Suppose the economy is initially operating at the natural level of output. Now, suppose the central bank raises the inflation target by 2.5%. Given this information, we would expect that:
A) the nominal interest rate will increase by more than 2.5% in the medium run.
B) the nominal interest rate will increase by exactly 2.5% in the medium run.
C) the nominal interest rate will fall by exactly 2.5% in the medium run.
D) the nominal interest rate will fall by less than 2.5% in the medium run.
E) the nominal interest rate will not change in the medium.

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The Answer of Suppose the economy is initially operating at the natural level of output. Now, suppose the central bank raises the inflation target by 2.5%. Given this information, we would expect that:
A) the nominal interest rate will increase by more than 2.5% in the medium run.
B) the nominal interest rate will increase by exactly 2.5% in the medium run.
C) the nominal interest rate will fall by exactly 2.5% in the medium run.
D) the nominal interest rate will fall by less than 2.5% in the medium run.
E) the nominal interest rate will not change in the medium.

Suppose the Economy Is Initially Operating at the Natural Level