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Refer to the table below and assume that the Fed's reserve ratio is 10 percent and the economy is in a severe recession. Also suppose that the commercial banks are hoarding all excess reserves (not lending them out) because they fear loan defaults. Finally, suppose that the Fed is highly concerned that the banks will suddenly lend out these excess reserves and possibly contribute to inflation once the economy begins to recover and confidence returns. (1) Reserve (2) Checkable (3) Actual (4) Required (5) Excess Ratio, % (6) Money-Creating Potential (7) Money-Creating Deposits Reserves Reserves Reserves of Single Bank, - (5) Potential of Banking System (1) 10 $ 20,000 $ 5,000 $ 2,000 $ 3,000 $ 3,000 $ 30,000 (2) 20 20.000 5,000 4,000 1.000 1.000 5,000 (3) 25 20,000 5,000 5,000 0 0 0 (4) 30 20,000 5,000 6,000 -1.000 -1,000 -3,333 Instructions: In part a, enter your answer as a whole number, In part b, round your answers to 2 decimal places. In part c. enter your answer as an absolute value. a. By how many percentage points does the Fed need to increase the reserve ratio to eliminate one-third of the excess reserves? percentage points b. What is the size of the monetary multiplier before the change in the reserve ratio? What is the size after the change? c. By how much would banks' lending potential decline as a result of the increase in the reserve ratio