What is the primary focus of fiscal policy?

The primary focus of fiscal policy is controlling government spending and taxation. Fiscal policy involves the use of government budgetary tools, primarily how much money the government spends and how it collects revenue through taxes, to influence a country’s economy. Through fiscal policy, governments aim to ensure economic stability and growth, mitigate unemployment, and maintain a healthy level of inflation. By adjusting spending levels and tax rates, fiscal policy can stimulate economic activity or cool down an overheated economy.

The other options pertain to different aspects of economic and political strategies. Regulating foreign transactions falls under the domain of trade policy, which deals with imports, exports, and international trade relations. Setting interest rates is a function of monetary policy, managed by central banks aiming to control inflation and stabilize the currency. Managing international relations, while essential for a country's diplomacy, is a broad diplomatic function that does not directly relate to the fiscal levers of government spending and taxation. Thus, the focus of fiscal policy squarely lies in managing the financial aspects of government operations.