Read the two statements and choose the correct option.
I. In a two-sector model there is no government and no foreign trade.
II. In a two-sector model with no saving, all income is spent on firms' goods.

Only ICorrect answerYour answerOnly IICorrect answerYour answerBoth I and IICorrect answerYour answerNeither I nor IICorrect answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer C

Correct answer: C

The two sectors are households and firms only, so I is true.
With no saving, no taxes and no imports, every rupee earned is spent on firms' output. II is true.

Ten questions from Basic Concepts & the Circular Flow, at your own pace.

Ten questions from Basic Concepts & the Circular Flow, at your own pace.

Read the two statements and choose the correct option.I. In a two-sector model there is no government and no foreign trade.II. In a two-sector model with no saving, all income is spent on firms' goods.