Question IV:

Let's put dollar amounts on the flows in the circular flow diagram of Figure 2.2. in your packet.

a. Suppose that businesses buy a total of $100 billion of the four resources (labor, land, capital, and

entrepreneurial ability) from households. If households receive $60 billion in wages, $10 billion in rent,

and $20 billion in interest, how much are households paid for providing entrepreneurial ability?

b. If households spend $55 billion on goods and $45 billion on services, how much in revenues do

businesses receive in the product market?