Public Finance

This is the study of how the government collects and spends the money. It can also be defined as activities caried out by the government that involve raising the finances and spending those finances to facilitate development.

Purpose of Public Finance

To control consumption of a certain commodity

The government will increase the taxes on those commodities in order to increase their prices reducing demand. When the price is high, consumer may be discouraged to purchase.

To encourage consumption of a certain commodity

The government may encourage the consumption of some commodities by lowering the taxes. Lowering the taxes reduces the price of goods hence encouraging them to purchase more.

To provide essential goods and services

It is the responsibility of the government to ensure those essentials goods and services that individual investor cannot invest in are provided to the citizens. Such services are, public schools, roads and security.  In order to provide them, the government much have funds which are provided through public finance.

To promote balanced regional development

The government use the money collected through public finance to start projects in areas that are lagging behind. The government may give incentives such as low taxes, subsidies and tax holiday to entrepreneurs who wish to start businesses in such areas.

To promote economic stability

The government uses the revenue collected on projects that can solve problems such as unemployment. Such projects may also trigger the economy positively.