Potential Weaknesses of Nominal GDP Targeting Include

question 26

Multiple Choice

Potential weaknesses of nominal GDP targeting include

• A)it is more complicated to explain to the public than inflation targeting and thus the public might be confused about the objectives of the central bank.
• B)it implies that the central bank will respond to slowdowns in the real economy even if inflation is not falling.
• C)real GDP growth that is below potential or inflation that is below the inflation objective will encourage more expansionary monetary policy.
• D)it focuses not only on controlling inflation but also explicitly on stabilizing real GDP.

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