Nominal GDP targeting is a policy approach in which the Federal Reserve:
A) uses its policy tools to try to keep nominal GDP at a selected, fixed level.
B) uses the current level of nominal GDP as its target for GDP to maintain stability.
C) sets the level of nominal GDP and then sees what that does to the money supply.
D) uses its policy tools to try to achieve a selected rate of growth in nominal GDP.

Question

Quizplus · Accepted Answer

Nominal GDP targeting involves the central bank, such as the Federal Reserve, aiming for a specific growth rate in nominal GDP, rather than trying to keep it at a fixed level or directly manipulating the money supply to achieve a nominal GDP level. This approach focuses on the growth rate to manage economic stability and inflation expectations.

Nominal GDP Targeting Is a Policy Approach in Which the Federal