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.

Question

Quizplus · Accepted Answer

Nominal GDP targeting may be more difficult to communicate to the public than inflation targeting, leading to confusion about the central bank's objectives.

Potential Weaknesses of Nominal GDP Targeting Include