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Why would a higher inflation target result in higher average

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Reference no: EM132935207

Problem 1: Why would a higher inflation target result in a higher average level of interest rates?

Group of answer choices

Option 1: Higher inflation, once experienced, leads banks to increase interest rates.

Option 2: Higher inflation, once experienced, increases nominal interest rates.

Option 3: Higher inflation, once expected, leads the Fed to increase the Feds funds rate.

Option 4: Higher inflation, once expected, increases nominal interest rates.

Reference no: EM132935207

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