Saving Investment in Circulation of Money

Saving & Investment 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. 

Saving & Investment in Circulation of Money –

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

Saving Investment 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 these production factors in production process and earn income in terms of rent on land, interest on capital and wages or salaries on manpower etc. Also, this sector 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. We can say that the house-hold is the entire market for business sector. They buy the entire production factor from house hold and pay them (rent, interest, wages or salaries) for this. A business man also starts saving for future investment and also for R&D. A business man also uses capital market for saving & investment point.