what is the effect of the budget on public finance

Expert Solution

Public finance deals with the government collection of revenues and expenditure and it is strongly affected by the budget. When budget makes expenditure to be more than revenue, then public finance makes strategies to generate funds to finance their expenditure. It can be be done by deficit financing and or quantitative easing using printing of currencies. So, it is the budget that decides the nature of public finance and mode of operations used by the public finance. It makes causative effect of budget on public finance.

Further, it is the budget that makes government to intervene in the economy and works to achieve objectives. If budget focuses upon income equality and redistribution of income, then government uses public finance to draft policies plans that can reach out to poor and help them. At the same time, if budget focuses to eliminate market failure and or promote growth, then public finance is used to correct the market by either putting subsidies or collecting taxes and spend money on policies that can stimulate the demand. Hence, it can be said that it is the budget and its objective that sets the public finance in a direction to achieve the objective of the budget.

Rahul Sunny answered 2 years ago

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what is the impact of the budget on public finance

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