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Public FinanceWhat is Public FinancePublic Finance, field of economics concerned with how governments raise money, how that money is spent, and the effects of these activities on the economy and the society.What is Public FinancePublic finance studies how governments at all levelsnational, state, and local provide the public with desired services and how they secure the financial resources to pay for these services.

Scope of public FinanceFour major divisions in the study of public finance1. Public Revenue, which deals with the method of raising funds and the principles of taxation. Thus, within the purview of public revenue, we take up the classification of public revenue, canons and justification of taxation, the problem of incidence and shifting of taxes, effects of taxation, etc.

2. Public Expenditure, which deals with the principles and problems relating to the allocation of public spending. Here we study the fundamental principles governing the flow of public funds into different channels; classification and justification of public expenditure; expenditure policies of the government and the measures adopted for general welfare.

Four major divisions in the study of public finance3. Public Debt, which deals with the study of the causes and methods of public loans as well as public debt management.

4. Financial Administration, under this the problem of how the financial machinery is organized and administered is dealt with.

According to Richard Musgrave, an American economist famous for his Theory of Public Finance, the scope of public finance embraces the following three functions of the governments budgetary policy confined to the fiscal department:1. The Allocation Branch- determine what adjustments in allocation are needed, who shall bear the cost, what revenue and expenditure policies to be formulated to fulfill the desired objectives.

2. The Distribution Branch- determine what steps are needed to bring about the desired or equitable state of distribution in the economy.

3. The Stabilization Branch- confine itself to the decisions as to what should be done to secure price stability and to maintain full employment level.

Significance of public financeTaxationProtection of Infant IndustriesProvision Public GoodSide Effects of a Market EconomyRedistribution of IncomeEquity

Subsidies and grantsOptimum utilization of resourcesEconomic planningProviding employment opportunitiesMarket Failures

Issues and ProblemsIssues and ProblemsObstacles to mobilization of domestic financial resourcesIssues and ProblemsRegressive taxationIssues and ProblemsInefficient tax administration-Inefficiency Issues and ProblemsLimited external sources of public financing

Issues and ProblemsTax incentivesIssues and ProblemsBorrowing

Underspending on Social development

Philippines Policy on Public Finance

Monetary Policymeasures or actions taken by the central bank to influence the general price level and the level of liquidity in the economy

aimed at influencing the timing, cost and availability of money and credit, as well as other financial factors, for the main objective of stabilizing the price levelExpansionary Monetary Policy monetary policy setting that intends to increase the level of liquidity/money supply in the economy and which could also result in a relatively higher inflation path for the economy.

Contractionary Monetary Policy - monetary policy setting that intends to decrease the level of liquidity/money supply in the economy and which could also result in a relatively lower inflation path for the economy.

In the Philippines, monetary policy instruments are classified into: Open Market Operations (OMO)Rediscounting Reserve Requirement Direct ControlsMoral Suasion

Fiscal policy of the PhilippinesFiscal policy refers to the "measures employed by governments to stabilize the economy, specifically by manipulating the levels and allocations of taxes and government expenditures.

Fiscal policy of the PhilippinesFiscal measures are frequently used in tandem with monetary policy to achieve certain goals." In the Philippines, this is characterized by continuous and increasing levels of debt and budget deficits, though there have been improvements in the last few years.

Tools of Fiscal PolicyTaxationSpending

The Four Major Functions of Fiscal PolicyAllocationDistributionStabilizationDevelopment

EXPANSIONARY FISCAL POLICYA form of fiscal policy in which an increase in government purchases, a decrease in taxes, and/or an increase in transfer payments are used to correct the problems of a business-cycle contraction. The goal of expansionary fiscal policy is to close a recessionary gap, stimulate the economy, and decrease the unemployment rate. Expansionary fiscal policy is often supported by expansionary monetary policy. An alternative is contractionary fiscal policy.

CONTRACTIONARY FISCAL POLICY: A form of fiscal policy in which a decrease in government purchases, an increase in taxes, and/or a decrease in transfer payments are used to correct the inflationary problems of a business-cycle expansion. The goal of contractionary fiscal policy is to close an inflationary gap, restrain the economy, and decrease the inflation rate. Contractionary fiscal policy is often supported by contractionary monetary policy. An alternative is expansionary fiscal policy.

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