Public Finance is a branch of economics that you should be aware of. What is public finance? You may have heard about this, but you have never thought it through. Zenithblog.com will explain this branch of economics to you! Continue reading to learn more!
What is the meaning of public finance
Public finance is a branch of economics. It`s responsible for government expenditure and government revenue. Public finance deal with:
– Macroeconomic stabilization;
– Distribution of Income;
– Allocation of resources
The starting point for public finance analysis is a government. The theory of public financial management implies that the private markets should create and allocate goods and services for individuals.
If the private markets can distribute and allocate income according to the social needs, then it would not be the responsibility of the government. However, there are conditions that can affect markets` productivity.
One of the reasons for government officials to learn public finance is to reduce the risks of market failure. This happens when the markets do not distribute goods and services efficiently.
There is also the possibility of something called government failure. It projects a non-market failure that occurs in a country or globally. It`s usually connected with failure of taxation policy, social programs and individuals’ revenue distribution. Therefore, in this particular situation, the government budget can`t handle the government programmes.
The difference between government spending and revenues is called deficit (if the spending overwhelms the revenues) or surplus (if the revenues overwhelm the spending). In the case of a deficit, the accumulation of deficit overtime is called the public debt. Therefore, the government may manipulate the government taxes to change the deficit. It`s also part of public finance management.
Functions of Public Finance
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– Allocation Function. It`s the main function of any public finance system. Basically, it`s a matter of what services and products should be produced for the efficiency of the government economics. It also considers the methods of production and the number of goods to be produced.
– Stabilization function. It implements the maintenance of high-level resource efficiency. It also includes the production factors, employment factors, and stability of the government currency.
– Distribution function. It`s the realization of the economic determination which ensures proper income distribution.
– The function of Economic Development. It`s one of the simplest functions that ensure the economic development of a country.
– Social Development. The function of any country is impossible without proper social programmes. Therefore, public finance is also responsible for the function of distribution of social programmes.
– National Defence. The public finance is different according to country.
– General Government. The public finance takes responsibility for the government structures to ensure their liability.
Objects of Public Finance
What is public finance? It is basically to do with everything about a country`s financial system. Starting from getting money through taxes and other relevantly effective methods of earning them and ending with how effective the government can spend this money. From the functions of public finance, it`s possible to look over its objects!
– Development of industries;
– Public Debt Servicing;
– Police and Military Force Maintenance;
– Defense goods production;
– Administration of Law Order;
– Public Health Provision;
– Communication Development;
– Social goods creation;
– Administration.
Taxes
Tax policy is a backbone of any public finance system. The main idea of taxation for today is raising revenues. Taxation is necessary to maintain the welfare of any country. Nevertheless, high taxation can lead to problems of the country, if the revenues are not distributed accordingly. Therefore, it`s necessary to not only collect taxes but also distribute them.
Debt
Governments can take loans to provide a sustainable development of their financial system. These loans can be taken from external creditors, like the World Bank or internal creditors like private banks. The government should also use the money from taxpayers in the most efficient ways to ensure the return of money.
Public Finance Conclusion
What is public finance management? It`s a system that should help any government to maintain the most efficient use of revenues. It also provides a thorough analysis of how to use the revenues so it would be possible to develop the country.
The misusing of the public finance by government authorities may lead to a financial catastrophe within the country. Moreover, due to the constant changes of trends on the market – it`s vital to develop a proficient public finance strategy to help a state to survive.
Therefore, public finance is another method to assist the country in maintaining a stable economy. Without a proper strategy for public finance, it`s impossible to maintain anything in any country!
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