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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Definitions:

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An approach to valuing a company's shares by calculating the present value of its expected dividends through discounting.

Cumulative Voting

A voting system that allows shareholders to allocate all of their votes to one candidate or distribute them among multiple candidates during an election.

Preferred Stock

A class of ownership in a corporation that has a higher claim on assets and earnings than common stock, often with dividends that are paid out before those of common shares.

Debt

Money that is owed or due to another individual or entity, often involving agreed repayment terms and interest.