Question

Which of the following correctly matches resources and their payments in the Circular Flow Model?

I. Labor = wages, Land = interest
II. Entrepreneurship = profits, Labor = wages
III. Capital = rent, Land = profits
IV. Investment = capital gains, Government = taxes
V. Labor = wages, Land = rent

A. Only statement I is correct.
B. Only statements II and III are correct.
C. Only statements III and IV are correct.
D. Only statements II and V are correct.
E. Only statement IV is correct.

Answer 1

D. 2 (Entrepreneurship = Profits , Labour = Wages) & 5 (Labour = Wages , Land = Rent) are correct .

Step-by-step explanation:

In basic two sector circular flow of model :

4 Factors of Production - Land , Labour , Capital , Entrepreneur get

Factor Incomes - Rent , Wages , Interest , Profit respectively .

So , all other options (3,4) are inapt matching as per the above .