What is fiscal policy primarily concerned with?

Fiscal policy is primarily concerned with government spending and taxation. It involves the use of government revenue collection (taxation) and expenditure (spending) to influence the economy. The government implements fiscal policy to manage economic fluctuations, stimulate economic growth, or stabilize the economy during downturns. By adjusting spending levels and tax policies, the government can affect overall demand within the economy, which in turn can impact factors such as employment levels, inflation, and investment.

Government spending can include expenditures on public services like education, infrastructure, and healthcare, which can boost economic activity, while taxation influences household and business spending capacity. Through careful manipulation of these two levers, fiscal policy aims to achieve macroeconomic objectives such as full employment, sustainable growth, and price stability, making it a key tool in economic management.

Other options relate to different areas of economic policy; for example, managing inflation rates is typically the domain of monetary policy, which focuses on controlling money supply and interest rates rather than taxation and government spending directly.