Objectives of Public Finance - SS2 Economics Lesson Note
The objectives of public finance are the goals that governments aim to achieve through their fiscal policies and they include:
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Allocative Efficiency: Governments can use public finance to allocate resources in the economy more efficiently, by funding public goods and services that are not provided adequately by the private sector. Examples of public goods include national defence, public health, and education.
Economic Growth: Governments can use fiscal policy to promote economic growth by investing in infrastructure projects, providing tax incentives for businesses, and creating employment opportunities.
Income Distribution: Public finance can be used to promote a more equitable distribution of income by providing social welfare programs and targeted tax policies that benefit lower-income households.
Price Stability: Governments can use fiscal policy to manage inflation and price stability, by adjusting taxes and spending to regulate demand in the economy.
Fiscal Stability: Public finance can be used to maintain fiscal stability, by ensuring that government revenue and expenditure are balanced over the long term and that the government is not accumulating excessive debt.