The article examines how monetary and fiscal policies impact prices and growth in Pakistan. It shows that changes in monetary policy affect prices and output, while fiscal policy has a dominant role in influencing inflation dynamics. The study finds that fiscal deficits and debt accumulation have a significant impact on aggregate demand. Additionally, the research highlights the importance of fiscal and monetary variables in determining inflation in Pakistan. The study suggests that following a rule-based regime can improve macroeconomic stability in terms of output and inflation.