One of the more traditional subfields of economics, public finance emphasises the function and role of government in the economy. The establishment of a formal or informal government by the inhabitants of a particular area serves a number of purposes, including social needs provision, defence against external aggression, protection of citizens’ private property, creation of jobs, upkeep of internal law and order, and defence against external aggression.
Private markets should, in theory, be able to distribute goods and services among people effectively (in the sense that no waste happens and that consumer preferences match the economy’s capacity for production). There would be no need for government if private markets could produce effective results and if the income distribution was morally right.
Through control over resource distribution, income distribution, and economic stabilisation, the federal government contributes to the prevention of market failure. Taxation accounts for the majority of the regular funding for these programmes.
The federal government is also financed by borrowing money from banks, insurance providers, and other governments, as well as by receiving dividends from its corporations.The federal government also provides grants and assistance to state and municipal governments. User fees from ports, airports, and other facilities, fines for breaching the law, money from licence and registration fees, including those for driving, and revenue from the sale of government securities and bond issues are some more sources of public funding.
By Anisha Sengupta
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