Answer to Question #323177 in Macroeconomics for Gomax

Question

What are some of the effects if government does not involve in the circular flow of income model

Answer 1

Payments the government makes to both the resource market and the product market are called “government spending.” The government uses goods, services, and resources to provide “public goods” like education, roads, and police services. So if the government doesn't get involved in the circular flow, consumers will get exploited by suppliers, will consume unsafe products and they will not get to access to public goods which are only provided by the government.