Macroeconomics/Government Finances

Concept of government finances

  In general, Government Finances is that part of economics which is concerned with the income and expenditure of government authorities and its effects on the economy. The meaning and scope of this science may be also understood from the two words 'public' and 'Finances'. By public we mean of the people or the government and finance means the authorities of getting revenue and expenditure or the financial activities. So Government Finance is often called as Public Finances.

Definition of different economists

• According to Adam Smith, "Public Finances is an investigation into the nature and principles of the State revenue and expenditure".

• According to Prof. Hugh Dalton, "Public finance is one of these subjects, which line on the border line between economics to politics. It is concerned with the income and expenses of public authorities with the adjustment of one to another".

1. Government Expenditure

  The expenditure made by government for public welfare is called Government Expenditure. It is essential to maintain law and order of a country, to construct physical infrastructure and other social services. Government manages its expense by taxation and borrowing.