What is fiscal policy primarily concerned with?

Fiscal policy is fundamentally focused on the management of government budgets, which includes both taxation and government spending. This approach to policy aims to influence the overall economic activity and address issues like inflation, unemployment, and economic growth. Through adjustments in spending levels and tax rates, the government can effectively stimulate or cool down an economy as needed, making fiscal policy a crucial tool for economic stabilization and health.

In contrast to monetary policy, which deals with controlling the money supply and setting interest rates, fiscal policy directly impacts the economy through the government's budgetary decisions. This relationship with budget management allows policymakers to allocate resources where they are most needed, promote investment in public goods, and redistribute economic resources to achieve social objectives.