Question 6. Consider an economy in which capital is available with a rate of return higher than money and money is demanded only by banks to meet the Reserve Requirements. Suppose the Reserve Requirements increase from 10% to 20%. 1. Explain why the increase in reserve requirement ratio causes welfare to decline. 2. Construct a graph in the c1, 02 space (the axes) showing how the increase in the reserve requirement ratio will affect a person's lifetime budget constraint