Imagine an economy is hit by a severe negative supply shock, causing both a rise in the general price level and a decrease in output. A central bank must decide how to respond. Evaluate the two primary policy options available to the central bank: (1) maintaining the current policy stance to support output and employment, or (2) implementing a contractionary policy to combat the rising price level. In your evaluation, discuss the potential short-term and long-term consequences of each choice on inflation, output, and inflation expectations.