Economics

  1. What are the four factors of production, and what are the remunerations to each of these called? Land, Labour, Capital and Entrepreneurship are the four factors of production. i)  Land - Rent is the remuneration paid for the use of land. ii) Labour -  The remuneration for labour is paid through wages or salary. iii) Capital - The remuneration for capital is called interest. iv) Entrepreneurship - The remuneration or reward of the entrepreneur is the profit that is gained after the product is sold.  2. Why should the aggregate final expenditure of an economy be equal to the aggregate factor payments? Explain.  The aggregate final expenditure of an economy is the sum of all the spending in the economy. In economics, factor payment denotes the wage, interest, rent and other payments done as a remuneration for the factors or production. The income earned is either spent on goods on services or saved. But, all savings can be counted as investments for future exp...

 Money and Banking Anything which is used as a medium of exchange, store of value, measure of value and standard of deferred payments is called money. Barter System of Exchange – It is a system in which goods are exchanged for goods. Direct exchange of goods against goods without use of money is called barter system. It is also called C – C Economy. Drawbacks: (i) It requires double coincidence of wants which is hard to find. (ii) It lacks a common unit of exchange. (iii) It lacks the system of future payments or deferred payments. (iv) It lacks the system of storage and transfer of value.   Function of Money  Money as the Medium of Exchange – Money came into use to remove the inconveniences of barter system. Money as medium of exchange has solved this problem as money has separated the act of purchase from sale. A money system is of greater utility of human being. Money is also called generalized purchasing power because it provides freedom of choice to buy things he...