Answer :

Public finance is the branch of economics that related to public expenditure, public income and public debt. Fiscal policy is the policy decisions of the Government regarding public finance. Together these two elements determine a country’s progress.

The growth of any country is conventionally measured in the growth of its Gross Domestic Product (GDP), it is the total value of all the goods produced and services provided in an economy in a year. A related dynamic is the operation of demand and supply in the economy. The public finance and fiscal policy help in adjusting consumption patterns in the economy, and thereby facilitating a healthy growth of the country.


For an economy to operate without large troubles it is necessary that demand from the consumers and supply from the producers be equal to each other, as much as possible. This equilibrium is often unbalanced, creating situations of excess demand (demand exceeds supply) or excess supply (supply exceeds demand). Such situations are harmful to the economy in the long run. The Government uses its tools of public finance and fiscal policy to bring back the equilibrium in demand and supply.


For example, when there is excess demand the government increases tax rates to arrest the excess money in the hands of the public, so as to reduce the demand. When there is excess supply, the government does the opposite, it reduces tax rates to increase the money in the hands of the public in order to increase demand to reach the supply level. Thus, the government through its tools of public finance and fiscal policy intervene in the economy to ease situations before it turns detrimental to the country’s progress.


Rate this question :

How useful is this solution?
We strive to provide quality solutions. Please rate us to serve you better.
Related Videos
Heights and Distances-IHeights and Distances-IHeights and Distances-I45 mins
Sphere and HemisphereSphere and HemisphereSphere and Hemisphere16 mins
Cube and CuboidCube and CuboidCube and Cuboid41 mins
History - Concept and QuestionsHistory - Concept and QuestionsHistory - Concept and Questions57 mins
Resources and Development RevisionResources and Development RevisionResources and Development Revision28 mins
Corrosion: Types, Pros and ConsCorrosion: Types, Pros and ConsCorrosion: Types, Pros and Cons41 mins
Right Circular CylinderRight Circular CylinderRight Circular Cylinder45 mins
Right Circular Cone And FrustumRight Circular Cone And FrustumRight Circular Cone And Frustum43 mins
Revision on Substitution and  Elimination MethodRevision on Substitution and  Elimination MethodRevision on Substitution and Elimination Method44 mins
Area Related to Circles- Important Formula and ConceptsArea Related to Circles- Important Formula and ConceptsArea Related to Circles- Important Formula and Concepts59 mins
Try our Mini CourseMaster Important Topics in 7 DaysLearn from IITians, NITians, Doctors & Academic Experts
Dedicated counsellor for each student
24X7 Doubt Resolution
Daily Report Card
Detailed Performance Evaluation
caricature
view all courses
RELATED QUESTIONS :

Classify the billKerala Board - Social Science Part II

Calculate the amoKerala Board - Social Science Part II

Public finaKerala Board - Social Science Part II

Visit the websiteKerala Board - Social Science Part II

Compare developmeKerala Board - Social Science Part II

From the central Kerala Board - Social Science Part II

Collect bills forKerala Board - Social Science Part II

What are thKerala Board - Social Science Part II

Rewrite Kerala Board - Social Science Part II

Explain witKerala Board - Social Science Part II