Consider that the elasticity of both inflation gap and unemployment gap equal to 0,5, by using Taylor rule answer the following questions: i) What should the Central Bank do if the current inflation rate is 2% higher than the target? ii) What should the central bank do if the unemployment rate is 4% higher than the natural rate? iii) Based on your answers to the above point (i) and (ii), provide a general conclusion regarding the Central Bank’s strategy facing the various macroeconomic conditions.

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