What is "fiscal policy" primarily concerned with?

• A. The regulation of foreign trade
• B. The use of government spending and taxation
• C. The control of inflation through interest rates
• D. The enforcement of labor laws

Answer: (B)

Fiscal policy refers to the government's use of spending and taxation to influence the economy. It is primarily concerned with how government revenues (through taxes) and expenditures affect overall economic activity. For instance, by adjusting tax rates or increasing spending on public projects, the government can stimulate demand, create jobs, and potentially drive economic growth. On the other hand, reducing spending or increasing taxes can help to control inflation or budget deficits. This approach contrasts with monetary policy, which focuses on managing the money supply and interest rates to regulate economic activity. The choices regarding foreign trade, inflation control through interest rates, and labor laws are not the central components of fiscal policy, making the focus on government spending and taxation the most appropriate answer.