Questions and Answers
Which of the following is primarily responsible for providing free services to the public?
What do households receive in exchange for selling the services of their factors of production?
In the context of the economy, what role do business firms primarily play?
Which of the following factors is NOT considered as part of the factors of production owned by households?
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How does the government primarily generate income to fund its expenditures?
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In economics, what is the term used for the services that households provide to producers?
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What percentage of their income do households spend on purchasing goods and services?
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What are business firms primarily considered in the context of the economy?
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Which of the following best describes the relationship between households and business firms?
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What is the primary function of households in the economy?
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Study Notes
Overview of Economic Agents
- An economy comprises various decision-making units known as economic agents.
- The primary economic agents are households, business firms, and the government.
Households
- Households own the factors of production: land, labor, capital, and entrepreneurship.
- They provide factor services to producers and earn income through rent, wages, interest, and profit.
- A significant portion of household income is spent on goods and services from producers.
- Households also save a part of their income and pay taxes to the government.
Business Firms
- Business firms, also referred to as producers, hire factor services from households.
- They produce commodities for sale to households, other firms, the government, and international markets.
- Firms serve as the major buyers of factors of production and are key producers of commodities.
- Business firms include both private and government enterprises.
Government
- Government is defined as 'general government' to exclude government enterprises.
- It purchases goods and services from producers and factor services from households.
- The government provides free services such as education, healthcare, sanitation, and police to meet public needs.
- Revenue for the government primarily comes from taxes imposed on households and business firms, including both direct and indirect taxes.
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Description
This quiz covers the basic components of an economy, focusing on the decision-making units known as economic agents. You will explore the roles of households, business firms, and government within the economy. Understand how these units influence production and resource allocation.
