The Public finances They are part of the economy that are in charge of the way governments do the collection of money, how they spend it and the effectiveness of these activities within the economy and in the society.
They have the ability to study how national, state, and local governments can facilitate society the services they want and how to secure the financial resources to pay for those services.
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They are made up of policies that organize public spending and taxes. The economic stability of the nation will depend on all this relationship. Its objective is to investigate the form and principles that are applied in public power in order to obtain the necessary resources to the good function and efficient development of the activities to be carried out, in order to generate satisfaction with the services public.
In this article you will find:
What are public finances?
These finances allow governments to modify and improve the secondary effects that can affect the market economy.
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Industries and homes can contaminate by releasing chemicals into the environment without thinking that this can cause negative effects on others, therefore this is a side effect that affects people who are not responsible for this situation.
To fix this problem, governments can restrict some activities. One way is by making recycling promotions in order to reduce pollution, approve laws of restriction or sanction with taxes related to activities that generate damage to the environment.
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Why are public finances necessary?
Governments provide public goods and services and for this they need public finances so that they can finance services such as roads and public lighting, the military, among others.
Private citizens do not voluntarily pay for these types of services, which means that companies are not incentivized to carry out production.
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How do public finances affect the economy?
Public expenditures and taxes can affect the good performance of the economy. If, for example, the government increased the cost of building a new road, new jobs would be created of work, which would create income that would be spent on purchases, which would help the growth of the economy.
The opposite can happen when the government increases taxes, causing businesses and households to may have less income to be able to spend on the purchase of their goods and it would cause a decrease in the economy.
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A government's fiscal policy is the way the government spends and levies taxes that directly influence the economy. Missing expenditure refers to the expenditure of funds that are obtained from loans rather than taxes, because of this, governments finance deficiencies by borrowing from money.
It is necessary for governments to have income or funds and thus be able to cancel their activities. These revenues can come out through collection of fees for services rendered, such as tolls for the use of roads or also at the entrances to enter national parks.
Despite this, most of the income is due to taxes, such as taxes on income, capital and sales or on the consumption of something in specific.
What is the revenue from public finances?
During each year, national and local governments design a budget in order to know how much money they could spend in the following year. Such budget indicates which are the public goods that are going to be produced, the possible problems that are due to correct and the total assistance that will be provided to citizens who have the most economic resources low.
The government administrator, being the prime minister, the governor or the mayor, should be in charge of proposing the budgets. The Legislature, Parliament, the Provincial Council or the Municipality, are the ones that agree and approve the budgets, which can be modified by the Legislature, however, they must not make changes that the administrator can to refuse.
Elements of public finance
There are different elements that explain the operation that the state executes in order to obtain the resources that generate expenses by offering the services that satisfy public needs. These elements are:
Public needs
These needs arise from the community that is satisfied through the action of the state, which ensures the primary needs that originate from the community. The state fulfills these satisfactions, since it is impossible for each individual to fulfill them alone.
Public services
These are the activities carried out by the state in order to benefit public needs. These services are directly related to the various needs that must be classified between essential and non-essential public services.
Public expenditures
It refers to the investments of wealth that public entities carry out in order to produce the main services that satisfy the public needs and the demands of the services.
Public resources
They are the means from which public expenditures are financed, in addition to constituting income to the state treasury regardless of the legal or economic nature that have.
National income
It is the sum of the economic system of goods and services that are produced, distributed and sold in a nation at a certain time, within a fiscal year.
The public finances and its great importance within the state, they generate a fundamental role in relation to government decisions, since it can study the way in which the state makes use of finances and invests the resources it receives from income.
We are waiting for you in an upcoming edition. Thank you for your reading!
