a) What is double counting problem? How can it be solved? b) Describe the two sector,...

a) What is double counting problem? How can it be solved?

b) Describe the two sector, three sector and four sector circular flow of GDP.

Solutions

Expert Solution

PART - B

In two sector economy there is - Firms, Households and Banks.

Households provide Factors of production like land,labor,entrepreneur etc. to firms and in consume the goods and services produced by the firms.

Firms- They Provide the services to households and pay the factor income to the households in form of wages,rent, interest, profits.

Banks - They provide loans to both firms and households and provide the services.

Three- Sector Economy:-

Role of households and firms remains same. In this government is also involved.

Households and Firms pays taxes to government and Government purchase goods and services from firms and provids various facilities to households in return.

Four sector economy:-

All the things remains same as three sector economy. In this Rest of the world is also added.

Households purchase goods and services of foreign, known as imports and Firms sales their Goods and services to rest of the world known as Imports.

Rahul Sunny answered 1 year ago

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