3. Monetary Policy Explain, using diagrams, the effects of monetary policy in the following three equation model of the economy, 313 =a,a,(x +pa" F)o:3f+d 1:22.?\" +y1j3+y1f+s 1"\" = r_',::I+:rre +h(:r 21*) +bj+v where 1: is the inflation rate, :13: :1, is the expected ination rate and a' is the ination target. The policy interest rate set by government is if. j}, g, and f are respectively the deviations of output, government spending and taxes from their steady state values. Demand, :sgpply and monetary policy shocks are given by d, s and v respectively, while a1,:xl,p,a3,y1,y1,h andbare all positive consta nts. Note: this is a version of the New Keynesian model with backward looking expectations