Although real variables such as unemployment and real GDP are the best measures of economic performance,most economists do not advocate manipulating money supply directly to hit a real target because:
A) they believe a constant growth rate of the money supply is the best way to stabilize real GDP or unemployment.
B) if the Bank of Canada chose a target that was not the natural output or the natural unemployment rate,the result would be accelerating inflation or deflation.
C) if the Bank of Canada chose a target for the unemployment rate above the natural rate,the result would be accelerating inflation.
D) if the Bank of Canada chose a target for the unemployment rate below the natural rate,the result would be accelerating deflation.

Question

Quizplus · Accepted Answer

Manipulating the money supply directly to hit a real target can lead to accelerating inflation or deflation if the chosen target is not the natural output or unemployment rate. Therefore, most economists do not advocate this approach. Instead, they believe in a constant growth rate of the money supply as the best way to stabilize real GDP or unemployment.

Although Real Variables Such as Unemployment and Real GDP Are