Government participate in Circulation of Money Government involvement

Government participate in Circulation of Money

It is a basic concept about income that money always is in a rotation from one person to another in the form of income & expenditure. There is lot of activity like saving, tax, government exp, investment and import or export, if we add these figure then we are able to find out our National Income from different – 2 method like – income method or expenditure method and we know that our national income is always be equal to national expenditure

Government involvement –

In these types of economic, we divide the economic in four sectors like House-hold, Business, Capital Market (Saving or Investment) and Government:- 

Government participate in Circulation of Money

House-hold –

This side of the economic holds the entire production factor like land, capital or man power etc. House hold sales there services in production process and earn income in terms of rent on land, interest on capital and wages or salaries on manpower etc. Before any consumption, house-hold must pay Government Tax and Government Returns this amount in terms of social welfare like school, pension, hospital and police etc. Then start saving and we make a new involvement in flow of money like Bank (Capital Market). House-hold always prefers to save a part of his total income for future and rest is spending on consumption.

Business –

These sectors have the idea and produce the goods & services and sale these production to the house hold and earn money. On this income, business man must pay Government tax and Government buy many product from the market, also Government spend money on infra project to support the industry.

So, we can say that Government involvement in the Circulation Flow of Money or in the market is really important and it is the Government responsibility to implement the welfare scheme for society and make such policies which support the industry & its growth.