Question

A. Suppose that businesses buy a total of $160 billion of the four resources (labor, land, capital, and entrepreneurial ability) from households. If households receive $84 billion in wages, $22 billion in rent, and $32 billion in interest, how much are households paid for providing entrepreneurial ability?

$_______ billion.

b. If households spend $85 billion on goods and $75 billion on services, how much in revenues do businesses receive in the product market?

$ __________billion.

Answer 1

A. Households are paid $22 billion for providing entrepreneurial ability.

B. Businesses receive $160 billion in revenues in the product market.

Step-by-step explanation:

A. In order to determine how much households are paid for providing entrepreneurial ability, we need to subtract the wages, rent, and interest from the total amount of resources bought by businesses. Given that households receive $84 billion in wages, $22 billion in rent, and $32 billion in interest, we can calculate the payment for entrepreneurial ability as follows:

Entrepreneurial Ability Payment = Total Resource Payment - (Wages + Rent + Interest)

Entrepreneurial Ability Payment = $160 billion - ($84 billion + $22 billion + $32 billion) = $22 billion

Therefore, households are paid $22 billion for providing entrepreneurial ability.

B. To find out how much revenue businesses receive in the product market, we need to add up the spending on goods and services by households.

Given that households spend $85 billion on goods and $75 billion on services, the total spending is:

Total Household Spending = Goods Spending + Services Spending

Total Household Spending = $85 billion + $75 billion = $160 billion

Therefore, businesses receive $160 billion in revenues in the product market.