show how income and output are distributed between different sectors of the economy. The circular flow of income is also used to calculate the national income of a country.

Two-sector economy In a two sector economy, the households supply factors of production to the Firms and receive factor payments in return of their services. The firms in turn supplies goods and services to the households and receive payments in return.

Three-sector economy

The three sector economy involves the Households, Firms and the Government sector. Households supply factors of production to the Firms and receive income in return. Firms use these factors to produce goods and services and supply to the households and government for final consumption. The government sector in turn supplies public goods to the households and make payments to households as factor payments.

Explanation of Solution

Four-sector economy

The four sector economy involves the Households, Firms, Government and the Rest of the World sector. Households supply factors of production to the Firms and receive factor income in return. Firm use these factors to produce goods and services and supply to the households and government for final consumption. The government sector in turn supplies public goods to the households and make payments to households as factor payments. While, the rest of the world sector makes factor incomes to the residents of a country working abroad. In addition to this, the rest of the world sector receives factor incomes of the residents of other countries working in our country.

The households and other sectors also save a part of their income in the financial sector. These savings are a leakage out of the income flow while the financial sector provides loans for investments, which are termed as injections into the spending stream.

Economics Concept Introduction

Introduction:

Circular flow of income and output describes the flow of income from firms to the households and output from firms and government to the households.

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1. Imagine a society that produces military goods and consumer goods, which we'll call "guns" and "butter." a. Draw a production possibilities frontier for guns and butter. Using the concept of opportunity cost, explain why it most likely has a bowed-out shape. b. Show a point that is impossible for the economy to achieve. Show a point that is feasible but inefficient. c. Imagine that the society has two political parties, called the Hawks (who want a strong military) and the Doves (who want a smaller military). Show a point on your production possibilities frontier that the Hawks might choose and a point the Doves might choose. d. Imagine that an aggressive neighboring country reduces the size of its military. As a result, both the Hawks and the Doves reduce their desired production of guns by the same amount. Which party would get the bigger "peace dividend," measured by the increase in butter production? Explain.

Answer 2

Question

Chapter 8, Problem 8.1LO

To determine

The circular flow of income and output.

Expert Solution & Answer

Answer to Problem 8.1LO

Circular flow of income and output show how income and output are distributed between different sectors of the economy. The circular flow of income is also used to calculate the national income of a country.

Two-sector economy In a two sector economy, the households supply factors of production to the Firms and receive factor payments in return of their services. The firms in turn supplies goods and services to the households and receive payments in return.

Three-sector economy

The three sector economy involves the Households, Firms and the Government sector. Households supply factors of production to the Firms and receive income in return. Firms use these factors to produce goods and services and supply to the households and government for final consumption. The government sector in turn supplies public goods to the households and make payments to households as factor payments.

Explanation of Solution

Four-sector economy

The four sector economy involves the Households, Firms, Government and the Rest of the World sector. Households supply factors of production to the Firms and receive factor income in return. Firm use these factors to produce goods and services and supply to the households and government for final consumption. The government sector in turn supplies public goods to the households and make payments to households as factor payments. While, the rest of the world sector makes factor incomes to the residents of a country working abroad. In addition to this, the rest of the world sector receives factor incomes of the residents of other countries working in our country.

The households and other sectors also save a part of their income in the financial sector. These savings are a leakage out of the income flow while the financial sector provides loans for investments, which are termed as injections into the spending stream.

Economics Concept Introduction

Introduction:

Circular flow of income and output describes the flow of income from firms to the households and output from firms and government to the households.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 8, Problem 8.1LO

To determine

The circular flow of income and output.

Expert Solution & Answer

Answer to Problem 8.1LO

Circular flow of income and output show how income and output are distributed between different sectors of the economy. The circular flow of income is also used to calculate the national income of a country.

Two-sector economy In a two sector economy, the households supply factors of production to the Firms and receive factor payments in return of their services. The firms in turn supplies goods and services to the households and receive payments in return.

Three-sector economy

The three sector economy involves the Households, Firms and the Government sector. Households supply factors of production to the Firms and receive income in return. Firms use these factors to produce goods and services and supply to the households and government for final consumption. The government sector in turn supplies public goods to the households and make payments to households as factor payments.

Explanation of Solution

Four-sector economy

The four sector economy involves the Households, Firms, Government and the Rest of the World sector. Households supply factors of production to the Firms and receive factor income in return. Firm use these factors to produce goods and services and supply to the households and government for final consumption. The government sector in turn supplies public goods to the households and make payments to households as factor payments. While, the rest of the world sector makes factor incomes to the residents of a country working abroad. In addition to this, the rest of the world sector receives factor incomes of the residents of other countries working in our country.

The households and other sectors also save a part of their income in the financial sector. These savings are a leakage out of the income flow while the financial sector provides loans for investments, which are termed as injections into the spending stream.

Economics Concept Introduction

Introduction:

Circular flow of income and output describes the flow of income from firms to the households and output from firms and government to the households.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 8, Problem 8.1LO

To determine

The circular flow of income and output.

Expert Solution & Answer

Answer to Problem 8.1LO

Circular flow of income and output show how income and output are distributed between different sectors of the economy. The circular flow of income is also used to calculate the national income of a country.

Two-sector economy In a two sector economy, the households supply factors of production to the Firms and receive factor payments in return of their services. The firms in turn supplies goods and services to the households and receive payments in return.

Three-sector economy

The three sector economy involves the Households, Firms and the Government sector. Households supply factors of production to the Firms and receive income in return. Firms use these factors to produce goods and services and supply to the households and government for final consumption. The government sector in turn supplies public goods to the households and make payments to households as factor payments.

Explanation of Solution

Four-sector economy

The four sector economy involves the Households, Firms, Government and the Rest of the World sector. Households supply factors of production to the Firms and receive factor income in return. Firm use these factors to produce goods and services and supply to the households and government for final consumption. The government sector in turn supplies public goods to the households and make payments to households as factor payments. While, the rest of the world sector makes factor incomes to the residents of a country working abroad. In addition to this, the rest of the world sector receives factor incomes of the residents of other countries working in our country.

The households and other sectors also save a part of their income in the financial sector. These savings are a leakage out of the income flow while the financial sector provides loans for investments, which are termed as injections into the spending stream.

Economics Concept Introduction

Introduction:

Circular flow of income and output describes the flow of income from firms to the households and output from firms and government to the households.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 8, Problem 8.1LO

To determine

The circular flow of income and output.

Expert Solution & Answer

Answer to Problem 8.1LO

Circular flow of income and output show how income and output are distributed between different sectors of the economy. The circular flow of income is also used to calculate the national income of a country.

Two-sector economy In a two sector economy, the households supply factors of production to the Firms and receive factor payments in return of their services. The firms in turn supplies goods and services to the households and receive payments in return.

Three-sector economy

The three sector economy involves the Households, Firms and the Government sector. Households supply factors of production to the Firms and receive income in return. Firms use these factors to produce goods and services and supply to the households and government for final consumption. The government sector in turn supplies public goods to the households and make payments to households as factor payments.

Explanation of Solution

Four-sector economy

The four sector economy involves the Households, Firms, Government and the Rest of the World sector. Households supply factors of production to the Firms and receive factor income in return. Firm use these factors to produce goods and services and supply to the households and government for final consumption. The government sector in turn supplies public goods to the households and make payments to households as factor payments. While, the rest of the world sector makes factor incomes to the residents of a country working abroad. In addition to this, the rest of the world sector receives factor incomes of the residents of other countries working in our country.

The households and other sectors also save a part of their income in the financial sector. These savings are a leakage out of the income flow while the financial sector provides loans for investments, which are termed as injections into the spending stream.

Economics Concept Introduction

Introduction:

Circular flow of income and output describes the flow of income from firms to the households and output from firms and government to the households.

Answer 6

Chapter 8, Problem 8.1LO

To determine

The circular flow of income and output.

Expert Solution & Answer

Answer to Problem 8.1LO

Circular flow of income and output show how income and output are distributed between different sectors of the economy. The circular flow of income is also used to calculate the national income of a country.

Two-sector economy In a two sector economy, the households supply factors of production to the Firms and receive factor payments in return of their services. The firms in turn supplies goods and services to the households and receive payments in return.

Three-sector economy

The three sector economy involves the Households, Firms and the Government sector. Households supply factors of production to the Firms and receive income in return. Firms use these factors to produce goods and services and supply to the households and government for final consumption. The government sector in turn supplies public goods to the households and make payments to households as factor payments.

Explanation of Solution

Four-sector economy

The four sector economy involves the Households, Firms, Government and the Rest of the World sector. Households supply factors of production to the Firms and receive factor income in return. Firm use these factors to produce goods and services and supply to the households and government for final consumption. The government sector in turn supplies public goods to the households and make payments to households as factor payments. While, the rest of the world sector makes factor incomes to the residents of a country working abroad. In addition to this, the rest of the world sector receives factor incomes of the residents of other countries working in our country.

The households and other sectors also save a part of their income in the financial sector. These savings are a leakage out of the income flow while the financial sector provides loans for investments, which are termed as injections into the spending stream.

Economics Concept Introduction

Introduction:

Circular flow of income and output describes the flow of income from firms to the households and output from firms and government to the households.

Answer 7

Chapter 8, Problem 8.1LO

To determine

The circular flow of income and output.

Answer 8

Expert Solution & Answer

Answer to Problem 8.1LO

Circular flow of income and output show how income and output are distributed between different sectors of the economy. The circular flow of income is also used to calculate the national income of a country.

Two-sector economy In a two sector economy, the households supply factors of production to the Firms and receive factor payments in return of their services. The firms in turn supplies goods and services to the households and receive payments in return.

Three-sector economy

The three sector economy involves the Households, Firms and the Government sector. Households supply factors of production to the Firms and receive income in return. Firms use these factors to produce goods and services and supply to the households and government for final consumption. The government sector in turn supplies public goods to the households and make payments to households as factor payments.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Explanation of Solution

Four-sector economy

The four sector economy involves the Households, Firms, Government and the Rest of the World sector. Households supply factors of production to the Firms and receive factor income in return. Firm use these factors to produce goods and services and supply to the households and government for final consumption. The government sector in turn supplies public goods to the households and make payments to households as factor payments. While, the rest of the world sector makes factor incomes to the residents of a country working abroad. In addition to this, the rest of the world sector receives factor incomes of the residents of other countries working in our country.

The households and other sectors also save a part of their income in the financial sector. These savings are a leakage out of the income flow while the financial sector provides loans for investments, which are termed as injections into the spending stream.