If Congress controlled central bank decisions, it would have
A)a short-run incentive to lower the target rate of inflation.
B)no political incentive to adjust the target rate of inflation in the short run.
C)a long-run incentive to lower the target rate of inflation.
D)a long-run incentive to raise the target rate of inflation.
E)a short-run incentive to raise the target rate of inflation.

Question

Quizplus · Accepted Answer

If Congress controlled central bank decisions, it would have a short-run incentive to raise the target rate of inflation. This is because if inflation is high, it makes it easier for the government to pay off its debts with cheaper dollars. However, in the long-run, high inflation could be detrimental to the economy and undermine the value of the currency.

If Congress Controlled Central Bank Decisions, It Would Have