Public finance is concerned with the revenue-raising and spending activities of the government and, especially how such activities affect the economic life of people.
Five main areas of the subject matter of public finance can be explicitly identified as:
- The Theory of Public Revenue: This aspect deals with alternative sources of government revenue, taxation, non-tax revenue, public debt and creation of additional currency notes and coins.
- Theory of Public Expenditure: How government, through its expenditure, influences financial flows in the economy, and how public expenditure serves as a tool for implementing growth, welfare and other policies of government.
- Financial Administration: The formulation, execution, and auditing of government budgetary policies and related matters.
- Stabilization, Growth and Distributive Justice: The financial implications of government economic policies meant to promote issues relating to economic growth and development.
- Federal Finance: An analysis of issues and problems relating to intergovernmental financial flows where multilevel or federal system of government exists.
It is evident from the above discussion that public finance explores the principles and problems of the public sector of the economy.