A Central Bank Increases Its Inflation Target When Real and Potential

Multiple Choice

A central bank increases its inflation target when real and potential GDP are equal if it

A) wants to avoid a political business cycle.
B) succumbs to political pressure to stimulate the economy.
C) wants to raise the rate of inflation in the long run.
D) is more concerned with long-run stability than short-run gain.
E) wants to lower the rate of inflation in the long run.