According to the Taylor principle a 1% increase in inflation requires a greater than 1% increase in nominal interest rates a 1% increase in nominal interest rates a 1/2% increase in nominal interest rates a 0% change in nominal interest rates 5 ) Suppose a Phillips curve has a beta of 0.8. In the economy, inflation is 7%, there is a 1% positive shock to inflation, and the output gap is 5%. What must be expected inflation? 4.5% 3.5% eage 2.0% 1.0% Which if of the following is a reason in favor of active policy to stabilize the economy? fluctuations in the economy don't matter much shocks can be mitigated by the correct policy response the outside lag of policy means it effects the economy the inside lag of policy allows for recognition of shocks