If prices and wages were perfectly flexible and Congress had control over central bank decisions, Congress would have
A)no political incentive to adjust the target rate of inflation.
B)a long-run incentive to lower the target rate of inflation.
C)a short-run incentive to raise the target rate of inflation.
D)a short-run incentive to lower the target rate of inflation.
E)a long-run incentive to raise the target rate of inflation.

Question

Quizplus · Accepted Answer

If prices and wages were perfectly flexible, then the economy would always be at its equilibrium level and there would be no need for Congress to adjust the target rate of inflation. Therefore, Congress would have no political incentive to adjust the target rate of inflation.

If Prices and Wages Were Perfectly Flexible and Congress Had