Correct Option
The passage asserts that monetary and fiscal policies are interdependent and cannot operate effectively in isolation. Monetary policy is primarily formulated and executed by the central bank, while fiscal policy falls under the purview of the government. Therefore, the direct corollary is that the central bank, responsible for monetary policy, cannot function independently without the active support and coordination of the government's fiscal policy.
Incorrect Options
Option 2: While the regulation of financial markets and institutions is a crucial aspect of economic governance, the passage specifically addresses the interdependence between monetary and fiscal policies, not the necessity or extent of financial market regulation. This statement is not a direct corollary of the given passage.
Option 3: The passage discusses the operational interdependence of macroeconomic policies (monetary and fiscal) within an economy. It does not delve into the compatibility or incompatibility of different economic systems, such as market economies and socialist policies. This statement is outside the scope of the passage.
Option 4: Financial sector reforms can contribute to economic welfare. However, the passage emphasizes the fundamental principle of interdependence between monetary and fiscal policies for overall macroeconomic effectiveness. The need for specific financial sector reforms, while potentially beneficial, is not the direct corollary derived from the stated interdependence of these two broad policy wings.