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23 October, 18:37

Suppose the fed sells $100 of government securities. if the desired reserve ratio is 20 percent and there is no currency drain, then the quantity of money

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  1. 23 October, 21:47
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    The reserve ratio is the part of a depositor ’s balances that banks must have on hand as cash.

    This is a requirement determined by Federal Reserve and this affects the money supply in a country at any given time.

    If the desired reserve ratio is 20%, and the FED sold $100 of government and there is no currency drain, then the quantity or supply of money will decrease.
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