Which factor of production receives interest?
Answer and explanation
Correct answer: Capital
Interest is the factor reward for capital. It is paid for the use of financial capital, machinery, equipment, or other produced means of production, so option C is correct. The standard correspondence is land–rent, labour–wages, capital–interest, and entrepreneurship–profit. Remembering these pairs also helps identify which payments enter factor cost and distinguish them from indirect taxes and subsidies.
Frequently asked questions
What is the correct answer to this question?
Capital
Why is this the correct answer?
Interest is the factor reward for capital. It is paid for the use of financial capital, machinery, equipment, or other produced means of production, so option C is correct. The standard correspondence is land–rent, labour–wages, capital–interest, and entrepreneurship–profit. Remembering these pairs also helps identify which payments enter factor cost and distinguish them from indirect taxes and subsidies.
Which subject and chapter does this question cover?
This is a Class 12 Economics question. Chapter: National Income and Related Aggregates. Topic: Aggregates related to national income - Market price and factor cost.
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