What does "fiscal policy" primarily influence?

Fiscal policy primarily influences government spending and taxation decisions that affect the economy. This type of policy is formulated by the government and is crucial in managing economic activity. By adjusting spending levels and tax rates, the government can directly impact overall demand within the economy, which can lead to effects such as stimulating economic growth during a recession or cooling down an overheating economy through reduced spending and higher taxes.

Through fiscal policy, the government can make targeted investments in infrastructure, education, and social services, which can spur job creation and economic development. Conversely, changing tax rates can alter disposable income levels for individuals and businesses, therefore influencing consumption and investment.

The other options focus on aspects that are not directly governed by fiscal policy. Investment strategies in the stock market are influenced by a variety of factors including investor sentiment and company performance. Interest rates, which are primarily managed through monetary policy by the central bank, can be affected by fiscal policy in an indirect way but are not influenced by it directly. Similarly, the pricing of goods and services in the market is determined through supply and demand dynamics, not directly by fiscal policy measures.