Question 3: (4 marks) Consider an economy where the impact of monetary policy can be summarized by the relation: Y = BM where Y, M, B are output, the money supply and the monetary policy multiplier, respectively. It is not possible to adjust M to consistently hit a target, say Y, perfectly. This inability to hit the target generates the loss function, L (a function that describes the extent to which a target is missed): L= = (Y - Y' )2 Let Y* = 5. Based on the above information, compute the choice of money supply M to minimize the above loss function when we are uncertain about the monetary policy multiplier, specifically B can be either 0.8 or 1.2, with a 40% chance of it being 0.8 and 60% chance of it being 1.2