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.
