Question

Read the below case and answer the question that follow:

Circular Income Flow in a Two Sector Economy: In the figure given we can see that upper loop shows the resources such as land, capital and entrepreneurial ability flow from households to firms in the direction shown by the arrow direction.

The money flows from firms to the households as factor payments in the form of wages, rent, interest and profits, shown by the arrow direction.

The lower part of the figure shows the flow of money from households to firms in the form of consumption expenditure done by the households to purchase the goods and services produced by the firms, making the flow of goods and services from firms to households.

Thus, we see that money flows from business firms to households as factor payments and then it flows from households to firms. Thus, there is, in fact, a circular flow of money or income. This is how the economy functions.

Money Flows from ______ to ______ as factor payments.

विकल्प

• Firms, households

• Households, firms

• Government, firms

• Households, government

Answer 1

Money Flows from Firms to households as factor payments.

Explanation:

Wages, rent, interest, and profits move from the firm to the household as factor payments.