SS2 Second Term Economics Lesson Note – Elementary Theory of Fiscal Policy

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WEEK 9

TOPIC:  ELEMENTARY THEORY OF FISCAL POLICY

CONTENT: 

1. Public Finance and Fiscal Policy
2. Revenue Allocation
3. Government Revenue and Expenditure
4. Direct Tax.

Sub Topic 1: Public Finance and Fiscal Policy

Public Finance

Public finance deals with the financial activities of government with respect to revenue and expenditure. It shows government policy measures on generating revenue (income) and allocating expenditure, borrowing and lending, receiving and spending by the federal, state and local governments and their agencies to achieve specific objectives.

Objectives of Public Finance

Public finance aims at

1. Effective and efficient allocation of resources among the different sectors of the economy.
2. Improving the level of production by reducing tax, granting subsidies and increasing government investment in productive activities.
3. Re-distribution of income and productive goods among the various classes in the economy.
4. Ensuring price stability by curtailing inflationary and deflationary tendencies in the economy to maintain reasonable prices of goods and services over time.
5. Creating an improved and favorable balance of payments through increased taxation, import duties, subsidies, etc
6. Creation of employment opportunities thereby reducing the level of unemployment to the barest minimum.
7. Development of a good and appropriate fiscal policy for the government.
8. Promotion of social welfare through the provision of infrastructural goods at reduced prices.
9. Revenue generation through creation of diverse avenues by which government can derive more revenue.

Fiscal Policy

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