Question:medium
In a two sector economy, the flow of factor payments moves from ________ to _________.
In a two sector economy, the flow of factor payments moves from ________ to _________.
Show Hint
In a two-sector economy, households provide factors of production to firms, and firms make factor payments to households.
Updated On: Mar 19, 2026
- firms, households
- firms, government
- banks, households
- households, firms
Show Solution
The Correct Option is D
Solution and Explanation
Step 1: Identifying agents in a two-sector model.
A simplified two-sector economy consists only of households (owners of factors of production) and firms (producers of goods).
Step 2: Analyzing the direction of payment.
Households provide factor services (labor, capital, land, and entrepreneurship) to firms. In exchange for these services, firms must compensate the households. This compensation—consisting of wages, interest, rent, and profit—is known as factor payments.
Step 3: Conclusion.
Since the firms are the ones paying for the resources they use, the monetary flow of factor payments originates at the firms and moves toward the households.
Final Answer: firms, households.
A simplified two-sector economy consists only of households (owners of factors of production) and firms (producers of goods).
Step 2: Analyzing the direction of payment.
Households provide factor services (labor, capital, land, and entrepreneurship) to firms. In exchange for these services, firms must compensate the households. This compensation—consisting of wages, interest, rent, and profit—is known as factor payments.
Step 3: Conclusion.
Since the firms are the ones paying for the resources they use, the monetary flow of factor payments originates at the firms and moves toward the households.
Final Answer: firms, households.
Was this answer helpful?
0
Top Questions on Foreign exchange market
- For a hypothetical economy, assuming there are only two firms (X and Y) with equal values of Gross Value Added (GVA). On the basis of the following data, estimate the values of Domestic Sales by firm X:
- CBSE Class XII - 2026
- Economics
- Foreign exchange market
- Read the following statements carefully:
Statement 1: Under the flexible exchange rate system, a deficit or surplus in the Balance of Payments is automatically corrected.
Statement 2: Under the flexible exchange rate system, there is always a possibility of over/under valuation of currency.
In the light of the above given statements, choose the correct option from the following:- CBSE Class XII - 2026
- Economics
- Foreign exchange market
- Explain the likely impact of implementation of “Exports Promotion Scheme” of Government of India on the Balance of Payment (BoP) of the country. (Keeping other factors constant)
State the meaning of Trade Surplus.- CBSE Class XII - 2026
- Economics
- Foreign exchange market
- Read the following statements – Assertion and Reason (R). Choose the correct option from those given below: Assertion : Increase in exchange rate implies that the price of foreign currency in terms of domestic currency has increased. Reason (R): Balance of trade records the inflows and outflows of goods.
- CBSE Class XII - 2026
- Economics
- Foreign exchange market
- Want to practice more? Try solving extra ecology questions todayView All Questions
