A nominal GDP rule requires the Fed to adjust money growth enough to offset changes in velocity.

Question

Quizplus · Accepted Answer

A nominal GDP rule targets a specific level of nominal GDP, which means the Fed would have to adjust money growth to offset any changes in velocity (the rate at which money circulates in the economy). This would ensure that the Fed is not solely targeting inflation but also the overall output of the economy.

A Nominal GDP Rule Requires the Fed to Adjust Money