Advocates of nominal GDP targeting claim that it would achieve greater macroeconomic stability. When recession hits, real output falls but prices tend to adjust more slowly. This means that by targeting nominal GDP, central banks could actually smooth output fluctuations better. They could also react more appropriately to supply shocks."It would be a big step for the Fed," says Ryan Sweet, a senior economist at Moody's Analytics. "There seems to be gathering a lot of support. Given where the economy is right now, it could provide a boost. That said, it's unclear what the economic impact will be. In theory, it would help the economy perform better, but I don't know the Fed wants to go down that road this year."
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