![]() Government Tax: Tax is a tool which use by the government to take the money out of the economy. ![]() Government also consume any kinds of goods to build the infrastructure and provide public service to the resident. The government provides a thousand jobs to the government officers such as soldiers, teachers, and so on. Government Spending: Government is one of the big producers and consumers in the economy but their spending and consumption are not included in the circular flow model.The producer needs to purchase raw material and labor from the community, so the money will flow back to them. The company itself also needs to use goods to support daily operations, so they need to purchase from other producers as well. When households need goods or services in their daily life they need to purchase from the company. Moreover, the government may need to adjust the monetary and fiscal policy to improve the economy. The government needs to analyze the circular flow as it has an impact on the country’s GDP (Gross Domestic Product). ![]() We go to work in exchange for money and we use the money to buy goods or services. Both activities are very important to the economic flow. It is the cycle flow of money that will go on forever. The money flows from producer to household and will flow back again. The company pays money to the worker and those workers will pay back to the company in exchange for goods or service. Circular Flow Model is the process by which money flows in the economy.
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