Suppose that output is given by :v = J7 + bow: - 1:9) and the loss function of the policy maker is 1 1 L = 505107 '3\"): +5 \"520\"?\" 31"\"): with y* > i and (2:2 > 0:1 > 0 .Assume that the central banker acts under discretion. a) Give economic intuition for (:2 > 0:1 > i] and explain the economic reasoning for y\" > i [10 marks] b) Explain whyr private sector expectations are crucial for the inflation bias problem ination under discretionary policy. [20 marks] c) Explain why appointing a \"conservative" central can help to reduce the ination bias problem. Discuss potential problems with this approach. [20 marks]