Read the passage and answer. Inflation is often described as a hidden tax. When prices rise faster than incomes, every rupee buys less than before, and the savings of ordinary families quietly shrink. The poor suffer most, because a larger share of their income goes on food and fuel, whose prices tend to be the most volatile. Central banks try to tame inflation by raising interest rates, which makes borrowing costlier and cools spending. The remedy, however, has side effects: businesses postpone investment and unemployment may rise. According to the passage, raising interest rates:

1. lowers unemployment
2. increases inflation
3. increases investment
4. makes borrowing costlier and reduces spending

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