What does the term 'Product and Factor Markets' most accurately describe in the context of global economics?
A. Control of money supply by the central bank
B. An institution that matches savers with borrowers
C. The income from citizens working abroad
D. A sudden fall in a nation's currency value
Answer (1)
The correct answer is letter B. An institution that matches savers with borrowers. It describes a financial intermediary.The product market and factor market are two essential parts of the circular flow of an economy.In the Product Market, businesses sell finished goods and services to consumers. For example, when you buy rice from a store or pay for a haircut, that transaction takes place in the product market.In the Factor Market, households provide resources (called factors of production) such as labor, land, and capital to businesses, and businesses pay them wages, rent, and interest in return.If you are working in a factory, you're selling your labor in the factor market. When you use your salary to buy groceries, you’re participating in the product market.Understanding these two markets helps students see how income is earned and spent, how businesses and households interact, and how the economy keeps circulating money.
