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Which of the following is considered as a part of nominal flow in the circular flow of income?
- a)Flow of goods and services from firms to households
- b)Flow of factor payments from firms to households
- c)Flow of factor services from households to firms
- d)Flow of factors of production from households to firms
Correct answer is option 'B'. Can you explain this answer?
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Which of the following is considered as a part of nominal flow in the ...
Nominal flows refer to the flow of money in the form of money income and spending on goods and services.
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Which of the following is considered as a part of nominal flow in the ...
Explanation:
The circular flow of income is a model used to show the flow of money, goods, and services within an economy. It illustrates how households and firms interact with each other in terms of production and consumption.
In the circular flow of income model, there are two main types of flows: real flows and money flows. Real flows refer to the flow of goods, services, and factors of production, while money flows refer to the flow of money payments.
Nominal Flow:
The nominal flow refers to the flow of money payments between different sectors of the economy. It includes the flow of factor payments from firms to households and the flow of factor services from households to firms.
Flow of factor payments from firms to households:
- In the circular flow model, households are the owners of factors of production such as land, labor, capital, and entrepreneurship.
- Firms, on the other hand, hire these factors of production from households to produce goods and services.
- In return for the use of these factors, firms make payments to households in the form of wages, rent, interest, and profit.
- This flow of money payments from firms to households is known as the flow of factor payments.
Significance:
The flow of factor payments is an important part of the circular flow of income because it represents the income earned by households. This income is used by households to purchase goods and services from firms.
- The wages earned by households are used to buy goods and services produced by firms.
- The rent earned from the use of land is used to pay for housing or other goods and services.
- The interest earned on savings or investments is used for consumption or further investment.
- The profit earned by entrepreneurs is either reinvested in the firm or used for personal consumption.
Overall, the flow of factor payments from firms to households is an integral part of the circular flow of income as it represents the income earned by households and the source of funds for households to purchase goods and services.
The circular flow of income is a model used to show the flow of money, goods, and services within an economy. It illustrates how households and firms interact with each other in terms of production and consumption.
In the circular flow of income model, there are two main types of flows: real flows and money flows. Real flows refer to the flow of goods, services, and factors of production, while money flows refer to the flow of money payments.
Nominal Flow:
The nominal flow refers to the flow of money payments between different sectors of the economy. It includes the flow of factor payments from firms to households and the flow of factor services from households to firms.
Flow of factor payments from firms to households:
- In the circular flow model, households are the owners of factors of production such as land, labor, capital, and entrepreneurship.
- Firms, on the other hand, hire these factors of production from households to produce goods and services.
- In return for the use of these factors, firms make payments to households in the form of wages, rent, interest, and profit.
- This flow of money payments from firms to households is known as the flow of factor payments.
Significance:
The flow of factor payments is an important part of the circular flow of income because it represents the income earned by households. This income is used by households to purchase goods and services from firms.
- The wages earned by households are used to buy goods and services produced by firms.
- The rent earned from the use of land is used to pay for housing or other goods and services.
- The interest earned on savings or investments is used for consumption or further investment.
- The profit earned by entrepreneurs is either reinvested in the firm or used for personal consumption.
Overall, the flow of factor payments from firms to households is an integral part of the circular flow of income as it represents the income earned by households and the source of funds for households to purchase goods and services.
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Which of the following is considered as a part of nominal flow in the circular flow of income?a)Flow of goods and services from firms to householdsb)Flow of factor payments from firms to householdsc)Flow of factor services from households to firmsd)Flow of factors of production from households to firmsCorrect answer is option 'B'. Can you explain this answer?
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Which of the following is considered as a part of nominal flow in the circular flow of income?a)Flow of goods and services from firms to householdsb)Flow of factor payments from firms to householdsc)Flow of factor services from households to firmsd)Flow of factors of production from households to firmsCorrect answer is option 'B'. Can you explain this answer? for Humanities/Arts 2024 is part of Humanities/Arts preparation. The Question and answers have been prepared according to the Humanities/Arts exam syllabus. Information about Which of the following is considered as a part of nominal flow in the circular flow of income?a)Flow of goods and services from firms to householdsb)Flow of factor payments from firms to householdsc)Flow of factor services from households to firmsd)Flow of factors of production from households to firmsCorrect answer is option 'B'. Can you explain this answer? covers all topics & solutions for Humanities/Arts 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Which of the following is considered as a part of nominal flow in the circular flow of income?a)Flow of goods and services from firms to householdsb)Flow of factor payments from firms to householdsc)Flow of factor services from households to firmsd)Flow of factors of production from households to firmsCorrect answer is option 'B'. Can you explain this answer?.
Which of the following is considered as a part of nominal flow in the circular flow of income?a)Flow of goods and services from firms to householdsb)Flow of factor payments from firms to householdsc)Flow of factor services from households to firmsd)Flow of factors of production from households to firmsCorrect answer is option 'B'. Can you explain this answer? for Humanities/Arts 2024 is part of Humanities/Arts preparation. The Question and answers have been prepared according to the Humanities/Arts exam syllabus. Information about Which of the following is considered as a part of nominal flow in the circular flow of income?a)Flow of goods and services from firms to householdsb)Flow of factor payments from firms to householdsc)Flow of factor services from households to firmsd)Flow of factors of production from households to firmsCorrect answer is option 'B'. Can you explain this answer? covers all topics & solutions for Humanities/Arts 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Which of the following is considered as a part of nominal flow in the circular flow of income?a)Flow of goods and services from firms to householdsb)Flow of factor payments from firms to householdsc)Flow of factor services from households to firmsd)Flow of factors of production from households to firmsCorrect answer is option 'B'. Can you explain this answer?.
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Which of the following is considered as a part of nominal flow in the circular flow of income?a)Flow of goods and services from firms to householdsb)Flow of factor payments from firms to householdsc)Flow of factor services from households to firmsd)Flow of factors of production from households to firmsCorrect answer is option 'B'. Can you explain this answer?, a detailed solution for Which of the following is considered as a part of nominal flow in the circular flow of income?a)Flow of goods and services from firms to householdsb)Flow of factor payments from firms to householdsc)Flow of factor services from households to firmsd)Flow of factors of production from households to firmsCorrect answer is option 'B'. Can you explain this answer? has been provided alongside types of Which of the following is considered as a part of nominal flow in the circular flow of income?a)Flow of goods and services from firms to householdsb)Flow of factor payments from firms to householdsc)Flow of factor services from households to firmsd)Flow of factors of production from households to firmsCorrect answer is option 'B'. Can you explain this answer? theory, EduRev gives you an
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