1. As the head of your central bank, you have been asked to adopt a new nominal anchor for monetary policy. The domestic inflation rate is 3% per annum, and your target for the end of the following year is 2% per annum. Your economy's real rate of output growth is 1.0% annually and the real interest rate is 0%. Your country's currency is the peso and prices are fully flexible. a. What is the importance of having a nominal anchor for your monetary policy? Name one drawback of having a nominal anchor. b. What is the current growth rate of money supply in the domestic economy? If adopt a money supply target, which money supply growth rate would allow you to reach your inflation target of 2%? c. The inflation rate in the Eurozone is 0% and you are considering adopting a target exchange rate relative to the Euro. By what percentage will the peso have to appreciate or depreciate to achieve your target? d. Finally, you may choose an interest rate policy to achieve your inflation target. Using Fisher's equation, compute the domestic (peso) interest rate. What nominal rate of inflation will allow you to achieve the inflation target