New Order Economies

Public Finances

So, what is public finance, What are effects of public finance on government, How Is Public Finance Managed? All of these question and much more are debate in many Economies and need to be solved.

Everything You Need To Know About Public Finances

What Is Public Finance?

If you are familiar with finances and financial terminology, you probably already know what the term public finance refers to. If not, today you will learn more about it in general, and you will be more confident to talk about public finance among experts.

So, what is public finance? Well, public finance is the study of the role of the government in economy. In other words, it deals with government revenue and government expenditure of public authorities.


In addition to that, it also deals with adjustments of government revenue and government expenditure of public authorities in order to achieve desirable effects and avoid undesirable ones.

What Are The Effects Of Public Finance?

The effects of public finance on government are threefold. Public finance effects allocation of resources, distribution of income and macroeconomic stabilization.

What’s The Role Of Government In Public Finance?

Well, since by now it has been made clear that public finance and government go hand in hand, perhaps now is the time to explore into further detail what is the role of government in public finance. Because the private market cannot provide efficient outcomes without compromising market efficiency, the need for public good has been noted.

MPA405PublicFinanceIn order to allocate goods and services efficiently, there has been a need for the existence of a market which is defended by the state and allows non rival-consumption or public good.

In other words, the role of the government in public finance is to protect the interest of the people who live in a certain country, protect public budgeting and give up inefficient practices.

How Is Public Finance Managed?

The main subdivisions of public finance are public expenditure, public revenue, public debt, financial administration and federal finance.

Public finance management is a process which is transparent for the public and dealt with by government. As a way of handling public finance, the government can prioritize programs, control the budgetary process, manage resources, exercise controls, in order to make it possible for the country to flourish and prosper.

Government also deals with income distribution, income security, employment insurance, health care and public financing of campaigns.

Taxes And Debts

7027608495_daeb33feb7_bThe government also deals with taxes and debts. In other words, the taxes and the debts we all have to pay, are only handled by the government and these financial resources are invested in the country we all live in. This is why responsible citizens pay their taxes and debts and in this way they help the functioning of their country and their government.

If everyone would stick to the rules the government has made, the public debt could also be dealt with. In addition to that, many governments have entered huge public debts (Greece is one famous example) and have made a long-lasting damage to their citizens for years to come.