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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