Fiscal policy of a government is mainly concerned with which of the following broad areas?

Introduction / Context:
Economic policy is often divided into fiscal policy and monetary policy. Fiscal policy refers to the use of government spending and taxation to influence the economy, while monetary policy refers to management of the money supply and interest rates by the central bank. Understanding this distinction is crucial for students of economics and public administration. This question asks which area fiscal policy is mainly connected with.

Given Data / Assumptions:

• Fiscal policy is generally formulated by the government or the finance ministry.
• Monetary policy is usually managed by the central bank.
• International trade policy covers exports and imports and is often treated separately as trade policy.
• The options list public revenue and expenditure, exports and imports, currency issue, interest rate decisions, and only tax law design.

Concept / Approach:
Fiscal policy focuses on how the government raises money through taxes and other revenue sources and how it spends that money on public services, infrastructure, transfers, and other programmes. Decisions about tax rates, public investment, subsidies, and welfare schemes all fall under fiscal policy. Issue of currency, control of money supply, and management of interest rates are part of monetary policy, usually handled by the central bank. Trade policy manages exports and imports. Therefore, the correct identification is that fiscal policy is connected with public revenue and public expenditure.

Step-by-Step Solution:
Step 1: Recall that fiscal policy is usually presented as the government decisions about taxation and spending.Step 2: Recognise that raising public revenue through taxes, duties, and other means is one side of fiscal policy.Step 3: Recognise that allocating funds through public expenditure on defence, education, health, infrastructure, and welfare is the other side of fiscal policy.Step 4: Observe that exports and imports are governed by trade policy and international agreements, not by fiscal policy alone.Step 5: Understand that issuing currency and managing money supply are key responsibilities of monetary policy and the central bank.Step 6: Conclude that option a, which mentions public revenue and public expenditure, correctly describes the main concern of fiscal policy.

Verification / Alternative check:
Macroeconomics textbooks define fiscal policy as the use of government taxation and expenditure policies to achieve macroeconomic objectives such as growth, full employment, and price stability. Examples include expansionary fiscal policy where spending is increased or taxes are reduced, and contractionary fiscal policy where spending is reduced or taxes are increased. The role of the central bank in issuing currency and controlling interest rates is discussed separately under monetary policy. This clear separation confirms that public revenue and expenditure form the core of fiscal policy.

Why Other Options Are Wrong:
Exports and imports are influenced by tariffs, quotas, and trade agreements and fall under foreign trade or commercial policy rather than pure fiscal policy, although taxes can have some effect. Issue of currency and control of money supply are functions of the central bank and are part of monetary policy, not fiscal policy. Fixing administered interest rates is also a monetary policy tool. Designing direct tax laws without considering expenditure captures only part of fiscal policy; full fiscal policy involves both sides of the budget, revenue and spending.

Common Pitfalls:
Students sometimes confuse fiscal and monetary policy because both aim to stabilise the economy. Another common mistake is to think that fiscal policy deals only with taxes and forget that spending is equally important. To avoid confusion, remember that fiscal policy equals tax plus spend, while monetary policy equals money plus interest rates, and trade policy equals exports plus imports.

Final Answer:
Fiscal policy is mainly connected with public revenue and public expenditure decisions of the government.