Answer to Question #226198 in Macroeconomics for Anum naz

Question

“We can have the GDP path we want equally well with a tight fiscal policy and an easier
monetary policy, or the reverse, within fairly broad limits. The real basis for choice lies in
many subsidiary targets, besides real GDP and inflation, that are differentially affected by
fiscal and monetary policies.” What are some of the subsidiary targets referred to in the
quote? How would they be affected by alternative policy combinations?

Answer 1

The quote may involve several subsidiary targets, apart from inflation and real GDP which tend to be influenced by monetary and fiscal policies differently. It tends to be apposite presuming that countries may work on their GDP path they wish having with better fiscal policy as well as easier form of monetary policy. Easier Monetary policy tends to increase GDP while tight form of Fiscal policy minimizes it.