4. Money Multiplier (15 points). Consider an economy with a monetary base of $1,000. People hold 1/5 of their money in the form of currency (and thus 4/5 as bank deposits). Banks hold 1/4 of their deposits in reserves. a.) What is the currency-deposit ratio, the reserve-deposit ratio, the money multiplier, and the m= cr+1 money supply? (Note: The equation for the money multiplier is , where crtrr .. , cr represents the currency-deposit ratio and rr represents the reserve-deposit ratio.) b.) Suppose the Federal Reserve raises reserve requirements such that banks now hold 3/4 of their deposits in reserves. What is the new money multiplier and the new money supply? c.) What explains why the change in the reserve-deposit ratio caused this change in the money supply? d.) If the Fed wants to conduct an open market operation to keep the money supply at its original level, does it buy or sell government bonds? Calculate, in dollars, how much the central bank needs to transact