Potential Weaknesses of Nominal GDP Targeting Include

question 2

Multiple Choice

Potential weaknesses of nominal GDP targeting include

• A)it requires accurate estimates of potential GDP growth,which are not easy to achieve.
• B)real GDP growth that is below potential or inflation that is below the inflation objective will encourage more expansionary monetary policy.
• C)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.
• D)both A and C.

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Definitions:

Head Injury

Physical trauma to the head, which may or may not affect the brain, leading to various degrees of impairment.

Retrograde Amnesia

A loss of memory-access to events that occurred, or information that was learned, before an injury or the onset of a disease.

New Memories

Freshly formed memories that have been encoded into the brain, representing recent experiences or learned information.

Proactive Interference

Situation in which material that was learned earlier disrupts the recall of material that was learned later.