Notes

The government role in the circular flow of the economy is to buy part of the gross domestic product that is flowing through the markets that produce the products and he helps make the task and functions proceed. His actions help the national defense, education, and the judicial system. Those gross domestic products are financed from taxes that is collected by the household sector. When tax revenue starts to break down the government burrow's through financial markets. The reason for the government sector to collect taxes from the household sector is to be able to pay the government purchases. When the government purchases from the government sector then the government gets placed as the third basic expenditure. Tax isn't the only income that the government use to finance. The government also sells legal claims as means of burrowing income for the government purchases. When the government is included in the circular flow, the government diverts a part of it. The diversion doesn't actually change the full amount of the gross domestic product, factor payments, or national income. It will divert income from consumptions, saving taxes, and the investment to the governments purchases. The government purchases is as important as the source of financing. If there was a trillion dollars spent on the government purchases then it would have to be paid with national income through taxes or saving.