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.
