3. (30 points) Suppose that the real money demand is L(Y,i) = 0.05Y / i where Y is the real output and i is the nominal interest rate. Also suppose that the real output is constant over time at 200 and the real interest rate r is constant at 2%. Assume that the Fisher equation holds, i.e. i = r + TT, where IT is inflation. The equilibrium on the money market states that the nominal money supply Ms is equal to the nominal money demand,i.e. Ms =P.L(Y,i), whereP is the price level. a. Suppose that the central bank makes a credible announcement that inflation is going to be 3%. If the nominal money supply is 200, what is the current price level? b. Suppose that the central bank makes a credible announcement that the money supply will be growing at 5% per year for a long time. What is the value of the expected inflation rate? If the nominal money supply is currently 200, what is the new price level