Question Two (10 Marks) Assume that the money multiplier m = (1 +c)/(r+etc). Where c is the currency deposit ratio, e is the excess reserve ratio and r is the required reserve natio. a) With examples, explain what will cause an increase in the ratios c, e andr b) Explain the implications of an increase in each of the ratios on the ability of the central bank to increase money supply by increasing the monetary base. Page 1 of 2 c) Assume that consumers trust in the banking sector improves because of more transparent banking practices. How will this affect the money multiplier and the central bank's monetary control Question Three (10 Marks) a) In ordinary language, explain the meaning of Velocity of Money. b) State and explain the variables in the equation of exchange. c) Use the equation of exchange stated in b) above to explain the relationship between changes in the money supply and the price level. State any assumptions made. d) Using the equation of exchange from part b) and information of the Bank of Ghana's Quarterly Bulletin/Statistical Bulletin as well as quarterly GDP releases from the Ghana Statistical Service, calculate the Velocity of Money for the Ghanaian economy from the first quarter of 2020 to the second quarter of 2021. c) Based on your answer from d) is it reasonable to assume that the Velocity of Money is constant in Ghana? Why or why not? 1) The Bank of Ghana currently announces its monetary policy in terms of changes in the interest rates (1.c. Monetary Policy Rate). Based on the information in parts d)-e) do you think it should continue to implement this practice? If yes, explain why. If not, what should it target then