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    Public Finance

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    Amrit Kaur
    1. Public finance is related to the income and expenditure of public authorities like governments. It studies the principles underlying how public authorities raise and spend funds. 2. Public finance can be considered both a science and an art. As a science, it studies the relationship between facts relating to government revenue and expenditure. As an art, it applies knowledge of revenue and expenditure to achieve objectives like full employment and price stability. 3. The scope of public finance includes public revenue, public expenditure, public debt, and financial administration. It deals with methods of raising funds and taxation, principles of spending, causes and management of public debt, and how financial systems are organized and administered.

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    Public Finance

    Uploaded by

    Amrit Kaur
    98 views5 pages
    1. Public finance is related to the income and expenditure of public authorities like governments. It studies the principles underlying how public authorities raise and spend funds. 2. Public finance can be considered both a science and an art. As a science, it studies the relationship between facts relating to government revenue and expenditure. As an art, it applies knowledge of revenue and expenditure to achieve objectives like full employment and price stability. 3. The scope of public finance includes public revenue, public expenditure, public debt, and financial administration. It deals with methods of raising funds and taxation, principles of spending, causes and management of public debt, and how financial systems are organized and administered.

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    1. Public finance is related to the income and expenditure of public authorities like governments. It studies the principles underlying how public authorities raise and spend funds. 2. Public finance can be considered both a science and an art. As a science, it studies the relationship between facts relating to government revenue and expenditure. As an art, it applies knowledge of revenue and expenditure to achieve objectives like full employment and price stability. 3. The scope of public finance includes public revenue, public expenditure, public debt, and financial administration. It deals with methods of raising funds and taxation, principles of spending, causes and management of public debt, and how financial systems are organized and administered.

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    © All Rights Reserved
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    Download as docx, pdf, or txt
    98 views5 pages

    Public Finance

    Uploaded by

    Amrit Kaur
    1. Public finance is related to the income and expenditure of public authorities like governments. It studies the principles underlying how public authorities raise and spend funds. 2. Public finance can be considered both a science and an art. As a science, it studies the relationship between facts relating to government revenue and expenditure. As an art, it applies knowledge of revenue and expenditure to achieve objectives like full employment and price stability. 3. The scope of public finance includes public revenue, public expenditure, public debt, and financial administration. It deals with methods of raising funds and taxation, principles of spending, causes and management of public debt, and how financial systems are organized and administered.

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    You are on page 1of 5

    Lets divide the concept in 2 parts

    1. Public
    2. Finance
    Public can be generally related to government or massess or
    population Whereas finance is somewhat related to expenditure
    and revenue So we can say that public finance is related with
    the income and expenditure of public authorites. Now lets see
    the definition given by different authors
    According to findlay shirras

    “public finance is the study of principles underlying the


    spending and raising of funds by public authorities”.
    So is the concept clear to you?
    Now we are going to study the nature of public finance
    This is same as the nature of management
    Nature of public finance implies whether it is a science or art or
    both.
    If we talk about public finance as science , we know that what
    science is ?
    Science is the systematic study of any subject which studies
    relationship between facts. Public finance is considered as
    science because it studies the relationship between facts relating
    to revenue and expenditure of the government.
    And we know the meaning of art also
    Art is application of knowledge for achieving definite
    objectives. Fiscal policy which is an important instrument of
    public finance makes use of the knowledge of government’s
    revenue and expenditure to achieve the objectives of full
    employment, economic development and equality. Price stability
    etc.
    Next topic is scope of business finance

    1. Public revenue, which deals with the method of raising funds


    and the principles of taxation.
    2. Public expenditure, which deals with the principles and
    problems relating to the allocation of public spendings.
    3. Public debt, which deals with the study of the causes and
    methods of public loans as well as public debt management.
    4. Financial administration, under this the problem of how the
    financial machinery is organised and administered is dealt with.
    This branch of public finance studies the income and
    expenditure of the financial administration of the govt.

    Importance of public finance


    1. Steady state economic growth:

    Government finance is important to achieve sustainable high


    economic growth rate. The government uses the fiscal tools in
    order to bring increase in both aggregate demand and aggregate
    supply. The tools are taxes, public debt, and public expenditure
    and so on.
    2. Price stability:

    The government uses the public finance in order to overcome


    form inflation and deflation. During inflation it reduces the
    indirect taxes and increase expenditures but increases direct
    taxes and capital expenditure. It collects internal public debt and
    mobilizes for investment. In case of deflation, the policy is just
    reversed.

    3. Economic stability:
    The government uses the fiscal tools to stabilize the economy.
    During prosperity, the government imposes more tax and raises
    the internal public debt. The amount is used to repay foreign
    debt and invention. The internal expenditures are reduced.
    During recession, the case is just reversed.
    4. Equitable distribution:

    The government uses the revenues and expenditures of itself in


    order to reduce inequality. If there is high disparity it imposes
    more taxes on income, profit and properties of rich people and
    on the goods they consume. The money collected is used for the
    benefit of poor people through subsidies, allowance, and other
    types of direct and indirect benefits to them.
    5. Proper allocation of resources:

    The government finance is important for proper utilization of


    natural, manmade and human resources. For it, on the
    production and sales of less desirable goods, the government
    imposes more taxes and provides subsidies or imposes taxes
    lightly on more desirable goods.
    6. Balanced development:

    The government uses the revenues and expenditures in order to


    erase the gap between urban and rural and agricultural and
    industrial sectors. For it, the government allocates the budget for
    infrastructural development in rural areas and direct economic
    benefits to the rural people.

    7. Promotion of export:
    The government promotes the export imposing less tax or
    exempting form the taxes or providing subsidies to the export
    oriented goods. It may supply the inputs at the subsidized prices.
    It imposes more taxes on imports and so on.
    8. Infrastructural development:

    The government collects revenues and spends for the


    construction of infrastructures. It has to keep peace, justice and
    security too. It has to bring socio-economic reformation too. For
    all these things it uses the revenues and expenditures as fiscal
    tools

    Difference between private and public finance

    So tell me what is the difference between them?

    rivate finance Public finance


    An individual adjusts his or her The public authority adjusts its income to
    xpenditure according to his or her income its expenditure.
    A private individual tries to have a surplus A public authority will spend all that it
    f income over expenditure i.e. Surplus gets
    udget.
    inances of individuals are limited Finances of government are flexible

    Not a single individual can print notes A state can print currency notes in order to
    meet its expenditure in difficult times
    t has a narrow scope It has a wider scope

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