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Role ofGOVERNMEN
T SECTORSUBMITTED BY:•Suvasmita rout
HOUSEHOLD
HOUSEHOLDS GOVERNMENT
TAXES/DONATIONS/
INVESTEMENTS/RESOURCES
ALLOWANCES/ SCHLORSHIPS/ NGOS/ PROVIDES EMPLOYMENT
INCOME
BUSINESS FIRMS
GOVERMENT
CORPORATE TAX/DIVIDENDS
ON INVESTMENTS
BUSINESS FIRM
GOVT PURCHASES/GOODS & SERVICES/PAYMENTS TO THE FIRMS/SUBSIDIES/ FINANCIAL
AID/ INVESTMENT
FINANCIAL SECTOR
FINANCIAL SECTOR
GOVERNMENT
Govt. borrowings(loan),
dividends & interests
Rate on Investments & yield dividends
REST OF THE WORLD
Rest of the world Government
LOAN/DONATIONS/GIFTS/GOODS & SERVICES/ IMPORT
LOAN/DONATION/GIFTS/GOODS & SERVICES/EXPORT
F.S
CRITICAL ELEMENTS
leakages
Leakage means withdrawal from theflow
LEAKAGES INJECTIONS
TAX EVASIONS INVESTMENTS
SAVINGS EXPORT
TAX HOLIDAY GOVT. SAVINGS
SUBSIDIES
HOARDINGS
PENSIONS
IMPORTS
The financial sector
In circular flow the leakage that financial institutions provide in the economy is the option for households to save their money. This is a leakage because the saved money can not be spent in the economy and thus is an idle asset that means not all output will be purchased.
How tax becomes a leakage:
• “Tax” is paid to Government from Households and firms.
• current income and reduces the expenditure on current goods and services.
• The injection provided by Government on this leakage is Government spending( services and welfare payments to the community.
• For e.g.. Income tax collected by Government is a leakage and Government spends some amount as food subsidy as an injection.
POLICIES
Economic policies
Medicine given to cure a “sick” economy.•Fiscal policies.•Industry policies.•Foreign exchange policies.•Monetary policies.•Trade policies.By these policy govt. stabilize the national economy by controlling interest rates or inflation& by pushing the employment rate towards full employment so that all sectors will affect.
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