What does the term 'fiscal policy' encompass?

The term 'fiscal policy' specifically refers to the government's use of taxation and spending to influence the economy. It encompasses actions taken by the government, primarily through its budgetary process, to adjust its spending levels and tax rates to monitor and influence national economic activity.

These policies are crucial in managing economic fluctuations, such as stimulating growth during a recession by increasing spending or cutting taxes, or slowing down an overheating economy by decreasing expenditure or raising taxes. This approach can mitigate the effects of economic cycles and aim for a stable economic environment.

In contrast, the other options relate to different aspects of financial management or policy. Strategies businesses use are more aligned with corporate finance practices, while market strategies focus on competitive practices within industries. Local government laws about public expenditures pertain to a narrower scope of governmental action that doesn't encompass the broader economic implications associated with fiscal policy. Thus, option B accurately captures the full essence of what fiscal policy entails.