Governments, like individuals, must distribute resources to various areas of the economy. Public finance is the process by which federal, state, and municipal governments collect revenue and control expenses for all of the services they give to the general public. One of the most important functions of a government is to generate money through trade, taxes, and loans and to distribute that income among different purposes such as debt servicing, infrastructure development, and recurrent expenditure.
Government agencies support a stable economy and prevent market failure by overseeing income generation and allocation. Tax administration, debt issuance, budgeting, foreign trade, and inflation control are all parts of governmental finance. These elements have a direct and long-term impact on business and personal finances.
The government via taxation and subsidies can get desired outcomes by influencing demand and supply in the market. Government budgeting throws light on its priorities for the time being if it’s social infrastructure, financial or defence. The budget formulation is an important task of the government that acts as an engine and gives direction to a country’s economy.