Problem 4. [Ill points] Consider an economy whom money supply M is determined by the householdsr cashdeposit ratio or... banl-Lsr reservedeposit ratio IT, and the monetary baseB: cr+1 1" + T?\" llr'floreo'lrer1 the price level P in this economy is determined by the equilibrium condition M: B. for the real money balances: M . ? = L(1,Y], where L is the demand for real money balances as a function of the interest rate a" and the real output 1". Assume further that where Ex is the expected ination rate in percentages. [a] Suppose that the central bank wants the [armual] ination rate over the next year to be 2 percent. How much should the central bank let the monetary base 3 grow over this period relative to the current level? [bl Suppose that the stock market crashes and the banks in this economy become extremely cautious. As a result, they raise their reservedeposit ratio to 1"!" = [1.2. The central bank still wants the ination rate over the next year to be 2 percent. How much should the central bank let the monetary base 3 grow over this period relative to the current level? [c] In addition to the banks' change in the reservedeposit ratio to 1"!" = [1.2, households also respond by raising their cashdeposit ratio to CT = 13.2 and adjusting their expected ination to Err = 1 percent. The central lJEJll'L still wants the ination rate over the next year to be 2 percent. How much should the central bank let the monetary base 3 grow over this period relative to the current level