Final answer:
Fiscal policy involves government spending and taxation decisions. It is used to manage economic growth and address fiscal issues like deficits, surpluses, or balanced budgets.
Step-by-step explanation:
The policy that involves decisions about government spending and taxation is B) Fiscal policy. Fiscal policy is a strategy utilized by public officials to manage the economy by adjusting government spending levels and rates of taxation. This type of policy is crucial for managing economic growth, influencing the nation's money supply, and addressing unemployment and inflation.
Fiscal policy can lead to a budget deficit when government spending exceeds tax revenue, conversely, a budget surplus occurs when more taxes are collected than what is spent. Balanced budgets occur when spending equals taxation. Understanding the roles of monetary policy and fiscal policy is key in macroeconomic analysis.