Congress acting as the principal can tie a budget to outcomes, thus incentivizing the agent
For better understanding, let us explain the role of Congress in the budget process
- The Congress play a huge role in the budget process. They are actively involved in budget resolutions. They first undertake the annual process so as to pass a budget resolution that brings about a standard and setting limits for overall. The Congress has two chambers that is the Senate and the House of Representative and each therefore draft their own budget resolution.
- The principal-agent relationship is a form of a relationship like an arrangement where one entity legally choose another to act on its behalf. In this form of relationship, the agent acts on behalf of the principal and thus gets profits or incentives.
From the above, we can therefore say that the answer Congress acting as the principal can tie a budget to outcomes, thus incentivizing the agent, is correct
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