Final answer:
The incorrect statement about public and private finance is that both have the same objectives. Public finance aims for macroeconomic goals while private finance seeks profit maximization, and each has distinct purposes despite both pursuing deficit financing and working with limited resources.
Step-by-step explanation:
Regarding the question of which statement is not correct about public and private finance, the option that states both have the same objectives is not correct. Public and private finance operate under different objectives. While public finance, represented by government spending and taxation, aims to achieve macroeconomic stability, redistribution of wealth, and the provision of public goods, private finance primarily focuses on profit maximization, individual or corporate wealth management, and investment decisions to ensure the best return on capital. Both sectors are indeed based on rationality, pursue deficit financing in certain circumstances, and operate with limited resources. However, the fundamental goals driving public and private entities diverge significantly.
When a government runs a budget deficit, it signifies that the government's expenditures have exceeded its revenues, thereby necessitating borrowing. This can lead to a phenomenon known as crowding out, where government borrowing absorbs a substantial part of the financial capital that otherwise could be available for private sector investment. Hence, large and continuous government borrowing can reduce the financial capital for private enterprises and might even precipitate trade imbalances and financial crises.