A policy to slow the growth of nominal GDP
A)can result in a higher inflation rate and an increase in the output ratio.
B)can result in a lower inflation rate and a drop in the output ratio.
C)can be combined with cost-cutting supply policies to lower the inflation rate while maintaining the output ratio.
D)A and C.
E)B and C.

Question

Quizplus · Accepted Answer

Slowing the growth of nominal GDP would result in a lower inflation rate as there would be less demand-pull inflation pressure. However, it could also lead to a drop in the output ratio as there may be reduced monetary stimulus to the economy. To address this, a combination of cost-cutting supply policies could be implemented to maintain output levels while keeping inflation in check.

A Policy to Slow the Growth of Nominal GDP