What term best describes the system of rules that arranges both words and phrases into an understandable and meaningful statement?

The term that best describes the system of rules arranging both words and phrases into understandable and meaningful statements is syntax. Syntax focuses specifically on the structure of sentences, including how different parts of speech, like subjects and verbs, come together to form coherent expressions. It dictates the order of words and how they interact to convey meaning, which is essential for effective communication.

While grammar refers to the broader system that includes various rules governing the structure and composition of sentences—encompassing syntax, punctuation, and morphology—syntax is the specific term that deals directly with the arrangement of words and phrases. Phonology relates to sounds in language, and semantics pertains to meaning, but neither captures the essence of sentence structure as specifically as syntax does. Therefore, syntax is the most precise term in this context.