3. Consider an economy in which the demand for real balances is given by Y where M denotes nominal money balances, P the price level, V output, and i the nominal interest rate. a. Holding output fixed, does the demand for real balance (F) Increase or decrease With an increase of the nominal interest rate? Assume that Y = 1, 'r' = 0.02. Suppose that the monetary policy consists in setting the price level constant. Specifically, the central bank sets P = 1. b. Find the equilibrium inflation rate. :2. Find the equilibrium nominal interest rate if the central bank is believed to set the price level constant forever. d. Find the equilibrium level of real balances (g) e. Find the equilibrium level of money supply M