Meaning of Public finance
Public Finance can be defined as an aspect of Economics that studies income and expenditures of the government. Public Finance encompasses all financial activities of government as they relate to revenue, expenditure, debt operation and their effect on the economy.
Objectives of public finance
Objectives of Public Finance include:
- Perhaps the most important objective of Public Finance is to GENERATE REVENUE for government so as to be able to finance its activities.
- Public Finance ensures equitable distribution of wealth within the society
- It helps government regulate economic activities
- It is used to create employment in the country
- It helps government to stabilize the rate of growth
- Public finance is used by government to ensure that a good and acceptable fiscal policy is attained.
- It also helps government to stabilize prices of goods and services
Meaning of Fiscal Policy
Fiscal policy is the use of government revenue collection (mainly taxes) and expenditure (spending) to influence the economy.
Governments use spending and taxing powers to promote stable and sustainable growth
Objectives of fiscal policy
- Achieve and maintain full employment: The main objective of fiscal policy in a developing economy is to achieve and maintain full employment in an economy. To generate employments and increase productive efficiency of the economy, government must increase spending on social amenities and capital projects.
- Price Stability
- Accelerate rate of economic growth
- Adequate resource allocation: Resource allocation refers to assigning the available resources of the economy to specific uses chosen among many possible and competing alternatives. Good Fiscal Policy ensures optimum allocation of the resources.
- Increase in Savings: In the developing countries rich class spends a lot of money on luxuries. The government can impose taxes on them and can provide the basic necessities of life to the poor class on low rate. In this way by providing incentives, savings can be increased.
- Equal Distribution of income and Wealth
- Economic stability
- Fiscal Policy is used to check Increase in Consumption