Chapter 1 Flashcards

1
Q

It is the branch of economics that assesses the government revenue and government expenditure of the public authorities and the adjustment of one or the other to achieve desirable effects and avoid undesirable ones.

A

Public finance

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2
Q

Public Finance is the study of the -

A

role of the government in the economy.

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3
Q

Public finance is the study of principles underlying the spending and raising of funds by public authorities. This definition is accoring to ?

A

According to Findlay Shirras

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4
Q

Public finance deals with the provision, custody and disbursement of resources needed for conduct of public or government function. This definition is according to ?

A

According to H.L Lutz

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5
Q

Public finance is concerned with the income and expenditure of public authorities, and with the adjustment of the one to the other. This definition is according to ?

A

According to Hugh Dalton

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6
Q

It is concerned with the principles and practices of obtaining funds and spending the same for achieving the maximum social welfare and economic growth in the country.

A

Public Finance

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7
Q

Nature of public finance

A

Implies whether it is a science or art or both.

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8
Q

Public finance has been held as science which -

A

deals with the income and expenditure of the government’s finance.

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9
Q

Public finance studies the relationship between -

A

facts relating to revenue and expenditure of the government.

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10
Q

3 Arguments in support of Public Finance as Science

A

1.Principles of Public finance are empirical.
2.Public finance is studied by the use of scientific methods.
3.Public finance is concerned with definite and limited field of human knowledge.

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11
Q

Nature of Public Finance as -

A
  1. Science
  2. An art
  3. Both a science and art
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12
Q

Fiscal Policy which is an important instrument of public finance makes use of the knowledge of government’s revenue and expenditure to achieve the objectives of full employment, economic development and equality. Price stability etc. To achieve the goal of economic equality taxes are levied which are likely to be opposed. Therefore, it is important to plan their timing and volume.

A

Public Finance as Art

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13
Q

The study of public finance factual information about the problems of government’s revenue and expenditure can be known. It also offers suggestions in this respect. The study of public finance presents norms or standards of the government’s financial operations . It reveals what should be the quantum of taxes, kind of taxes and on what items less of public expenditure can be incurred.

A

Public finance is both science and art.

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14
Q

5 scope of public finance

A

1.Public Revenue
2.Public Expenditure
3.Public debt
4.Financial/Fiscal administration
5.Economic Stabilization and Growth

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15
Q

Public finance not only includes the income and expenditure of the government but also the -

A

sources of income and the way of expenditure of various government corporations, public companies and quasi government ventures.

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16
Q

Thus, the scope of public finance extends to the study of -

A

independent bodies acting under the government’s direct and indirect control.

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17
Q

Public finance deals with all those sources or methods through which a government earns revenue. It studies the principles of taxation, methods of raising revenue, classification of revenue, deficit financing etc.

A

Public Revenue

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18
Q

This studies how the government distributes the resources for the fulfillment of various expenses. It also studies principles that the government should keep in view while allocating resources to various sectors and effects of such expenditure.

A

Public Expenditure

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19
Q

It deals with borrowing by the government from internal and external sources. At any time, government may exceed its revenue. To meet the deficit, government raises loans. The study of public finance focuses on the problems of raising loans and the methods of repayment of loans.

A

Public debt

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20
Q

It covers all the financial functions of the government It includes drafting and sanctioning of the budget, auditing of the budget, etc.

A

Fiscal/Financial Administration

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21
Q

Financial administration is concerned with the organization and functioning of -

A

the government machinery responsible for performing the various financial functions of the state.

22
Q

It is the master financial plan of the government.

A

budget

23
Q

For the attainment of these objectives, the government formulates its fiscal policy comprising of various fiscal instruments directed towards the economic stability of the nation.

A

Economic Stabilization and Growth

24
Q

The view of public finance is considered to be -

A

threefold

25
Q

3 governmental effects of Public Finance

A

1.The efficient allocation of available resources
2.The distribution of income among citizens
3.The stability of the economy.

26
Q

5 Subject matter of Public Finance

A
  1. Public expenditure
  2. Public Revenue
  3. Public debt
  4. Financial administration and
  5. Federal finance (N/A)
27
Q

Since the modern government represents a welfare state, the responsibility of the government is to bring about maximum social welfare. In addition to this, it has to perform various other functions, which require heavy expenditures. We study in this sub-division, the fundamental principles governing the flow of government funds into different spending streams and the methods of incurring expenditure on the various activities.

A

Public expenditure

28
Q

This means different sources of government income. It deals with the methods of raising revenue for the government, principles of taxation and other related problems. Raising of tax revenue and non-tax revenue is the subject matter of public revenue. Tax revenue deals with the kinds of taxes and the impact and incidence of various taxes.

A

Public revenue

29
Q

3 Non-tax revenue

A

1.Commercial revenue
2.Administrative revenues
3.Gifts and grants

30
Q

Income earned through sale of goods and services and profits earned by public sector enterprises

A

Commercial revenue

31
Q

Fees, license fees, special assessments

A

Administrative revenues

32
Q

The problem relating to the raising and repayment of public loans is studied under this sub-division. It is the borrowing by the government from the public . In modern world, it is not possible for the government to meet all its expenditure through tax and non-tax revenue. Hence public revenue falls short of public expenditure. As a result, governments are forced to borrow from internal and external sources

A

Public debt

33
Q

Government borrows from the people, commercial banks and the central bank.

A

Internal debt

34
Q

This includes borrowing from international monetary institutions like IMF and World Bank and also from foreign countries.

A

External debt

35
Q

It is concerned with the organization and functioning of the government machinery that is responsible for performing various financial activities of the state. Preparing the budget for the particular financial year is the master financial plan of the government. The various works, starting with the objectives of designing a budget, the methods of preparing it, presentation of the budget before the Congress and Senate, execution, auditing, implementation etc., constitute the subject matter of financial administration.

A

Financial administration

36
Q

It is the deliberate manipulation of revenues and expenditures of the government. It is the financial plan of the government.

A

Government finance

37
Q

The government uses the different types of revenues and expenditures as -

A

fiscal tools to achieve different objectives.

38
Q

6 main objectives of Government Finance

A

1.high economic growth
2.price stability
3.favorable balance of trade and payment
4.equitable distribution of income and wealth
5.proper allocation of resources
6.balanced and stable economic growth

39
Q

5 government should avoid

A

1.inflation and deflation
2.recession or depression
3.improper use of resources
4.price fluctuation
5.high inequality

40
Q

2 sides of Government finance

A
  1. Government revenues
  2. Government expenditures
41
Q

In government revenues, the money received by the government in the form of -

A

1.royalties
2.taxes
3.escheats
4.penalties
5.fines
6.fees
7.development expenditure
8.administrative expenditures
9.diplomatic expenditure
10.difference expenditure
11.payments of public debts and interest 12.miscellaneous expenditure

42
Q

8 Importance of Public Finance

A

1.Steady state economic growth
2.Price stability
3.Economic stability
4.Equitable distribution
5.Proper allocation of resources
6.Balanced development
7.Promotion of export
8.Infrastructural development

43
Q

Government finance is important to achieve sustainable high economic growth rate. The government uses the fiscal tools in order to bring increase in both aggregate demand and aggregate supply.

A

Steady state economic growth

44
Q

Fiscal tools are -

A

taxes, public debt, and public expenditure

45
Q

The government uses the public finance in order to overcome form inflation and deflation. During inflation it reduces the indirect taxes and general expenditures but increases direct taxes and capital expenditure. It collects internal public debt and mobilizes for investment. In case of deflation, the policy is just reversed.

A

Price stability

46
Q

The government uses the fiscal tools to stabilize the economy. During prosperity, the government imposes more tax and raises the internal public debt. The amount is used to repay foreign debt and invention. The internal expenditures are reduced.
During recession, the case is just reversed.

A

Economic stability

47
Q

The government uses the revenues and expenditures of itself in order to reduce inequality. If there is high disparity it imposes more taxes on income, profit and properties of rich people and on the goods they consume. The money collected is used for the benefit of poor people through subsidies, allowance, and other types of direct and indirect benefits to them.

A

Equitable distribution

48
Q

The government finance is important for proper utilization of natural, manmade and human resources. For it, on the production and sales of less desirable goods, the government imposes more taxes and provides subsidies or imposes taxes lightly on more desirable goods.

A

Proper allocation of resources

49
Q

The government uses the revenues and expenditures in order to erase the gap between urban and rural and agricultural and industrial sectors. For it, the government allocates the budget for infrastructural development in rural areas and direct economic benefits to the rural people.

A

Balanced development

50
Q

The government promotes the export imposing less tax or exempting form the taxes or providing subsidies to the export-oriented goods. It may supply the inputs at the subsidized prices. It imposes more taxes on imports and so on.

A

Promotion of export

51
Q

The government collects revenues and spends for the construction of infrastructures It has to keep peace, justice and security too. It has to bring socio-economic reformation too.
For all these things it uses the revenues and expenditures as fiscal tools.

A

Infrastructural development