Answer to Question #155211 in Microeconomics for Ankit Adak

Question

Ravan Rusell borrowed Rs.10,000 to buy machinery for his small business. The total amount he repaid to his lender was Rs. 12,000. Identify the additional amount of Rs. 2000 Rusell paid his lender as which type of factor of payment in the circular flow model.

Answer 1

The additional amount of Rs 2000 Rusell paid to his lender is interest factor of payment in the circular flow modelmodel.

Interest is the amount paid to the lender by the borrower above the principal sum