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:

Contributions

Payments or donations made to an organization, which can be in the form of money, goods, or services.

Prior Service Cost

The expense recognized by a pension plan for benefits earned by employees in periods prior to the implementation of the pension plan.

Projected Benefit Obligation

An actuarial calculation of the total projected benefits owed to employees in a defined benefit plan, factoring in expected future salary increases.

Pension Asset/Liability

Represents the surplus or deficit in a company's pension plan, indicating whether assets are sufficient to cover pension obligations.