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Fiscal policy is best defined as government spending and tax policies. It encompasses the ways in which a government adjusts its spending levels and tax rates to influence a country's economy. This form of policy is crucial for managing economic growth, stabilizing the economy during recessions, and addressing unemployment levels.

By altering these fiscal measures, the government can stimulate or dampen economic activity. For instance, increasing government spending can lead to greater demand for goods and services, thereby boosting economic growth. Conversely, increasing taxes may be employed to reduce public debt or control inflation.

The other options relate to monetary policy or specific economic tools rather than fiscal policy. Regulating interest rates, managing inflation rates, and controlling the money supply fall under the purview of monetary policy, which is typically conducted by a country's central bank. Thus, the definition focusing on government spending and tax policies accurately reflects the essence of fiscal policy.