Central Bank Policy Response to an Economic Shock

An economy with an independent central bank is hit by a severe negative supply-side shock, which simultaneously causes a sharp rise in the general price level and a decrease in economic output. Given the central bank's dual objective of maintaining a stable target for price increases and keeping the job market at its equilibrium, which statement best analyzes the central bank's immediate policy conflict?

Central Bank Response to a Positive Demand Shock

If an economy's inflation rate rises significantly above the central bank's official target, the bank's policy framework dictates that it must immediately and aggressively raise its policy interest rate, even if the unemployment rate is also currently above its equilibrium level.