What is Public Finance?

For Economists, Public Finance can be defined as the study of the direct role of Government in the economy. It is preoccupied with assessing and analysing government revenue and the expenditure of the public authorities towards the achievement of desirable effects. Public Finance can also be defined from the perspective of analysing the sources of government revenue; the collection of taxes and how said money collected for taxes are used for the provision of public goods by the governments.

To reiterate the fact, Public Finance deals with government expenditure and revenue. It examines everything from taxation to public borrowing and lending, allocation of funds from the federal to the state and local governments and all the agencies of government. Also, it examines how the public money generated and spent directly impact people’s lives.

Objectives of Public Finance

  1. Provision of employment: Public finance is used to create employment in the country for those who are unemployed.
  2. Revenue generation: Through the public finance, the government of a country is able to generate revenue for the country and used the generated revenue to meet the needs of the society.
  3. Satisfaction of needs: Through public finance, the government is able to identify the needs of the people thereby creating means of satisfying or meeting the needs of the people to satisfy them.
  4. Price stabilization: through the public finance, the government is able to stabilize the prices of goods and services so as to avoid inflation or deflation of goods and services in the community.
  5. Equitable distribution of income: Public finance ensures that the revenue generated is distributed equally to the different economic sector of the economy and ensures there is no partiality in the distribution of the national resources.

Fiscal Policy

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SS2 Economics Third Term: Public Finance