Year Y 2018 500 490 276 2019 475 490 270 The central bank of Genovia follows a Taylor rule given by; 1 = 4+15 x (2 - RT) + 0.5Y where Y is the output gap in percent. (a) Calculate the value of the nominal policy rate set by the central bank in 2018. (1 = 6.5%) (b) Calculate the value of the nominal policy rate set by the central bank in 2019 (1 = 2.169%) (c) Use the fact that r = i - x, to re-write the Taylor rule in terms of the ex-post real interest rate. You may assume that / = 2%. (r = 1 + 0.5x +0.5Y). (d) Calculate the value of the real policy rate set by the central bank in 2019 (r=0.369%) In 2020 Genovia experiences a severe recession. Inflation is -1% and the output gap is -10%. (e) Calculate the value of the nominal policy rate that the Taylor rule implies should be set by the central bank. (negative policy rate: i = -5.5%) (f) Suppose the current Chair of the central bank of Genovia (a Dr Hi) reduces the nominal policy rate to zero but is not prepared to allow the nominal policy rate to fall below zero. What will be the value of the real policy rate? (r = -n = -(-1) =1%) (g) Dr Hi is replaced by his Deputy-Chair (a Dr Low), who is willing to follow the Taylor rule and set a negative value for the nominal policy rate. What will be the value of the real policy rate? (r = 1 - X = -5.5 - (-1) = -4.5%)