Public Finance

 1) CLASSIFICATION ON THE BASIS OF BENEFIT Cohn and Plehn classified public expenditure on the basis of benefits into following 4 classes:- A) EXPENDITURE CREATING BENEFIT FOR ALL- This includes expenditure on those items which create benefit to all type of people in the community, such as expenditure on defence, civil administration, education etc. B) EXPENDITURE CREATING BENEFIT FOR CERTAIN PEOPLE- It includes expenditure incurred to create benefit to a particular type of people or certain class. The money spent on poor relief fund is an example. C) EXPENDITURE CREATING A SPECIAL BENEFIT TO SOME BUT IS A BENEFIT FOR ALL- These include expenditure on the administration of justice and maintenance of law. It will be beneficial for the entire society. D) EXPENDITURE CREATING BENEFIT FOR A PARTICULAR GROUP OR GROUPS- The expenditure incurred for the benefit of particular individuals comes in this category. The production subsidy granted by the government to a particular type of indust...

 MEANING Public expen­diture consists of expenditure by central government, state governments and local authorities (such as municipalities and public corporations), with central government accounting for the major portion of such expenditure. It consists of expenses which a government incurs in protecting its citizens and in increasing their economic and social welfare. The Governments followed laissez faire economic policies and their functions were only confined to defend the country from foreign aggression and to maintain law and order within their territories. But now, the expen­diture of Government all the world over has greatly increased. Therefore, the modern econo­mists have started analysing the effects of public expenditure on production, distribution and the levels of income and employment in the economy. IMPORTANCE i. Economic Development: Without government support and backing, a poor country cannot make huge investments to bring about a favourable change in the econo...