Public Finance

Posted: November 30th, 2013





Public Finance

            Public finance is referred to as a study of the government’s role in the economy of a given country. Three main tenets form the basis of public finance. These elements are macroeconomic stabilization, efficient resource allocation, and income distribution. These elements guide the country’s ministry of finance in monitoring the economy of the country. Income distribution describes how the income is allocated to the country’s population. It is important because it prevents income disparities of a large magnitude in the country. Presence of such disparities hinders the level of economic growth in the country. Efficient resource allocation is the effective distribution of the country’s assets to its people. This prevents some areas from becoming more developed than others, thus bringing about equality in the various regions of the country. Macroeconomic stabilization ensures even growth in the economy of the country.

I completely agree that public finance should work to improve the quality of life enjoyed not only by current but also future generations. This is because if a certain country follows the three elements of public finance, the quality of residents’ life there will improve. This advancement will take place gradually and not overnight. The quality of life will also improve gradually. In some cases the implication of the economic growth will not be explicit, but this should not deter the citizens. After several years of such consistent, even though minimal economic growth, the quality of life will increase noticeably. The element of resource allocation ensures that all regions develop at the same pace; therefore, the people inhabiting those regions benefit as well.

The perspective that would be most easily included is that of macroeconomic stabilization. This is because it is the most important tenet in public finance. If the other two canons are implemented but this one excluded, the economic level of the country will be affected. The principle of macroeconomic stabilization encompasses economic growth in terms of the revenues collected by the government as well as the number of investors coming into the market. Another important marker of economic growth is the rate of taxation. The taxation should be proportional to the population of the country and the expenditure of the government. A country with a larger population should be expected to have higher taxation rate.

Consistently developing economies often attract many investors, both foreign and local ones. This is because investors prefer stable economies. This is attributed to the matter of the safety of their money. Unstable economies pose a possibility of loss of the investors’ money. This may happen, for instance, when the value of the shares cost of a firm drop randomly. This position is justified by reasons such as the need for a better life for the citizens. The government embraced these elements in a bid to improve the lives of its citizens. Another reason that may have led to the emergence of this position is the fact that parents and guardians wanted a better lifestyle for their children.

This motivated them to pursue and make changes in the government. This position was justified in the quest for equality in the country. Initially, the regions inhabited by nobles or royalty were the most developed while those inhabited by commoners and peasants had no developments whatsoever. Public finance is very important in the economic growth of a country as well as in attracting investors. It is also fundamental element in determining the citizen’s quality of life.

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