Please answer the following two questions related to inflation. Which of the fol
ID: 1205111 • Letter: P
Question
Please answer the following two questions related to inflation. Which of the following occurs as a result of a zero-inflation target Increased Interest Rates Decreased Unemployment Decreased Interest Rates Increased Unemployment Why do policy-makers often target a 3% inflation rate Inflation below 3% is not ideal for the American financial sector. There is no clear reason to aim for 3%. Any rate above 3% is banned by the United Nations. The World Bank will not lend to any country with higher inflation than 3%.Explanation / Answer
1) Increased Unemployment: Due to fisher effect
2) Policy makers often target at 3% inflation rate since below it will create a situation of deflation which is not ideal for the Americal financila Sectr