Public Finance deals with the financial activities of government concerning revenue, expenditure and debt operations and their effects on the economy. It tries to analyse the impacts of these financial activities of government on individuals and corporate bodies.
Public finance encompasses fiscal policy and this fiscally policy refers to the government plan of action concerning the raising of revenue through taxation and other means and deciding the pattern of expenditure to be applied. Many of the fiscal policies are embodied in the budget and such policies tend to direct the economic activities in the country.
Objectives and Functions of Public Finance
The objectives of public finance which includes fiscal policy are as follows:
1. Price Stabilization
Public finance maintains stability in the prices of goods and services thereby, preventing constant fluctuations and inflation and deflation that tend to destabilize the economy of a country.
2. Equitable Distribution of Wealth
Public finance is also concerned with equitable distribution of income and wealth among individuals and various sections of the country.
3. Satisfaction of Needs
The satisfaction of collective needs is another main objective of public finance.
4. Allocation of Resources
Public finance performs the function of allocating resources among public and private sectors.
5. Provision of Full Employment
Provision of full employment opportunities to citizens of a country is another aim of public finance.
6. Maintaining Favourable Balance of Payments
Tariffs and other fiscal policies are used in maintaining favourable balance of payments of a country.