What is fiscal policy primarily concerned with?

Fiscal policy is primarily concerned with influencing economic conditions through spending and taxes. It encompasses the government's decisions regarding its budget, specifically how much to spend on public projects, services, and welfare, as well as how much to collect in taxes. By adjusting these two levers, the government aims to stimulate economic growth, reduce unemployment, or control inflation depending on the current economic conditions.

When the government increases its spending, it injects more money into the economy, which can lead to higher demand for goods and services. Conversely, if it raises taxes, it can slow down spending by consumers and businesses, potentially leading to a cooling of the economy when inflation is too high.

In contrast, other aspects such as regulating banks or managing the money supply fall under the domain of monetary policy. Similarly, controlling inflation through interest rates is also primarily a function of central banks, not fiscal policy. Therefore, the focus on government spending and taxation as tools to influence the economy effectively identifies fiscal policy's core purpose.