There are many ways the government go about to create income for people, the downside is that when they did it too much it causes the dollar value to drop, and adds a debt on everyone's shoulders. So the best thing they can do is not do it too much. There are about tricks that really stick it to the people, or is income in there pockets.
First and most commonly known as the:
Multiplier Effect
This is used by the government when they invest in grants to any affiliation, or when sponsoring a distribution of employers of any kind. Many examples are the grants to fix highways, build buildings, fund students in school; all are different yet have the same effect. Everything the Government invests money into goes through a process
Invest in X>> X pays employees>> employees buy supplies>> which pays more employers>>
Now let each one represent an amount of the multiplier while the marginal propensity to consume is 10%.
$1000>100>10>1
So starting with a 1000 in the end equals $1111. Which means the government created $1000 but had a $111 dollar increase after distribution.
The bank:
When the government needs to take the people out of a recessionary gap (which is what we are in) it creates money in the Federal Reserve which banks use to loan out to people which causes the banks monetary value to rise due to the increase in interest payments. As the bank receives more money from the government they can loan out more, and receive more interest. Now if the government wanted to take the economy out of an inflationary gap (meaning things are to low priced) then they will limit the amount of money allowed to the banks. The banks will then borrow money from other banks which causes the system to stop running and only limited people can get money do to the interest savings in the banks bucket dropping to a lower amount.
