Potential weaknesses of nominal GDP targeting include
A)it requires accurate estimates of potential GDP growth,which are not easy to achieve.
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.

Question

Quizplus · Accepted Answer

Nominal GDP targeting requires accurate estimates of potential GDP growth, which are challenging to achieve, making it a potential weakness.

Potential Weaknesses of Nominal GDP Targeting Include