What is meant by Public Finance?

Question

Accepted Answer

Public Finance is the branch of economics that studies how the government — at the central, state, and local levels — raises revenue (mainly through taxation and non-tax sources), how it spends that revenue on administration, defence, infrastructure, and welfare, and how it manages the resulting surplus or deficit, including public borrowing, to fulfil its economic and social objectives. Its scope covers public revenue, public expenditure, public debt, and financial administration/the government budget.

✓Final answer

Public Finance is the study of how government raises revenue, spends it, and manages debt to achieve economic and social objectives, covering public revenue, public expenditure, public debt, and the government budget.

Same / Similar Concept — real previous-year questions on the same or a closely similar concept, not this exact question.

CBSE 2026Set ANNUAL1 markMCQ
$Q. Obligatory functions of the government - Provision of employment Maintaining internal law and order Welfare measures Exporting goods and services$
(a) c, d
(b) a, b
(c) only b
(d) a, c, d
›Reveal solutionSolution
The obligatory function of government is maintaining internal law and order, so the answer is only b.

Government functions are divided into obligatory (compulsory) functions — those the State must perform to exist, such as defence, justice, and maintaining internal law and order — and optional (welfare) functions it performs to raise citizens' welfare.

(b) Maintaining internal law and order is a classic obligatory function.

(a) Provision of employment and (c) welfare measures are optional functions.

(d) Exporting goods and services is done by producers/traders, not an obligatory government function.

✓Final answer
$Correct option: only b — Maintaining internal law and order.$
CBSE 2024Set ANNUAL1 markMCQ
$Q. Optional functions of government: Protection from external attack Provision of education and health services Provision of social security measures Collection of tax$
(a) b and c
(b) a, b and c
(c) b, c and d
(d) All of the above
›Reveal solutionSolution
Government functions are grouped into obligatory (must be performed) and optional (performed for public welfare). Provision of education and health services (b) and social security measures (c) are optional welfare functions. Defence from external attack (a) and tax collection (d) are obligatory. Correct option: b and c.

Why: Following the modern welfare-state view of public finance, government duties fall into two classes:

Obligatory functions — the basic, unavoidable duties of any state: defence against external attack, maintenance of law and order, and administration of justice; raising revenue through taxation to finance these is equally compulsory.

Optional (welfare) functions — functions the modern state undertakes to improve citizens' well-being: providing education and health facilities, and social-security measures like pensions and insurance for the weaker sections.

Since the question asks for the optional functions, statements b and c are correct.

✓Final answer
$b and c — provision of education/health services and provision of social security measures are optional functions of government.$

> [!ANSWER]
> Public Finance is the study of how government raises revenue, spends it, and manages debt to achieve economic and social objectives, covering public revenue, public expenditure, public debt, and the government budget.

Q.What is meant by Public Finance?

Concept understanding — Meaning, Scope and Role of Public Finance

Q.What is meant by Public Finance?

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