Public Finance

public finance is the study of the financial activities of governments and public authorities. divided into three categories: a - Knowing what activities the public sector engages in and how these are organized (that is, revenue gathering and expenditures) b - Understanding and foreseeing the full consequences of these governmental activities c - Evaluating alternative policies.
The positive side describes the activities of the public sector, explains the reasons of the programs in existence and also analyses the consequences of government policies
The normative side, on the other hand, is concerned with designing new policies that meet certain objectives.
*two approaches are complementary, because, in order to make judgements about what activities the government should follow, one must know the consequences of government activities. Economists dealing with public finance both analyse actual policies and develop guidelines for government activities.

THE ECONOMIC FUNCTIONS OF GOVERNMENT
1)The allocation function: The responsibility of the government is to ensure that the resources of the society are used efficiently for the satisfaction of the wants of its members.
2)The distribution function of government :covers the activities involved in the redistribution of income. Distribution means the sharing of national income by individuals in a society.
3) The stabilization function of government: Stabilization means that aggregate demand and aggregate supply should be in equilibrium in order to ensure economic stability.
4) The growth function of government: is concerned with activities aimed at ensuring an adequate rate of growth. Growth is achieved by increasing national income at a satisfactory rate each year. This will mean more welfare to the individuals within the society.

1. The Allocation Function of Government
Two theorems exist in market economies. The first theorem dictates that the competitive market, through the price mechanism, leads to efficient