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In a two-sector economy, the flow of factor payments moves from __________ to __________. (Choose the correct option to …

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In a two-sector economy, the flow of factor payments moves from __________ to __________.
(Choose the correct option to fill in the blanks)

a

Firms → Households

b

Firms → Government

c

Banks → Households

d

Households → Firms

✓ Correct answer: a)

Firms → Households

Explanation

(A) Firms → Households

Explanation:

Households provide factors of production such as land, labour, capital, and entrepreneurship to firms. In return, firms make factor payments like wages, rent, interest, and profit to households.

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